Edgewise Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of the financial condition and results of operations of Edgewise Therapeutics, Inc. should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited financial statements and notes included in our final prospectus for our initial public offering filed pursuant to Rule 424(b) under the Securities Act of 1933 with the Securities and Exchange Commission, on March 26, 2021. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by these forward-looking statements. You should carefully read the “Risk Factors” to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.” Overview We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, rare muscle disorders for which there is significant unmet medical need. Guided by our holistic drug discovery approach to targeting the muscle as an organ, we have combined our foundational expertise in muscle biology and small molecule engineering to build our proprietary, muscle focused drug discovery platform. Our platform utilizes custom-built high throughput and translatable systems that measure integrated muscle function in whole organ extracts to identify small molecule precision medicines regulating key proteins in muscle tissue, initially focused on addressing rare neuromuscular and cardiac diseases. Our lead candidate, EDG-5506, is an orally administered allosteric, selective, fast myofiber (type II) myosin small molecule inhibitor designed to address the root cause of dystrophinopathies including Duchenne muscular dystrophy (DMD) and Becker muscular dystrophy (BMD), and is currently in a Phase 1 clinical trial. We have developed and characterized a library of selective fast skeletal myosin inhibitors exhibiting a broad range of pharmacological and pharmacokinetic (PK) properties. We are characterizing EDG-6289 as a faster onset alternative to EDG-5506 for the treatment of movement disorders, including muscle spasticity associated with multiple sclerosis, cerebral palsy and stroke. We also intend to advance two other muscle-focused precision medicines into clinical development. Our third program, EDG-002, focuses on identification of novel mechanism cardiac modulators. We are initially pursuing a new target for inherited hypertrophic cardiomyopathy (HCM) in addition to exploring the potential of this novel mechanism across other rare cardiac disorders. Our fourth program, EDG-003, is focused on developing a next-generation approach to improve muscle and preserve nerves in a specific set of rare neuromuscular diseases. We believe our programs also offer substantial opportunities for us to expand into related rare diseases for which there are limited or no approved treatments. The Company announced in October 2021 positive topline results from the multiple ascending dose (MAD) portion of a first-in-human Phase 1, healthy volunteer (HV), clinical trial assessing the safety, tolerability, PK and pharmacodynamics of escalating doses of EDG-5506, an orally administered small molecule myosin inhibitor designed to protect injury-susceptible fast skeletal muscle fibers in dystrophinopathies such as DMD and BMD. Based on these favorable results, the Company anticipates initiation of Phase 2 trials in individuals with BMD in the first half of 2022 and DMD in the second half of 2022. Moreover, the Company has also started dosing individuals with BMD as part of the ongoing Phase 1b clinical trial. The Company also expects to initiate a follow-on open-label study in BMD patients in the first quarter of 2022 to explore the above parameters over 3 months. Since our inception in 2017, we have devoted substantially all of our focus and financial resources to discovering, identifying and developing potential product candidates, including advancing our development programs, conducting preclinical studies of our product candidates and initiating a clinical trial, organizing and staffing our company, business planning, raising capital and securing related intellectual property rights. To date, we have not completed the development of any of our product candidates, have not generated any revenue and have never been profitable. Our ability to achieve profitability, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We will need substantial additional funding to support our continuing operations and pursue our development and commercialization strategy. Until such time that we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including income from collaborations, strategic partnerships or marketing, 21 Table of Contents distribution or licensing arrangements with third parties or from grants from organizations and foundations. We may be unable to raise additional funds or to enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay or terminate our efforts to expand our product pipeline. We have incurred significant losses since the commencement of our operations. Our net losses were $12.9 million and $30.1 million for the three and nine months ended September 30, 2021, respectively and $3.6 million and $10.8 million for the three and nine months ended September 30, 2020, respectively, and we expect to continue to incur significant losses for the foreseeable future as we advance our product candidates through preclinical development and clinical trials and seek regulatory approval of our product candidates. Our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities. As of September 30, 2021, we had an accumulated deficit of $64.3 million. To date, we have financed our operations primarily through private placements of convertible preferred stock and an initial public offering (IPO) of our common stock. From inception through September 30, 2021, these private placements have provided gross proceeds of $160.7 million and the IPO generated net proceeds of $186.1 million after deducting underwriting discounts and commissions and offering costs of $16.3 million. We believe that our existing cash and cash equivalents and marketable securities of $290.5 million will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months. In March 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) outbreak a global pandemic. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted, reduced or suspended operating activities. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted productivity, have resulted in increased operational expenses, certain adjustments to the operations of our clinical trial, delays in the enrollment of new patients at our clinical trial site, and delays in certain supply chain activities and collecting and analyzing data from patients in our clinical trial, and may further disrupt our business and delay our development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct business in the ordinary course as well as the spread, severity and potential resurgence of COVID-19, the impact of new COVID-19 variants, and vaccination deployment efforts. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of our clinical trial and other related business activities. Components of Our Results of Operations Operating expenses Research and development expenses Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We record research and development expenses when these are incurred. Such expenses include: ● employee and consultant-related expenses including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions; ● expenses incurred in connection with the planned clinical development of our product candidates including under agreements with third parties, such as consultants and contract research organizations (CROs); ● the cost of manufacturing drug products for use in our preclinical studies and ongoing and planned clinical trials including under agreements with third parties such as consultants and contract development and manufacturing organizations (CDMOs); 22 Table of Contents ● expenses incurred in connection with the preclinical development of our product candidates including outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties; ● laboratory supplies; ● facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities; ● expenses related to compliance with regulatory requirements; and ● payments made under third-party licensing agreements. The majority of these expenses have been incurred to advance our lead product candidate, EDG-5506. We expect that significant additional spending will be required to progress EDG-5506 through the remainder of the clinical development phases. These expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply. We track our direct research and development expenses on a program-by-program basis once a lead compound has been selected and clinical trials have been initiated. These direct costs consist primarily of external costs such as fees paid to outside consultants, CROs, CDMOs, clinical trial sites and central laboratories in connection with our discovery and preclinical activities, process development, manufacturing and clinical development activities. These expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. Our direct research and development expenses by program also include costs of laboratory supplies that can be directly attributed to a specific program as well as any fees incurred under license agreements. We do not allocate employee-related costs, including stock-based compensation, or facility expenses, including rent, depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities and to manage our preclinical development, manufacturing and clinical development activities. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we advance EDG-5506 through clinical trials and additional product candidates enter clinical trials; continue to develop our proprietary drug discovery platform; continue to discover and develop additional product candidates; and hire additional personnel. The successful development of our product candidates is highly uncertain, and we do not believe it is possible at this time to accurately project the nature, timing and extent of expenses necessary to complete the development of our product candidates. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including: ● the timing and progress of preclinical and clinical development activities; ● the number and scope of preclinical and clinical programs we decide to pursue; ● our ability to maintain our current research and development programs and to establish new ones; ● establishing an appropriate safety profile with IND-enabling studies; ● successful patient enrollment in, and the initiation and completion of, clinical trials; 23 Table of Contents ● the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority; ● the receipt of regulatory approvals from applicable regulatory authorities; ● the timing, receipt and terms of any marketing approvals from applicable regulatory authorities; ● our ability to establish new licensing or collaboration arrangements; ● the performance of our future collaborators, if any; ● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; ● development and timely delivery of commercial-grade drug formulations that can be used in our planned clinical trials and for commercial launch; ● obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights; ● launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others; and ● maintaining a continued acceptable safety profile of the product candidates following approval. Any changes in the outcome of any of these factors could significantly impact the costs and timing associated with the development of our product candidates. General and administrative expenses General and administrative expenses consist primarily of salaries, related benefits and stock-based compensation expense for personnel in executive, finance, accounting, legal and administrative functions. General and administrative expenses also include facilities and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued research and development of our programs and also anticipate that we will incur higher expenses relating to accounting, audit, legal, regulatory, compliance, director and officer insurance and investor and public relations as a result of being a public company. Interest income Interest income primarily consists of interest income generated from our cash, cash equivalents and marketable securities. 24 Table of Contents Results of Operations Comparison of the three months ended September 30, 2021 and 2020 The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, ​ ​ ​ ​ 2021 2020 Change ​ ​ (in thousands) Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 9,880 ​ $ 3,238 ​ $ 6,642 General and administrative ​ 3,196 ​ 405 ​ 2,791 Total operating expenses ​ 13,076 ​ 3,643 ​ 9,433 Loss from operations ​ ​ ​ ​ ​ ​ Interest income ​ 127 ​ 1 ​ 126 Net loss ​ $ 12,949 ​ $ 3,642 ​ $ 9,307 ​ Research and development expenses ​ The following table summarizes our research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended September 30, ​ ​ ​ ​ 2021 2020 Change ​ ​ (in thousands) External research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ EDG-5506 clinical program ​ $ 4,669 ​ $ 1,551 ​ $ 3,118 Discovery and preclinical ​ 1,809 ​ 603 ​ 1,206 Internal and other unallocated costs ​ 3,402 ​ 1,084 ​ 2,318 Total research and development expenses ​ $ 9,880 ​ $ 3,238 ​ $ 6,642 ​ Research and development expenses were $9.9 million and $3.2 million for the three months ended September 30, 2021 and 2020, respectively. The increase of $6.6 million was primarily driven by $3.1 million of higher external research and development expenses related to our Phase 1 clinical trial of EDG-5506, an increase of $1.2 million related to increased drug discovery and preclinical development of our other programs and an increase of $2.3 million in employee-related costs, due largely to an increased employee headcount and stock-based compensation to support the growth of our research and development programs. General and administrative expenses General and administrative expenses were $3.2 million and $0.4 million for the three months ended September 30, 2021 and 2020, respectively. The increase of $2.8 million was primarily related to the cost related to operating as a public company, including $1.1 million in increased employee-related costs from increased headcount and stock-based compensation, $0.7 million in increased directors and officers insurance and $1.0 million in increased professional and consulting and other administrative costs. Interest income Interest income was $127,000 and $1,000 for the three months ended September 30, 2021 and 2020, respectively. The increase of $126,000 was the result of higher cash and marketable securities balances from the proceeds of our IPO in 2021 as compared to our cash balances in 2020, resulting in higher interest income earned. 25 Table of Contents Comparison of the nine months ended September 30, 2021 and 2020 The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, ​ ​ ​ ​ 2021 2020 Change ​ ​ (in thousands) Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 23,101 ​ $ 9,844 ​ $ 13,257 General and administrative ​ 7,292 ​ 1,004 ​ 6,288 Total operating expenses ​ 30,393 ​ 10,848 ​ 19,545 Loss from operations ​ ​ ​ ​ ​ ​ Interest income ​ 276 ​ 67 ​ 209 Net loss ​ $ 30,117 ​ $ 10,781 ​ $ 19,336 ​ ​ Research and development expenses ​ The following table summarizes our research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, ​ ​ ​ ​ 2021 2020 Change ​ ​ (in thousands) External research and development expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ EDG-5506 clinical program ​ $ 11,198 ​ $ 4,957 ​ $ 6,241 Discovery and preclinical ​ 4,516 ​ 1,908 ​ 2,608 Internal and other unallocated costs ​ 7,387 ​ 2,979 ​ 4,408 Total research and development expenses ​ $ 23,101 ​ $ 9,844 ​ $ 13,257 ​ ​ Research and development expenses were $23.1 million and $9.8 million for the nine months ended September 30, 2021 and 2020, respectively. The increase of $13.3 million was primarily driven by $6.2 million of higher external research and development expenses related to our Phase 1 clinical trial of EDG-5506, an increase of $2.6 million related to increased drug discovery and preclinical development of our other programs and an increase of $4.4 million in employee-related costs, due largely to an increased employee headcount and stock-based compensation to support the growth of our research and development programs. General and administrative expenses General and administrative expenses were $7.3 million and $1.0 million for the nine months ended September 30, 2021 and 2020, respectively. The increase of $6.3 million was primarily related to the cost related to operating as a public company, including $2.8 million in increased employee-related costs from increased headcount and stock-based compensation, $1.5 million in increased directors and officers insurance and $2.0 million in increased professional and consulting costs and other administrative costs. Interest income Interest income was $276,000 and $67,000 for the nine months ended September 30, 2021 and 2020, respectively. The increase of $209,000 was the result of higher cash and marketable securities balances from the proceeds of our IPO in 2021 as compared to our cash balances in 2020, resulting in higher interest income earned. 26 Table of Contents Liquidity and Capital Resources Sources of liquidity Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarily with proceeds from the sale of convertible preferred stock and the initial public offering of our common stock. Through September 30, 2021, we had received gross proceeds of $160.7 million from the sale of convertible preferred stock and $186.1 million in net proceeds from the initial public offering of our common stock after deducting underwriting discounts, commissions and offering costs of $16.3 million. As of September 30, 2021, we had cash, cash equivalents and marketable securities in the amount of $290.5 million. Cash flows The following table summarizes our sources and uses of cash for each of the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine months ended September 30, ​ 2021 2020 ​ ​ (in thousands) Net cash used in operating activities ​ $ (24,088) ​ $ (9,996) Net cash used in investing activities ​ (256,348) ​ (203) Net cash provided by financing activities ​ 186,091 ​ 25,277 Net (decrease) increase in cash and cash equivalents ​ $ (94,345) ​ $ 15,078 ​ Operating activities Cash used in operating activities in the nine months ended September 30, 2021 was primarily driven by our net loss for the period of $30.1 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $3.3 million. Cash used in operating activities was reduced by non-cash charges of $2.7 million relating to stock-based compensation expense of $2.5 million and depreciation of $0.2 million. Cash used in operating activities in the nine months ended September 30, 2020 was primarily driven by our net loss for the period of $10.8 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $0.5 million. Cash used in operating activities was reduced by non-cash charges of $0.3 million relating to stock-based compensation expense of $0.2 million and depreciation of $0.1 million. Investing activities Cash used in investing activities during the nine months ended September 30, 2021 amounted to $256.4 million which was due to $273.2 million in purchases of marketable securities and $0.6 million for purchases of equipment, which was partially offset by $17.4 million in maturities of marketable securities. Cash used in investing activities during the nine months ended September 30, 2020 amounted to $0.2 million and was for purchases of equipment. Financing activities Net cash provided by financing activities during the nine months ended September 30, 2021 was $186.1 million, primarily consisting of cash proceeds from the initial public offering of the Company’s common stock. In addition, we generated cash proceeds of $67,000 from the issuance of common stock upon the exercise of stock options and paid $0.1 million in preferred stock issuance costs. 27 Table of Contents Net cash provided by financing activities during the nine months ended September 30, 2020 was $25.3 million which was generated from cash proceeds from the issuance of Series B-2 convertible preferred stock for $25.1 million and the issuance of common stock upon the exercise of stock options for $0.2 million. Funding requirements We will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates, and begin to commercialize any approved products. We are subject to all of the risks incident in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. In addition, we expect to incur additional costs associated with operating as a public company. Our expenses will also increase if, and as, we: ● advance our product candidates through preclinical and clinical development; ● seek regulatory approvals for any product candidates that successfully complete clinical trials; ● continue to invest in our proprietary drug discovery platform; ● seek to discover and develop additional product candidates; ● establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly; ● hire additional clinical, quality control, scientific and other personnel; ● expand our operational, financial and management systems and increase personnel including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; ● maintain, expand, protect and enforce our intellectual property portfolio; and ● acquire or in-license other product candidates and technologies. We expect that our existing cash and cash equivalents and marketable securities, will be sufficient to enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 24 months. In order to complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including: ● the scope, progress, results and costs of researching and developing our product candidates including ● conducting preclinical studies and clinical trials; ● the costs, timing and outcome of regulatory review of our product candidates; 28 Table of Contents ● the number and characteristics of other product candidates that we pursue; ● the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; ● the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch; ● the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval; ● the cost and timing of hiring new employees to support our continued growth; ● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; ● the effect of competing products that may limit market penetration of our products; ● the ability to establish and maintain collaborations on favorable terms, if at all; ● the extent to which we acquire or in-license other product candidates and technologies; ● the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any; ● our need to implement additional internal systems and infrastructure, including financial and reporting systems; ● the compliance and administrative costs associated with being a public company; and ● the extent to which we acquire or invest in businesses, products, or technologies, although we currently have no commitments or agreements relating to any of these types of transactions. A change in the outcome of any of these or other factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts. We may also be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. The issuance of additional equity securities may cause our stockholders to experience dilution. Future equity or debt financings may contain terms that are not favorable to us or our stockholders including debt instruments imposing covenants that restrict our operations and limit our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions. 29 Table of Contents Contractual Obligations and Commitments The following table summarizes our contractual obligations as of September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ ​ ​ ​ Less Than ​ 1 to3 ​ 3 to5 ​ More Than ​ Total 1 Year Years Years 5 Years ​ ​ ​ (in thousands) Operating lease commitments (1) ​ $ 173 ​ $ 173 ​ $ — ​ $ — ​ $ — (1) Reflects minimum payments due for office and laboratory space in Boulder, Colorado leased under an operating lease that was amended in August 2021 and expires in August 2022, and laboratory space in Portland, Oregon, leased under a short-term arrangement with renewal options. We have exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) pursuant to a license agreement effective November 20, 2020. Under the license agreement, we are obligated to make payments to OSIF aggregating up to $1.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified development and regulatory approval milestones and approximately $2.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified sales milestones. We are also obligated to pay low single-digit royalties to OSIF based on net sales by us and our affiliates and sublicensees of each product covered by the OSIF licensed patent rights. In addition, in the event we sublicense the OSIF licensed patent rights, we are obligated to pay OSIF a specified portion of income we receive from sublicensing. In addition, we have entered into contracts in the normal course of business with CROs, CDMOs and other third parties for preclinical research studies and testing, clinical trials and manufacturing services. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice and, as a result, are not included in the table of contractual obligations and commitments above. Payments due upon cancellation consist only of payments for services provided and expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation. Off-Balance Sheet Arrangements We currently do not have, and did not have during the periods presented, any off-balance sheet arrangements, as defined in the rules and regulations of the U.S. Securities and Exchange Commission. Critical Accounting Policies and Significant Judgments and Estimates Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on a periodic basis. Our actual results may differ from these estimates. Our critical accounting policies are described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our final prospectus for our IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on March 26, 2021 and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the three and nine months ended September 30, 2021, there were no material changes to our critical accounting policies from those discussed in our final prospectus filed on March 26, 2021. ​ 30 Table of Contents Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our financial statements appearing in our quarterly report. Emerging Growth Company and Smaller Reporting Company Status Section 107 of The Jumpstart Our Business Startups Act of 2012 (JOBS Act) permits an “emerging growth company” such as us to take advantage of an extended transition time to comply with new or revised accounting standards as applicable to public companies. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies. We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering. We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (1) the market value of our stock held by non-affiliates is less than $250 million or (2) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.