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Item 7. Management’s Discussion and Analysis

2024-03-26 compared with 2023-03-23 · 114 added, 123 removed, 132 unchanged (64% of the section changed)

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We are a biotechnology company developing novel small molecule therapeutics to treat diseases across several therapeutic areas, including, central nervous system (“CNS”) disorders, lysosomal storage disorders (“LSDs”), metabolic disorders, and other diseases that can be targeted through protein degradation, such as oncology.

We use our exclusively in-licensed computational target and drug discovery platform, Site-Directed Enzyme Enhancement Therapy (“SEE-Tx®”), to discover novel allosteric binding sites on proteins implicated in a disease and to identify proprietary small molecules that bind these sites to modulate protein function and treat the underlying cause of the disease.

We believe that SEE-Tx® is uniquely suited to identify allosteric binding sites on the protein surface, which are different from the protein’s active (or orthosteric) binding site where the natural ligand of the protein binds.

Targeting an allosteric binding site instead of the active binding site of a protein provides numerous advantages, including:

the ability to regulate proteins implicated in disease through several different mechanisms of action covering both functional and conformational effects, including stabilization, destabilization, targeted degradation, allosteric inhibition, and allosteric activation of the targeted protein;

improved specificity of small molecules because binding to an allosteric binding site is non-competitive with the natural substrate that binds to the active binding site;

and the ability to identify small molecules with more favorable drug-like properties.

The SEE-Tx® platform has been used to identify novel allosteric sites and small molecules for all of our internal programs and partnered programs.

Discovering and targeting novel allosteric sites with our platform not only reduces traditional drug discovery timelines but enables rational drug design and offers the potential for superior small molecule drugs that are highly specific and that can penetrate hard to reach tissues and cross the blood-brain barrier.

We have generated an extensive preclinical data package providing evidence of the mechanism of action and effect of our lead product candidate GT-02287 for the treatment of GBA1 Parkinson’s disease, including restoration of GCase function, reduction of toxic lipid substrates and toxic forms of alpha-synuclein, improved survival of dopaminergic neurons, and increase of dopamine levels and improved locomotor function in animal models.

We anticipate completing IND-enabling toxicology studies in the first half of 2023 with the goal of filing the dossier required to commence a first-time-in-human, Phase 1 clinical trial of GT-02287 in the second half of 2023.

We plan to conduct the Phase 1 clinical trial in Australia and evaluate administration of both single and multiple ascending dose levels of GT-02287 in healthy volunteers to assess safety and pharmacokinetics.

In addition, we plan to continue to advance research programs and initiate additional programs targeting allosteric binding sites identified with the SEE-Tx® platform in various therapeutic areas, mainly oncology.

Through academic partnerships, co-development and licensing arrangements, we intend to develop a broad pipeline of therapeutics, using our novel approach of identifying and targeting previously unknown allosteric sites.

In response to the current financing environment, we continue to streamline our operational plans to become more capital efficient.

We are focusing on progressing our Parkinson’s and Gaucher disease programs and remain opportunistic to partnering opportunities for these lead programs and for drug discovery collaborations with our exclusively in-licensed computational SEE-Tx® platform.

In addition, we expect to continue to develop our program for Krabbe disease and liver and lung disease program, and use our exclusively in-licensed computational SEE-Tx® platform to establish new programs in oncology while seeking non-dilutive funding in order to continue or progress our other research programs.

We continue to monitor the impacts on our operations and access to financing of global and worsening macroeconomic conditions, such as the war in Ukraine, global geopolitical tension, the COVID-19 pandemic, heightened inflation and rising interest rates, exchange rate fluctuations, supply chain disruptions, recent and potential future bank failures and increases in commodity, energy and fuel prices.

GT-02287 - our lead product candidate:

for the treatment of GBA1 Parkinson’s disease and other synucleinopathies

Our clinical stage product candidate, GT-02287, is being developed for the treatment of GBA1 Parkinson’s disease.

We have generated an extensive preclinical data package providing evidence of the mechanism of action and safety of GT-02287.

In preclinical models of GBA1 Parkinson’s disease, GT-02287 has been shown to restore glucocerebrosidase, or GCase, function in the lysosome, reduce toxic lipid substrates and toxic forms of alpha-synuclein, improve survival of dopaminergic neurons, increase dopamine levels, completely restore locomotor function, and reduce plasma-based neurodegeneration maker, neurofilament light chain, or NfL, back to the level of healthy animals.

In September 2023, we initiated the first-in-human Phase 1 clinical trial to assess the safety, tolerability, pharmacokinetics, and food effect of GT-02287 in healthy participants.

The study design includes a single ascending dose part during which the study participants receive one dose of GT-02287 at different dose levels, and a multiple ascending dose part during which the study participants receive one daily dose of GT-02287 for 14 days at different dose levels.

In February 2024, we initiated the multiple ascending dose part of this Phase 1 clinical trial, which we anticipate completing in the second quarter of 2024, with the availability of the quality assurance audited interim report in the third quarter of 2024.

We are planning to expand the scope of this Phase 1 clinical trial by amending the study protocol to include a cohort of 12-15 patients with Parkinson’s disease.

These patients will be treated for a period of three months to evaluate safety, tolerability, and pharmacokinetics in patients, as well as to assess the effect of GT-02287 on certain biomarkers of the GCase disease cascade.

In preparation for the treatment of Parkinson’s disease patients, in September 2023, we initiated the sub chronic (13 weeks treatment) preclinical toxicity study.

The in-vivo phase of the preclinical toxicity study was concluded in January 2024 with the final, quality assurance audited, report expected by the beginning of the second quarter of 2024.

In addition, we are planning to initiate the chronic (6 months in rodents and 9 months in non-rodents) preclinical toxicity study in the second half of 2024, enabling the conduct of clinical studies in patients with a GT-02287 treatment duration beyond three months .

On June 1, , 2023 our Australian subsidiary (Gain Therapeutics Australia PTY LTD or “Gain Therapeutics Australia” ) was established.

Gain Therapeutics Australia is our wholly owned subsidiary with the business purpose to conduct and supervise the Phase 1 clinical trial of our lead product candidate GT-02287.

Financial Condition

Since our inception in 2017, we have devoted substantially all of our resources to identify and develop next-generation brain-penetrant allosteric small molecules for the treatment of devastating diseases with high-unmet medical needs using our in-licensed SEE-Tx® platform.

Our operations have consisted primarily of organizing and staffing the Company, expanding its operations, securing financing, performing research, conducting preclinical studies and acquiring, developing and securing our in-licensed technology.

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Even if our product development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

We have financed our operations through a combination of sales of convertible preferred stock, including Series A Preferred Stock and Series B Preferred Stock, and our initial public offering (“IPO”) of our common stock, as well as research grants.

In 2019 and 2020, through our Series A and Series B financings, we raised $14 million in aggregate gross proceeds.

On March 17, 2021, we completed our IPO and issued and sold approximately 4.1 million shares of our common stock at a public offering price of $11.00 per share, including approximately 0.5 million shares in connection with the full exercise of the underwriters’ option to purchase additional shares, resulting in net proceeds of approximately $40.5 million, after deducting the underwriting discounts and commissions and offering expenses.

From inception through December 31, 2022, we have raised an aggregate of $60 million of gross proceeds through the issuance of convertible preferred stock and our IPO.

In May 2022, we filed a shelf registration statement on Form S-3, which covers the offering, issuance and sale of up to a maximum aggregate offering price of $100.0 million of any combination of our common stock, preferred stock, debt securities and/or warrants from time to time in one or more offerings (the “Shelf Registration Statement”).

In May 2022, we entered into a Controlled Equity OfferingSM Sales Agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or Cantor, pursuant to which we were able to offer and sell shares of our common stock having an aggregate offering price of up to $16.0 million from time to time through or to Cantor, acting as our agent or principal, in a series of one or more at-the-market equity offerings, which we refer to as our ATM Program.

During the year ended December 31, 2023, we sold an aggregate of 862,535 shares of common stock at an average price of $4.60 per share, raising gross proceeds of $3.9 million, which includes $0.4 million in sales and commissions and other offering expenses.

The Sales Agreement and the ATM Program were terminated in conjunction with the public offering and concurrent private placement of shares of the Company’s common stock in November 2023, as described below.

In November 2023, we completed the public offering of 2.5 million shares of our common stock and warrants to purchase 1.3 million shares of our common stock.

The warrants have an exercise price of $2.75 per share and were sold at the rate of one warrant for every two shares of common stock purchased in the public offering.

The public offering price for each set of two shares of common stock and accompanying warrant to purchase one share of commons stock was $4.01 (with an effective price of $2.00 per share and $0.01 per warrant).

In a private placement that was completed concurrently with the public offering we also issued to accredited investors 2.5 million of shares of our common stock (or pre-funded warrants in lieu thereof) and private warrants to purchase 2.5 million shares of our common stock with an exercise price of $2.75 per share.

The private offering price per share and accompanying warrant in the private placement was $2.00 per set of securities sold privately.

The public offering and the concurrent private placement resulted in combined gross proceeds of $10.1 million, which includes $1.2 million of underwriting commissions, placement agent’s fees and other expenses connected with the financing round.

As of December 31, 2023 $0.9 million of the costs associated with the financing round had already been paid or deducted from the gross proceeds, while the reminder of the amount has been paid in the first quarter of 2024.

From inception through December 31, 2023, we have raised an aggregate of $74 million of gross proceeds through equity financings, including the issuance of convertible preferred stock, our IPO and sales under our ATM Program.

As of December 31, 2023, we had cash, cash equivalents and marketable securities of $16.8 million.

For the year ended December 31, 2022, we had cash outflows from operations of $14.7 million.

We have incurred recurring losses and negative cash flows from operations since inception and as of December 31, 2023 and December 31, 2022, had an accumulated deficit of $60.8 million and $38.5 million, respectively.

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In addition, we will need significant additional financing to fund our operations and to develop our product candidates.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given.

Cash requirements may vary materially from those now planned because of changes in direction of our research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments.

If adequate additional funds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our pipeline, management may need to curtail our development efforts and planned operations to conserve cash.

Going Concern

As of December 31, 2023 and December 31, 2022, we had an accumulated deficit of $60.8 million and $38.5 million, respectively, and as of December 31, 2023, we had cash, cash equivalents and marketable securities of $16.8 million.

During the year ended December 31, 2023, we incurred net losses of $22.3 million and generated negative cash flows from operations of $18.9 million.

Our current operating plan indicates that it will continue to incur losses from operations and generate negative cash flows from operating activities.

Our projected cash outflows for the upcoming periods raise substantial doubt about our ability to continue as a going concern for at least 12 months from the issuance of the financial statements included elsewhere in this Annual Report on Form 10-K.

We will need to raise additional capital to fund continued operations beyond the first quarter of 2025.

We plan to address our liquidity needs by taking steps to improve our operations and cash position, including identifying access to future capital and potential cost-reduction measures.

Investors should read the section below titled “Liquidity and Capital Resources” for additional information regarding our financial condition and ability to continue operations.

Financing Requirements;

Current Financing Environment

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to seek additional funding through a combination of public or private equity offerings, debt financings, government or private party grants, collaborations, strategic alliances and licensing arrangements.

Until such time, if ever, as we can generate substantial product revenues to support our business and corporate strategy, we expect to finance our cash needs through a combination of public and private equity offerings, including an at-the-market offering, debt financings, government or private party grants, collaborations, strategic alliances and licensing arrangements.

We may not be able to obtain financing on acceptable terms, or at all, and we may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all.

The terms of any financing may adversely affect our holdings or the rights of our stockholders.

If we are unable to obtain funding, we could be required to delay, limit, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such candidates ourselves, which could adversely affect our business prospects.

The war in Ukraine, global geopolitical tension, and COVID-19 pandemic continue to have unpredictable impacts on global societies, economies, financial markets, and business practices.

Recently worsening global macroeconomic conditions, including actions taken by central banks to counter inflation, recent and potential future bank failures, volatility in the capital markets and related market uncertainty, may impact our ability to obtain additional financing when needed on favorable terms or at all.

We are currently subject to General Instruction I.B.6 to Form S-3 (the “Baby Shelf Rule”), and the amount of funds we can raise through primary public offerings of securities in any twelve-month period using our Shelf Registration Statement is limited to one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates.

We will be limited by the Baby Shelf Rule until such time as our public float exceeds $75.0 million.

As of December 31, 2022, the Company has not sold any securities pursuant to the Shelf Registration Statement.

In May 2022, we entered into a Controlled Equity Offering SM Sales Agreement, or Sales Agreement with Cantor Fitzgerald & Co.

(“Cantor”), pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $16.0 million from time to time through or to Cantor, acting as our agent or principal, in a series of one or more at-the-market equity offerings.

Cantor is not required to sell any specific amount but acts as our sales agent using commercially reasonable efforts consistent with its normal trading and sales practices.

Shares sold pursuant to the Sales Agreement will be sold pursuant to the Shelf Registration Statement and will count towards the limit of the Baby Shelf Rule.

Our common stock will be sold at prevailing market prices at the time of the sale, and as a result, prices may vary.

As of December 31, 2022, the Company has not sold any shares of common stock pursuant to the Sales Agreement.

If we are unable to obtain funding, we could be required to delay, limit, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, or grant rights to develop, sell and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves, which could adversely affect our business prospects.

The war in Ukraine, the conflict between Hamas and Israel, global geopolitical tension, and the post COVID-19 environment continue to have unpredictable impacts on global societies, economies, financial markets, and business practices.

Recently worsening global macroeconomic conditions, liquidity concerns at and failures of banks and other financial institutions, volatility in the capital markets, and related market uncertainty, may impact our ability to obtain additional financing when needed on favorable terms or at all.

For additional discussion of our financing requirements, see “—Liquidity and Capital Resources” and “—Funding Requirements” below.

Strategic Transactions;

Collaboration and Licensing Arrangement

In connection with our business development activities, we enter into collaborative and licensing arrangement with third parties, to use our licensed SEE-Tx® computational platform technology to discover novel allosteric sites on misfolded proteins and identify proprietary small molecules that bind these sites, potentially restoring protein folding and treating disease.

In connection with our business development activities, we enter into collaboration and licensing arrangements with third parties, to use our licensed Magellan™ computational platform technology to discover novel allosteric sites on proteins and identify proprietary small molecules that bind these sites and may be developed into pharmaceutical products.

We expect to continue to identify and evaluate collaboration, co-development and licensing opportunities that may be similar to or different from the collaboration and licenses arrangements that we have entered into.

Collaboration with Zentalis

On April 20, 2021, we entered into a multi-target collaboration agreement, or the Zentalis Agreement, with Zentalis Pharmaceuticals, Inc.

(“Zentalis”) to discover new product candidates for the treatment of cancer.

Under the terms of the Zentalis Agreement, we have agreed to use our licensed SEE-Tx® computational platform technology to identify binding site on target proteins and determine the potential suitability of these sites as drug targets, as well as their prospective therapeutic use in oncology.

Zentalis has informed us of its desire to wind down the collaboration.

Based on the results generated during the collaboration, we plan to independently continue the research activities with respect to the applicable target as one of our own internal programs.

Components of Our Consolidated Results of Operations

We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future, if at all.

If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval and successfully commercialize them, we will not generate revenues in the future.

Our current revenue consists primarily of revenue from our Zentalis collaboration arrangement.

If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval and successfully commercialize them, we will not generate

revenues in the future.

Historically, we have received limited collaboration revenue pursuant to a collaboration agreement with Zentalis Pharmaceuticals which has been concluded in the year ended December 31, 2023.

Operating Expenses

Our expenses since inception have consisted solely of research and development costs and general and administrative costs.

Our operating expenses since inception have consisted solely of research and development and general and administrative costs.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, which include:

● expenses incurred under collaborations with third parties, including contract research organizations (“CROs”) and Universities, that conduct research and preclinical studies, such as in-vitro and in-vivo absorption, distribution, metabolism and excretion (“ADME”), cell model studies, in-vivo pharmacology and pharmacokinetic studies, toxicology studies and chemical synthesis, stability studies, manufacturing and control materials, process characterization, scale-up and transfer, on our behalf;

● employee salaries, benefits and other related costs, including share-based compensation expenses, for employees engaged in research and development functions and overhead allocations consisting of various support and facilities-related expenses, which include rent, utilities and maintenance of our Barcelona labs and Lugano office space, depreciation, travel and conference expenses;

● expenses incurred under collaborations with third parties, including contract research organizations (“CROs”) and Universities, that conduct research, preclinical and clinical studies, such as in-vitro and in-vivo absorption, distribution, metabolism and excretion (“ADME”), cell model studies, in-vivo pharmacology and pharmacokinetic studies, toxicology studies and chemical synthesis, stability studies, manufacturing and control materials, process characterization, scale-up and transfer, clinical trial expenses, on our behalf;

● employee salaries, benefits and other related costs, including share-based compensation expenses, for employees engaged in research and development functions and overhead allocations consisting of various support and facilities-related expenses, which include rent, utilities and maintenance of our facilities, depreciation, travel and conference expenses;

● fees paid to consultants who assist with research and development activities and related travel expenses;

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The following table provides a breakout of our research and development expenses by major categories of expense:

Pre-clinical activities and outside services

Pre-clinical activities, clinical activities and outside services

Personnel expenses

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Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

We anticipate that our research and development expenses will increase substantially in future periods to support progress in our research and development activities, including the commencement of the clinical trials for product candidates we are developing.

These increases will likely also result from increased headcount, expanded infrastructure and increased insurance costs.

Our primary research and development focus since inception has been the application of our in-licensed SEE-Tx® platform to various indications and targets.

We are using our platform to generate a broad pipeline of product candidates.

We anticipate that our research and development expenses will increase substantially in future periods to support progress in our research and development activities, including the progressing of the clinical trials for product candidates we are developing.

These increases will likely also result from expanded infrastructure and increased insurance costs.

Such expenses are offset by contributions from research grants, which are recorded as a reduction to research and development expenses based on our best estimate of the periods in which the related expenditures are incurred and activities performed.

Our primary research and development focus since inception has been the application of our Magellan™ platform to various indications and targets, and more recently the development of our clinical stage lead product candidate GT-02287 for the treatment of Parkinson’s diseae and other neurodegenerative diseases.

Research and development activities are central to our business model.

Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, 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 continue to increase in the foreseeable future as we (i) increase personnel costs, including stock-based compensation, (ii) continue preclinical development of our lead compounds, (iii) initiate clinical trials for certain product candidates, (iv) continue to discover and develop additional product candidates, and (v) pursue later stages of clinical development of product candidates.

As a result, we expect that our research and development expenses will continue to increase in the foreseeable future as we (i) increase personnel costs, including stock-based compensation, (ii) continue preclinical development of our lead compounds, (iii) progress our clinical trials for certain product candidates, (iv) continue to discover and develop additional product candidates, and (v) pursue later stages of clinical development of product candidates.

General and Administrative Expenses

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General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel expenses, and facility-related expenses, and other operating costs.

We anticipate that our general and administrative expenses will increase in the future, in the form of additional compensation, including salaries, benefits, incentive arrangements and share-based compensation awards, as we increase our headcount to support the expected growth, attract and retain additional personnel and the potential commercialization of our product candidates.

We also expect to incur increased expenses associated with being a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs and investor and public relations costs.

We will continue to focus on preserving our liquidity resources while we seek to maximize shareholders’ value.

We expect to continue the efforts started during the year ended December 31, 2023 to limit administrative expenses.

Other Financial Income (Expense)

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Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the periods indicated, together with the changes in those items in dollars.

The following table summarizes our results of operations for the periods indicated, together with the changes in those items.

Collaborative Agreements

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Comparison of the Years ended December 31, 2023 and 2022

For the years ended December 31, 2022 and 2021, total revenues were $140,108 and $164,994, respectively and consisted mainly of revenues from a collaboration agreement and other income related to subleasing our Lugano office space.

Collaboration revenues were $132,640 and $133,928 as of December 31, 2022 and 2021, respectively, and refer to development services related to the first target development program identified under the Zentalis Agreement.

For the years ended December 31, 2023 and 2022, total revenues were $55 thousand and $140 thousand, respectively, and consisted mainly of income from a collaboration agreement with Zentalis Pharmaceuticals.

Research and Development Expenses

Research and development expenses increased by $1,213,061 to $8,377,290 for the year ended December 31, 2022, from $7,164,229 for the year ended December 31, 2021.

The increase in research and development expenses for the year ended December 31, 2022 was primarily attributable to increases in external collaborations and external expenses, such as pre-IND clinical studies, quality and clinical manufacturing due to advancement of our GBA1 PD research programs into a development stage.

The variance is also due to higher personnel-related costs resulting from an increase in employee headcount and stock-based compensation expenses.

As of December 31, 2022, and 2021, research and development expenses are net of research grant of $82,133 and $184,748, respectively.

Research and development expenses increased by $3.1 million to $11.5 million for the year ended December 31, 2023, from $8.4 million for the year ended December 31, 2022.

The increase in research and development expenses for the year ended December 31, 2023 was primarily attributable to increases in external R&D services and external expenses related to the commencement and conduct of our Phase 1 clinical trial with our lead drug candidate GT-02287 for the treatment of GBA1 Parkinson’s disease.

General and Administrative Expenses

General and administrative expenses increased by $2,712,925 to $9,539,863 for the year ended December 31, 2022 from $6,826,938 for the year ended December 31, 2021.

The increase in general and administrative expenses for the year ended December 31, 2022 was primarily attributable to increases in expenses for legal fees relating to patent and corporate matters, professional fees for audit services, insurance and information technology as we continue to expand our business and build management infrastructure.

The variance is also due to higher personnel-related costs resulting from an increase in employee headcount and stock-based compensation expenses.

General and administrative expenses increased by $1.3 million to $10.8 million for the year ended December 31, 2023 from $9.5 million for the year ended December 31, 2022.

The increase in general and administrative expenses for the year ended December 31, 2023 was primarily attributable to increases in professional fees for corporate compliance consulting and non cash costs related to share based compensation.

Interest income, net

Interest income net increased by $362,862 to $375,357 for the year ended December 31, 2022 from $12,495 for the year ended December 31, 2021.

The increase is due to interest income earned on the excess of cash invested in United States Treasury Securities.

Income tax increased by $88,968 to $92,976 for the year ended December 31, 2022 from $4,008 for the year ended December 31, 2021.

The increase is due to higher taxable profit realized by our Spanish subsidiary as a consequence of the allocation of non deductible tax expenses.

Interest income net increased by $0.12 million to $0.49 million for the year ended December 31, 2023 from $0.37 million for the year ended December 31, 2022.

The increase in interest income, net is mainly attributable to interest income derived from our investment in available for sale treasury securities.

Foreign exchange loss, net

Foreign exchange loss, net increased by $0.34 million to $0.43 million for the year ended December 31, 2023 from $96 thousand for the year ended December 31, 2022.

The increase is mainly attributable to the Swiss Franc strengthening its value against the US dollar.

Income Taxes are $80 thousand and $93 thousand for year ended December 31, 2023 and 2022, respectively.

Income Taxes are mainly related to taxable income that was generated in Spain.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations.

We have not yet commercialized any products or technologies, and we do not expect to generate revenue from sales of any products in the near term, if at all.

We have funded our operations to date primarily through a combination of sales of our securities and research grants.

We do not currently have any approved products and have never generated any revenue from product sales.

To date, we have financed our operations primarily through the sale of equity securities and research grants.

As of December 31, 2022, and 2021, we had $22.1 million and $36.9 million in cash and cash equivalents and marketable securities, respectively, and an accumulated deficit of $38.5 million and $20.9 million, respectively.

We had indebtedness of $0.60 million and $0.69 million as of December 31, 2022 and 2021, respectively.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

stock, debt securities and/or warrants from time to time in one or more offerings (the “Shelf Registration Statement”).

We will be limited by the Baby Shelf Rule until such time as our public float exceeds $75.0 million.

As of December 31, 2022, the Company has not sold any securities pursuant to the Shelf Registration Statement.

In May 2022, we entered into a Controlled Equity Offering SM Sales Agreement, or Sales Agreement with Cantor Fitzgerald & Co.

Cantor is not required to sell any specific amount but acts as our sales agent using commercially reasonable efforts consistent with its normal trading and sales practices.

Shares sold pursuant to the Sales Agreement will be sold pursuant to the Shelf Registration Statement and will count towards the limit of the Baby Shelf Rule.

Our common stock will be sold at prevailing market prices at the time of the sale, and as a result, prices may vary.

As of December 31, 2022, the Company has not sold any shares of common stock pursuant to the Sales Agreement.

Until such time, if ever, as we can generate substantial product revenues to support our business and corporate strategy, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, government or private party grants, collaborations, strategic alliances and licensing arrangements.

We have not yet received approval for or commercialized any products or technologies, and we do not expect to generate revenue from sales of any products in the near term, if at all.

As described in additional detail under “Financial Condition” above, we have funded our operations to date primarily through a combination of sales of our securities and research grants.

As of December 31, 2023, and December 31, 2022, we had $16.8 million and $22.1 million in cash and cash equivalents and marketable securities, respectively, and an accumulated deficit of $60.8 million and $38.5 million, respectively.

We had indebtedness of $0.56 million and $0.60 million as of December 31, 2023 and December 31, 2022, respectively.

Our cash and cash equivalents available at December 31, 2023 are expected to be sufficient to fund our anticipated operating and capital requirements into the first quarter of 2025, but may not be sufficient to fund the Company’s operations for one year from the issuance of the financial statements included in our 2023 Form 10-K.

Therefore, we have reported there is substantial doubt about our ability to continue as a going concern.

Please refer to the discussion above titled “Going Concern”.

Until such time, if ever, as we can generate substantial product revenues to support our business and corporate strategy, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, at-the-market offerings, government or private party grants, collaborations, strategic alliances, and licensing arrangements.

As of December 31, 2023, we did not maintain any lines of credit or equity capital committed for funding.

We continue to explore potential opportunities and alternatives to obtain the additional resources that will be necessary to support our ongoing operations beyond the first quarter of 2025, including raising additional capital through either private or public equity, including at-the-market offerings, or debt financing, or additional program collaborations or non-dilutive funding.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders.

Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock.

We may not be able to obtain additional funds through equity or debt financings when needed on favorable terms or at all, including as a result of rising interest rates, recent and potential future bank failures, volatility in the capital markets and related market uncertainty.

If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

If we raise funds

through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock.

We may not be able to obtain additional funds through equity or debt financings when needed on favorable terms or at all, including as a result of rising interest rates, liquidity concerns at, and failures of, banks and other financial institutions, volatility in the capital markets and related market uncertainty.

Further, if we are unable to obtain additional funding to support our current or proposed activities and operations, we may not be able to continue our operations as currently anticipated, which may require us to suspend or terminate any ongoing development activities, modify our business plan, curtail various aspects of our operations, cease operations, or seek relief under applicable bankruptcy laws.

The following table provides information regarding our cash flows for the periods presented:

Cash used in operating activities

Cash used in investing activities

Cash (used) / provided by financing activities

Net (decrease) / increase in cash, cash equivalents and restricted cash

Cash provided/(used) by/in investing activities

Cash provided/(used) by/in financing activities

Effect of exchange rate changes

Net increase / (decrease) in cash, cash equivalents and restricted cash

Cash Used in Operating Activities

During the year ended December 31, 2022, we used $14,692 thousand of cash in operating activities, primarily to fund our operations related to the development of our product candidates and related general and administrative support activities.

Cash used in operating activities reflected our net loss of $17,591 thousand, which was partially offset by adjustments to reconcile net loss to cash used in operating activities of $1,384 thousand related mainly to stock-based compensation, depreciation and amortization, as well as a $1,515 thousand increase in cash flows resulting from changes in our operating assets and liabilities.

During the year ended December 31, 2021, we used $12,366 thousand of cash in operating activities, primarily to fund our operations related to the development of our product candidates and related general and

administrative support activities.

Cash used in operating activities reflected our net loss of $13,891 thousand, which was partially offset by adjustments to reconcile net loss to cash used in operating activities of $1,855 thousand related to stock based compensation, depreciation, internal use-software and issuance of warrants, as well as a $330 thousand decrease in cash flows resulting from changes in our operating assets and liabilities.

During the year ended December 31, 2023 and 2022, we used $18.9 million and $14.7 million of cash, respectively, in operating activities, primarily to fund our operations related to the development of our product candidates and related general and administrative support activities.

Cash Used in Investing Activities

During the year ended December 31, 2022, cash used in investing activities was $14,775 thousand, primarily due to the purchase of marketable securities for $17,735 thousand and the purchase of computers and equipment for $119 thousand, offset by $3,079 thousand attributable to maturity of marketable securities.

During the year ended December 31, 2021, cash used in investing activities was $94 thousand primarily due to purchases of furniture, computers and lab instruments.

During the year ended December 31, 2023, cash provided by investing activities was $10.2 million, primarily due to maturity of marketable securities for $12.2 million partially offset by th purchase of marketable securities for $2 million.

During the year ended December 31, 2022, cash used in investing activities was $14.7 million, primarily due to purchase of marketable securities for $17.7 million, partially offset by the maturity of marketable securities for $3 million.

Cash Used/Provided by Financing Activities

During the year ended December 31, 2022, cash used by financing activities was $79 thousand related to the payment of the current portion of a long-term loan.

During the year ended December 31, 2021, cash provided by financing activities was $41,767 thousand, reflecting $42,630 thousand related to proceeds from the issuance of our common stock through the IPO, net of underwriter discounts and commissions, $12 thousand in proceeds from the exercise of stock options, offset by payment for offering costs of $853 thousand and payment of current portion of long-term debts for $22 thousand.

During the year ended December 31, 2023, cash provided by financing activities was $12.6 million, mainly related to the net proceeds related to the public offering and the concurrent private placement for $9.2 million, and the net proceeds related to the ATM program for $3.5 million.

During the year ended December 31, 2022, cash used in financing activities was $78 thousand, reflecting the payment of current portion of long-term debt.

Funding Requirements

Our primary use of cash is to fund our operating expenses, which primarily consist of research and development expenditures.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.

Our primary use of cash is to fund our operating expenses, which consist of research and development and general and administrative expenditures.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements.

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● the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;

● the extent to which we encounter increased costs as a result of global and macroeconomic conditions, including heightened inflation and rising interest rates, supply chain disruptions, fluctuating exchange rates, and increases in commodity, energy and fuel prices ;

● the extent to which we encounter increased costs as a result of global and macroeconomic conditions, including heightened inflation and high interests rates, supply chain disruptions, fluctuating exchange rates, and increases in commodity, energy and fuel prices;

● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

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Because of the numerous risks and uncertainties associated with the development of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials.

We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, government or private party grants, collaborations, strategic alliances and licensing arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights as a common stockholder.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us.

We may not be able to obtain additional funds through equity or debt financings when needed on favorable terms or at all, including as a result of rising interest rates, volatility in the capital markets and related market uncertainty.

If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, including at-the-market offerings, debt financings, government or private party grants, collaborations, strategic alliances and licensing arrangements.

We may not be able to obtain additional funds through equity or debt financings when needed on favorable terms or at all.

See “Financing Requirements;

Current Financing Environment” and “Liquidity and Capital Resources”.

Critical Accounting Policies and Use of Estimates

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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.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, defined benefit pension liability, share-based compensation and recognition of research grants.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, defined benefit pension liability, share-based compensation, recognition of research grants

and the going concern assessment.

Our actual results may differ from these estimates under different assumptions or conditions.

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This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

We make estimates of our accrued expenses as of each balance sheet date based on facts and

circumstances known to us at that time at the date of the preparation of the financial statements.

We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time at the date of the preparation of the financial statements.

There may be instances in which payments made to our vendors exceed the level of services provided, and result in a prepayment reported under other current assets, which are subsequently expensed in the statement of operations when the related activity has been performed.

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Share-based compensation

We recognize compensation costs related to equity based compensation granted to employees, consultants and directors, based on the estimated fair value of the awards as of the grant date.

We recognize compensation costs related to share based compensation granted to employees, consultants and directors, based on the estimated fair value of the awards as of the grant date.

We estimate the grant date fair value, and the resulting share-based compensation, using the Black-Scholes option-pricing model.

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Certain assumptions used in our Black-Scholes option-pricing model represent management’s best estimates and involve a number of assumptions and the application of management’s judgment, as they are inherently subjective.

We recognize expenses related to Restricted Stock Units (or RSUs) based on their fair market value, determined as the closing price on Nasdaq of our common stock as of the grant date, on a straight-line basis over the requisite service period.

For Restricted Stock Units with market or performance based vesting conditions (or PRSUs), the fair value at grant date is calculated using an option-pricing model (Monte Carlo Simulation) or based on management’s assessment of the likelihood of concurrence of the underlying performance, respectively.

Research Grants

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Contributions from research and development activities under the grants are recorded based on management’s best estimate of the periods in which the related expenditures are incurred and activities performed and are classified in the statement of operations as a reduction to research and development expenses.

Going Concern Assessment

At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The assessment over going concern is based on management’s most updated budget and forecast and does not take into consideration estimated future cash inflows that are not certain as of the date of preparation of the financial statements.

We qualify as an “emerging growth company”, as defined in the JOBS Act.

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If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and the market price of our common stock may be more volatile.

have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years or (iv) the date on which we are deemed a “large accelerated filer” under the rules of the SEC with at least $700 million of outstanding equity securities held by non-affiliates.

We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenue of $1.07 billion or more, (ii) December 31, 2026, (iii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years or (iv) the date on which we are deemed a “large accelerated filer” under the rules of the SEC with at least $700 million of outstanding equity securities held by non-affiliates.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis