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Item 7. Management’s Discussion and Analysis

2024-03-08 compared with 2023-03-30 · 88 added, 147 removed, 166 unchanged (59% of the section changed)

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Our differentiated technology platform leverages structure-based drug discovery and computational chemistry expertise and enables us to develop oral small molecule therapeutics for the treatment of various diseases including those impacting the metabolic, cardiovascular, and pulmonary systems.

In February 2023, we completed our Initial Public Offering (“IPO”) for net proceeds of $166.7 million.

In February 2023, we completed our Initial Public Offering (“IPO”) for net proceeds of approximately $166.7 million, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

In September 2023, we entered into a share purchase agreement with certain institutional investors (the “Purchase Agreement”), pursuant to which we issued and sold an aggregate of 21,617,295 ordinary shares and 2,401,920 non-voting ordinary shares for net proceeds of approximately $281.5 million (the “Private Placement”).

Our initial focus is on G-protein coupled receptors (“GPCRs”) as a therapeutic target class.

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By leveraging our world-class GPCR know-how, we aim to design differentiated small molecule therapies to overcome the limitations of biologics and peptide therapies targeting this family of receptors.

We are developing GSBR-1290, our oral small molecule product candidate targeting the validated GLP-1R for the treatment of type 2 diabetes mellitus (“T2DM”) and obesity.

We are developing GSBR-1290, our oral small molecule product candidate targeting the validated glucagon-like-peptide-1 receptor (“GLP-1R”) for the treatment of type 2 diabetes mellitus (“T2DM”) and obesity.

We completed our Phase 1 single ascending dose (“SAD”) study of GSBR-1290 in September 2022.

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Food and Drug Administration (“FDA”) to support initiation of a Phase 1b study in T2DM and obesity and received FDA allowance in September 2022.

We initiated the Phase 1b multiple ascending dose (“MAD”) study in January 2023 and completed dosing in healthy overweight subjects in March 2023.

We plan to submit a protocol amendment to the FDA to transition to a Phase 2a proof-of-concept study in T2DM and obesity in the second half of 2023.

We expect to report topline data for the Phase 1b study and Phase 2a study with the expected initiation in the second half of 2023.

Beyond GSBR-1290, we are developing next generation GLP-1R candidates, including dual GLP-1R/GIPR agonists, each designed with customized properties to achieve additional benefit.

In September 2022, we completed a Phase 1 SAD and MAD study evaluating ANPA-0073, our small molecule product candidate targeting APJR.

ANPA-0073 was generally well tolerated in healthy human volunteers.

ANPA-0073 is in development for the treatment of patients with idiopathic pulmonary fibrosis (“IPF”) and pulmonary arterial hypertension (“PAH”).

We expect to conduct additional preclinical studies to be followed by a Phase 1 formulation bridging PK study in Australia.

Moreover, we are advancing a differentiated LPA1R antagonist for the treatment of IPF.

We selected a development candidate in January 2023 and expect to initiate a first-in-human study in 2024.

We initiated the Phase 1b multiple ascending dose (“MAD”) study of GSBR-1290 in January 2023 and completed dosing in otherwise healthy overweight subjects in March 2023.

In May 2023, we submitted a protocol amendment to the FDA and initiated dosing of the Phase 2a proof-of-concept study in T2DM and obesity.

We reported topline data for the 28-day Phase 1b MAD study in September 2023, in which GSBR-1290 was generally well-tolerated with no adverse event-related discontinuations and demonstrated an encouraging safety profile and significant weight loss of up to 4.9% placebo-adjusted, supporting once-daily dosing.

In December 2023, we reported clinically meaningful topline data from our Phase 2a T2DM cohort, interim results from our Phase 2a obesity cohort and topline data from a Japanese ethno-bridging study of GSBR-1290.

These data demonstrated that GSBR-1290 was generally well-tolerated, with no treatment-related SAEs over 12 weeks, with only one participant discontinuing the study due to adverse events in the T2DM cohort and none in the obesity cohort.

GSBR-1290 also showed significant reduction in weight in the obesity cohort at 8 weeks, and significant reductions in hemoglobin A1c (“HbA1c”) and weight in the T2DM cohort.

We expect to report the full 12-week Phase 2a obesity data in the latter half of the second quarter of 2024 with additional 24 participant data.

We also fully enrolled a formulation bridging and titration optimization study to evaluate capsule versus tablet PK and explore different titration regimens of GSBR-1290.

This study is expected to be completed in the latter half of the second quarter of 2024, in preparation for the global Phase 2b study for obesity which we expect to initiate in the fourth quarter of 2024.

A Phase 2 study in T2DM is also planned for the second half of 2024.

We are advancing a robust pipeline of small molecule therapeutic candidates for chronic diseases with unmet medical need.

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We believe this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the design and development of our product candidates.

We have established a manufacturing plan in the U.S.

and continue to contract in parallel with additional suppliers in the US and other regions outside of China to diversify the manufacturing of our active pharmaceutical ingredient and drug product .

As our development programs progress and we build new process efficiencies, we expect to continually evaluate this strategy with the objective of satisfying demand for registration trials and, if approved, the manufacture, sale and distribution of commercial products.

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As of December 31, 2023, we had an accumulated deficit of $206.6 million.

As of December 31, 2022, we have financed our operations primarily through the private placement of equity securities and have received aggregate gross proceeds of approximately $198.0 million, and have cash, cash equivalents and short-term investments of $90.8 million.

On February 7, 2023, we completed our initial public offering (“IPO”) of our American depositary shares (“ADSs”), in which we issued and sold an aggregate of 12,351,000 ADSs (inclusive of 1,611,000 ADSs purs uant to the exercise by the underwriters of their option) at a price of $15.00 per ADS for net cash proceeds of approximately $ 166.7 million, net of underwriting discounts and commissions and estimated offering costs.

Historically, we have financed our operations primarily through the private placement of equity securities.

In February 2023, we completed our IPO of our American depositary shares (“ADSs”), in which we issued and sold an aggregate of 12,351,000 ADSs (inclusive of 1,611,000 ADSs purs uant to the exercise by the underwriters of their option) at a price of $15.00 per ADS for net cash proceeds of approximately $ 166.7 million, net of underwriting discounts and commissions and estimated offering costs.

Upon the closing of the IPO, all outstanding shares of redeemable convertible preferred shares automatically converted into 67,018,087 ordinary shares.

Subsequent to the closing of the IPO, there were no shares of redeemable convertible preferred shares outstanding.

Based on our current business plan, we estimate that our existing cash, cash equivalents and short-term investments, together with the net proceeds from our IPO, will be sufficient to fund our projected operations through at least 2025.

In September 2023, we entered into a share purchase agreement with certain institutional investors (the “Purchasers”), pursuant to which we agreed to sell and issue to the Purchasers an aggregate of 21,617,295 ordinary shares and 2,401,920 newly designated non-voting ordinary shares at a purchase price of $12.49 per share (or the equivalent of $37.47 per ADS), the closing price of our ADS on the Nasdaq Global Market on September 28, 2023.

We completed the Private Placement in October 2023 and received approximately $281.5 million in net proceeds after deducting placement agent fees and other private placement expenses.

As of December 31, 2023, we have cash, cash equivalents and short-term investments of $467.3 million.

Based on our current business plan, we estimate that our existing cash, cash equivalents and short-term

investments will be sufficient to fund our projected operations through at least 2026.

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

We expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future, particularly if and as we continue to invest in our research and development activities and initiate additional clinical trials, expand our product pipeline, hire additional personnel and invest in and grow our business, maintain, expand and protect our intellectual property portfolio, and seek regulatory approvals for

and commercialize any approved product candidates.

In addition, following the closing of our IPO, we expect to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory, consulting, and tax-related services associated with being a public company, compliance with Nasdaq listing and Securities Exchange Commission (“SEC”) requirements, director and officer insurance premiums and investor relations costs that we did not incur as a private company.

In addition, we expect to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory, consulting, and tax-related services associated with being a public company, compliance with Nasdaq listing and SEC requirements, director and officer insurance premiums and investor relations costs that we did not incur as a private company.

As a result, we will need substantial additional capital to develop our product candidates and fund operations for the foreseeable future.

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

Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability.

Impact of the COVID-19 Pandemic and Other Macroeconomic Factors

In December 2019, a novel strain of coronavirus (including its variants, “COVID-19”), was reported in China.

Since then, COVID-19 has spread globally.

The spread of COVID-19 from China to other countries has resulted in the World Health Organization (“WHO”) declaring the outbreak of COVID-19 as a pandemic.

Many countries around the world had imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and had closed non-essential businesses.

If local jurisdictions continue to put restrictions in place, our ability to continue to operate our business may also be limited.

Such events may result in a period of business, supply and research activities’ disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.

To date, we have experienced delays in our patient enrollment and our supply chain as a direct result of COVID 19 on our suppliers’ ability to timely manufacture and ship certain supplies such as reagents and other lab consumables.

However, we cannot, at this time, predict the specific extent, duration or full impact that the COVID 19 pandemic will continue to have on our financial condition and operations, including our ongoing and planned preclinical studies and clinical trials.

While the pandemic appears to have waned, there may be significant uncertainty resulting from any changes with regards to COVID-19 infections, along with the impact of other macroeconomic factors such as inflation, supply chain issues, rising interest rates, future bank failures and the impact of the Russian/Ukraine conflict.

The impact of related responses and disruptions caused by the COVID-19 pandemic as well as prevailing macroeconomic factors has and may in the future More specifically, the COVID 19 pandemic could disrupt the supply chain and the manufacture or shipment of drug substances and finished drug products for our product candidates for use in our research, preclinical studies and clinical trials, impede our clinical trial initiation and recruitment and the ability of patients to continue in clinical trials and cause delays in the FDA’s review and approval processes, any of which could delay our preclinical studies and clinical trials and increase our development costs.

In addition, the spread of COVID 19, which has caused a broad impact globally, and other macroeconomic factors, may materially affect us economically.

While the potential economic impact brought by, and the duration of, any continuing impact of COVID 19 and the impact of macroeconomic factors may be difficult to assess or predict, a widespread pandemic, actual or anticipated changes in interest rates and economic

inflation, current and future bank failures and the impact of the Russian/Ukraine conflict has caused higher prices of supplies, declines in global confidence and could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity, or make any necessary financing more costly or more dilutive.

In addition, a recession or market correction resulting from the spread of COVID 19 and such macroeconomic factors could materially affect our business.

Possible effects of COVID-19 may also include absenteeism in our labor workforce and unavailability of products and supplies used in operations.

Impact of Geopolitical and Macroeconomic Factors

Although we did not see a significant financial impact to our business operations as a result of recent geopolitical and macroeconomic developments, such as recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, global pandemics, geopolitical tensions between the U.S.

and China and the ongoing Russia/Ukraine conflict for the year ended December 31, 2023, there may be potential impacts to our business in the future that are highly uncertain and difficult to predict, including our ability to raise additional funds, disruptions to the supply chain and the manufacture or shipment of drug substances and finished drug products for our product candidates for use in our research, preclinical studies and clinical trials, impediments to our clinical trial initiation and recruitment, errors or omissions at our clinical sites and the ability of patients to continue in clinical trials, delays in the FDA’s review and approval processes, our ability to effectively operate across different geographies in which our offices are located, continued increases in interest rates and economic inflation, bank failures, the impact on the global economy due to the Israel-Hamas war, higher prices of supplies, and changes in availability and cost of credit and our ability to access capital.

The ultimate impact of these geopolitical and macroeconomic factors, as well as any lasting effects on the way we conduct our business, is highly uncertain and subject to continued change, and we recognize that they may continue to present unique challenges for us.

Lhotse Collaboration Agreement with Schrödinger, LLC

In October 2020, Lhotse Bio, Inc., our wholly-owned subsidiary, entered into a Collaboration Agreement (the “Lhotse-Schrödinger Agreement”) with Schrödinger, LLC (“Schrödinger”) to discover and develop novel, orally bioavailable, small molecule inhibitors of LPA1R.

Under the Lhotse-Schrödinger Agreement, Schrödinger is obligated to provide computational modeling and design support, including by using its technology platform to perform virtual screens, and Lhotse is obligated to provide day-to-day chemistry and biology support.

In October 2020, Lhotse Bio, Inc., our wholly-owned subsidiary, entered into a Collaboration Agreement (the “Lhotse-Schrödinger Agreement”) with Schrödinger, LLC (together with its affiliates, “Schrödinger”) to discover and develop novel, orally bioavailable, small molecule inhibitors of lysophosphatidic acid 1 receptor (“ LPA1R”).

Under the Lhotse-Schrödinger Agreement, Schrödinger is obligated to provide computational modeling and design support, including by using its technology platform to perform virtual screens, and

Lhotse is obligated to provide day-to-day chemistry and biology support.

Pursuant to the Lhotse-Schrödinger Agreement, a joint steering committee comprised of representatives from both parties oversees the research performed under the agreement.

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Under the Lhotse-Schrödinger Agreement, Lhotse is obligated to pay Schrödinger a quarterly active program payment in the low six digits for each successive three-month period during which Schrödinger continues to perform research work as agreed by the parties, and as of December 31, 2023, we have paid to Schrödinger an aggregate of $0.8 million.

If Lhotse develops and commercializes a product containing a compound (a “Collaboration Compound”), that is discovered or developed under the Lhotse-Schrödinger Agreement (a “Collaboration Product”), Lhotse is obligated to pay Schrödinger development and regulatory milestone payments of up to an aggregate of $17.0 million, regardless of the number of Collaboration Products that reach such milestones.

Lhotse will also be obligated to pay Schrödinger tiered royalties on a Collaboration Product-by-Collaboration Product basis equal to low single digit percentages on aggregate worldwide net sales of Collaboration Products, subject to specified reductions and offsets.

Lhotse’s obligation to pay royalties to Schrödinger will expire on a Collaboration Product-by-Collaboration Product and country-by-country basis on the later of (i) the expiration of the last-to-expire Lhotse patent claim covering the composition of matter of the Collaboration Compound contained in such Collaboration Product in such country, (ii) the expiration of regulatory, pediatric, orphan drug, or data exclusivity with respect to such Collaboration Product in such country, and (iii) ten years after the first commercial sale of such Collaboration Product in such country (the “Royalty Term”).

If Lhotse develops and commercializes a product containing a compound (a “Lhotse Collaboration Compound”), that is discovered or developed under the Lhotse-Schrödinger Agreement (a “Lhotse Collaboration Product”), Lhotse is obligated to pay Schrödinger development and regulatory milestone payments of up to an aggregate of $17.0 million, regardless of the number of Lhotse Collaboration Products that reach such milestones.

Lhotse will also be obligated to pay Schrödinger tiered royalties on a Lhotse Collaboration Product-by- Lhotse Collaboration Product basis equal to low single digit percentages on aggregate worldwide net sales of Lhotse Collaboration Products, subject to specified reductions and offsets.

Lhotse’s obligation to pay royalties to Schrödinger will expire on a Lhotse Collaboration Product-by- Lhotse Collaboration Product and country-by-country basis on the later of (i) the expiration of the last-to-expire Lhotse patent claim covering the composition of matter of the Lhotse Collaboration Compound contained in such Lhotse Collaboration Product in such country, (ii) the expiration of regulatory, pediatric, orphan drug, or data exclusivity with respect to such Lhotse Collaboration Product in such country, and (iii) ten years after the first commercial sale of such Lhotse Collaboration Product in such country (the “Lhotse Royalty Term”).

Unless terminated earlier, the Lhotse-Schrödinger Agreement will continue for three years, subject to extension by mutual written agreement of the parties.

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Lhotse’s obligation to make milestone and royalty payments (subject to the Royalty Term) to Schrödinger continues after the expiration or termination of the Lhotse-Schrödinger Agreement.

As of December 31, 2023, no milestone or royalty payments have been paid or accrued.

Aconcagua Collaboration Agreement with Schrödinger

In November 2023, Aconcagua Bio, Inc., our wholly-owned subsidiary (“Aconcagua”), entered into a collaboration agreement (the “Aconcagua-Schrödinger Agreement”) with Schrödinger to discover and develop novel, small molecule modulators of a specific target.

Under the Aconcagua-Schrödinger Agreement, Schrödinger is obligated to provide computational modeling and design support, including by using its technology platform to perform virtual screens, and Aconcagua is obligated to provide day-to-day chemistry and biology support.

Pursuant to the Aconcagua-Schrödinger Agreement, a joint steering committee comprised of representatives from both parties oversees the research performed under the agreement.

During the term of the Aconcagua-Schrödinger Agreement or if longer, for a specified number of years after the effective date of the Aconcagua-Schrödinger Agreement, Schrödinger is obligated, subject to certain exceptions, to work exclusively with Aconcagua on the design, research, development and commercialization of compounds that inhibit the target.

Aconcagua will solely own the research results, work product, inventions and other intellectual property generated under the Aconcagua-Schrödinger Agreement other than improvements to Schrödinger’s background intellectual property.

During the term of the Aconcagua-Schrödinger Agreement, Aconcagua is obligated to pay Schrödinger a monthly active program payment in the low six digits, which payment includes fees payable for certain Schrödinger software employed in the Collaboration, and as of December 31, 2023, we have paid to Schrödinger an aggregate of $0.3 million.

If Aconcagua develops and commercializes a product containing a compound (“Aconcagua Collaboration Compound”) that is discovered or developed under the Aconcagua-Schrödinger Agreement or a derivative thereof (“Aconcagua Collaboration Product”), Aconcagua is obligated

to pay Schrödinger development, regulatory and commercialization milestone payments of up to an aggregate of $89.0 million for the first Aconcagua Collaboration Product to achieve a particular milestone event, regardless of the number of Aconcagua Collaboration Products that reach such milestones.

Aconcagua will also be obligated to pay Schrödinger tiered royalties in the low single digit range on aggregate worldwide net sales of all Aconcagua Collaboration Products, subject to specified reductions and offsets.

Aconcagua’s obligation to pay royalties to Schrödinger will expire on a Aconcagua Collaboration Product-by- Aconcagua Collaboration Product and country-by-country basis on the later of (i) the expiration of the last-to-expire Aconcagua owned patent claim covering the composition of matter of the Aconcagua Collaboration Compound contained in such Aconcagua Collaboration Product in such country and (ii) ten years after the first commercial sale of such Aconcagua Collaboration Product in such country (“Aconcagua Royalty Term”).

Unless terminated earlier, the Aconcagua-Schrödinger Agreement will continue for three years, subject to extension by mutual written agreement of the parties.

Either party may terminate the Aconcagua-Schrödinger Agreement for convenience after a specified period or for the other party’s uncured material breach.

Aconcagua’s obligation to make milestone and royalty payments (subject to the Aconcagua Royalty Term) to Schrödinger continues after the expiration or termination of the Aconcagua-Schrödinger Agreement, unless the Aconcagua-Schrödinger Agreement is terminated under specified circumstances.

As of December 31, 2023, no milestone or royalty payments have been paid or accrued.

Components of Our Results of Operations

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● the scope, rate of progress, expense and results of our clinical trials and preclinical studies and other research and development activities;

● the impact of data collection omissions at any of our clinical sites;

● the phases of development of our product candidates;

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● per subject trial costs;

● uncertainties in clinical trial enrollment rates or design and drop-out/discontinuation rates, especially in light of the ongoing COVID-19 pandemic;

● uncertainties in clinical trial enrollment rates or design and drop-out/discontinuation rates;

● significant and changing government regulation;

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Interest and Other Income (Expense), Net

Interest and other income (expense), net primarily consists of interest income earned on our cash, cash equivalents and short-term investments, including accretion and amortization of discounts and premiums on short-term investments, foreign currency exchange gains and losses and interest expense for the amortization of debt issuance costs.

Interest and other income (expense), net primarily consists of interest income earned on our cash, cash equivalents and short-term investments, including amortization and accretion of premiums and discounts on short-term investments, foreign currency exchange gains and losses and interest expense for the amortization of debt issuance costs.

Results of Operations

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Research and development expenses increased by $33.9 million, or 94%, to $70.1 million during the year ended December 31, 2023, compared to $36.2 million during the year ended December 31, 2022.

increase in research and development expenses was primarily due to increases in employee related expenses, consulting and laboratory expenses, as we increased our staffing and development efforts.

The increase in research and development expenses was primarily due to the advancement of our GLP-1R franchise and other research programs, clinical study activities and increases related to employee expenses, primarily due to an increase in personnel.

The following table summarizes our research and development expenses for the periods indicated (in thousands):

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General and administrative expenses increased by $16.3 million, or 100%, to $32.7 million during the year ended December 31, 2023, compared to $16.4 million during the year ended December 31, 2022.

The increase in general and administrative expenses was primarily due to increases in employee related expenses and professional services as we expanded our infrastructure to drive and support the growth in our operations to prepare to become a publicly-traded company.

The increase in general and administrative expenses was primarily due to increases in professional services and employee related expenses as we expanded our infrastructure to drive and support the growth in our operations as a publicly-traded company.

Interest and Other Income (Expense), Net

Interest and other income (expense), net, increased by $1.4 million to an income of $1.3 million during the year ended December 31, 2022, compared to an expense of $0.1 million during the year ended December 31, 2021.

The increase in interest and other income, net, was primarily due to an increase in interest income from higher interest rates.

Interest and other income (expense), net, increased by $12.1 million to an income of $13.4 million during the year ended December 31, 2023, compared to an income of $1.3 million during the year ended December 31, 2022.

The increase in interest and other income (expense), net, was primarily due to an increase in interest income from higher interest rates and cash, cash equivalents and short-term investment balances.

Liquidity and Capital Resources

Since we were reorganized as a Cayman Islands exempted company in February 2019 through December 31, 2022, we have funded our operations primarily with an aggregate of $198.0 million in gross cash proceeds from the sale of redeemable convertible preferred shares.

From our reorganization as a Cayman Islands exempted company in February 2019 through immediately prior to completion of our IPO, we funded our operations primarily with an aggregate of $198.0 million in gross cash proceeds from the sale of redeemable convertible preferred shares.

In February 2023, we completed our IPO and received $166.7 million in net proceeds after deducting underwriting discounts and commissions and estimated offering costs.

In October 2023, we completed our Private Placement and received $281.5 million in net proceeds after deducting placement agent fees and other private placement expenses.

As of December 31, 2023, we had cash, cash equivalents and short-term investments of $467.3 million and an accumulated deficit of $206.6 million.

Redeemable Convertible Preferred Shares

Series A Redeemable Convertible Preferred Shares

In April 2019, we entered into a Series A redeemable convertible preferred shares purchase agreement (the “Series A Purchase Agreement”), with certain investors to issue and sell 9,600,000 shares of Series A redeemable convertible preferred shares at $1.6667 per share (the “Series A Purchase Price”), for total gross proceeds of $16.0 million.

The Series A Purchase Agreement also provided for the issuance and sale to the investors of an additional 9,600,000 shares of Series A redeemable convertible preferred shares at the Series A Purchase Price upon achieving certain milestone conditions (the “Series A Milestone Closing”).

The issuance of Series A redeemable convertible preferred shares was recorded at the amount of proceeds received less issuance costs and the amounts allocated to the Series A Milestone Closing liability.

The Series A Milestone Closing occurred on December 9, 2019, and we issued 9,600,000 shares of Series A redeemable convertible preferred shares at the Series A Purchase Price for gross proceeds of $16.0 million.

Series A+ Redeemable Convertible Preferred Shares

In March 2020, we entered into a Series A+ redeemable convertible preferred shares purchase agreement with certain investors to issue and sell 12,799,681 shares of Series A+ redeemable convertible preferred shares at $2.0313 per share, for total gross proceeds of $26.0 million.

Series B Redeemable Convertible Preferred Shares

In July 2021, we entered into a Series B redeemable convertible preferred shares purchase agreement with certain investors to issue and sell 24,701,732 shares of Series B redeemable convertible preferred shares at $4.0483 per share, for total gross proceeds of $100.0 million.

In April 2022, we issued an additional 8,155,272 shares of our Series B redeemable convertible preferred shares for total gross proceeds of $33.0 million, also at $4.0483 per share.

Series B-1 Redeemable Convertible Preferred Shares

In March 2021, Basecamp Bio, Inc.

(“Basecamp Bio”), our wholly owned subsidiary incorporated in February 2021, entered into a purchase agreement with certain investors to issue and sell 9,000,000 shares of its Series Seed redeemable convertible preferred shares at a price of $1.00 per share for total gross proceeds of $9.0 million.

Of the 9,000,000 shares of Series Seed redeemable convertible preferred shares issued, 2,000,000 shares were issued to us and the remaining 7,000,000 shares were issued to other existing investors in Structure Therapeutics.

In December 2021, we acquired the 7,000,000 Series Seed redeemable convertible preferred shares of Basecamp Bio held by the other investors in exchange for 2,161,402 shares of our Series B-1 redeemable convertible preferred stock, with Basecamp Bio becoming a wholly owned subsidiary again.

Upon the closing of our IPO, all outstanding shares of redeemable convertible preferred stock automatically converted into 67,018,087 ordinary shares.

Funding Requirements

As of December 31, 2022, we financed our operations primarily through the private placement of equity securities and have received aggregate gross proceeds of approximately $198.0 million as of December 31, 2022.

Prior to our IPO, we financed our operations primarily through the private placement of equity securities and have received aggregate gross proceeds of approximately $198.0 million.

Since our inception, we have incurred net operating losses and negative cash flows from operations.

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In February 2023, we completed our IPO for net proceeds of $166.7 million.

In October 2023, we completed our Private Placement and received $281.5 million in net proceeds after deducting placement agent fees and other private placement expenses.

Our primary activities to date have included organizing and staffing our company, business and scientific planning, raising capital, conducting research and development activities, entering into strategic and corporate structuring transactions, enabling manufacturing activities in support of our product candidate development efforts, establishing our intellectual property portfolio, and providing general and administrative support for these activities.

As of December 31, 2023, we had cash, cash equivalents and short-term investments of $467.3 million.

Based on our current business plan, we believe that our existing cash, cash equivalents and short-term investments, together with the net proceeds from our IPO, will be sufficient to fund our projected operations for the next 12 months from the date of the issuance of our consolidated financial statements.

Based on our current business plan, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our projected operations for the next 12 months from the date of the issuance of our consolidated financial statements.

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

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In addition, following the closing of our IPO, we expect to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory, tax-related, director and officer insurance, investor relations and other expenses that we did not incur as a private company.

In addition, we expect to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory, tax-related, director and officer insurance, investor relations and other expenses that we did not incur as a private company.

Moreover, we may in the future seek to acquire or invest in additional businesses, products, or technologies that we believe could complement or enhance our product, enhance our technical capabilities or otherwise offer growth opportunities, although we currently have no agreements or understandings with respect to any such acquisitions or investments.

We are subject to the risks typically related to the development of new product candidates, and it may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

We are subject to the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

We will need substantial additional capital to develop our product candidates and fund operations for the foreseeable future.

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● our implementation of operational, financial and management systems;

● the impact of geopolitical and macroeconomic events, including the COVID 19 pandemic, future bank failures and the Russia/Ukraine conflict, on U.S.

and global economic conditions that may impact our ability to access capital on terms acceptable, or at all.

● the impact of geopolitical and macroeconomic events, including future bank failures, increased geopolitical tensions between the U.S.

and China, the Russia/Ukraine conflict, the Israel-Hamas war and global pandemics on U.S.

and global economic conditions that may impact our ability to access capital on acceptable terms, if at all.

A change in the outcome of any of these or other variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

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Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the public or private sale of equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your

ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a holder of our ADSs.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a holder of our ADSs.

Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute your ownership interest.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic or other events such as actual or anticipated changes in interest rates and economic inflation and the impact of the Russian/Ukraine conflict.

If we are unable to obtain additional funding, or funding on acceptable terms, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or any commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from geopolitical and macroeconomic events such as actual or anticipated changes in interest rates and economic inflation, future bank failures, global pandemics, geopolitical tensions between the U.S.

and China and the impact of the Russia/Ukraine conflict and the Israel-Hamas war.

If we are unable

to obtain additional funding, or funding on acceptable terms, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or any commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations.

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Financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash Flows Used in Operating Activities

During the year ended December 31, 2023, net cash used in operating activities was $79.5 million, consisting primarily of a net loss of $89.6 million, partially offset by non-cash charges of $3.2 million and a decrease in net operating assets of $7.0 million.

The increase in net loss was primarily due to the increase in operating expenses as we invest in our research and development efforts and operate as a publicly-traded company.

Non-cash charges consisted primarily of share-based compensation, partially offset by net gain from accretion of net investment discounts.

The decrease in net operating assets was primarily due to an increase in accrued expenses and other current liabilities, partially offset by an increase in prepaid expenses and other current assets.

During the year ended December 31, 2022, net cash used in operating activities was $46.1 million, consisting primarily of a net loss of $51.3 million, partially offset by non-cash charges of $2.2 million and a decrease in net operating assets of $3.0 million.

The cash used in operations was primarily due to the increase in net loss from the increase in operating expenses as we invest in our research and development efforts and prepared to become a publicly-traded company.

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The decrease in net operating assets was primarily due to increases in accounts payable and accrued expenses and other current liabilities.

During the year ended December 31, 2021, net cash used in operating activities was $32.2 million, consisting primarily of a net loss of $38.0 million, partially offset by non-cash charges of $1.8 million and a decrease in net operating assets of $4.0 million.

The cash used in operations was primarily due to the increase in net loss from the increase in operating expenses as we invest in our research and development efforts.

Non-cash charges consisted primarily of share-based compensation.

The decrease in net operating assets is primarily due to increases in accrued expenses and other current liabilities and accounts payable, partially offset by an increase in prepaid expenses and other current assets.

Cash Flows (Used in) Provided by Investing Activities

Cash Flows Used in Investing Activities

During the year ended December 31, 2023, net cash used in investing activities was $268.3 million, consisting primarily of net purchases of short-term investments of $266.2 million and purchases of property and equipment of $2.1 million.

During the year ended December 31, 2022, net cash used in investing activities was $62.1 million, consisting primarily of net purchases of short-term investments.

During the year ended December 31, 2021, net cash provided by investing activities was $17.9 million, consisting primarily of net maturities of short-term investments of $19.1 million, partially offset by purchases of property and equipment of $1.2 million.

Cash Flows Provided by Financing Activities

During the year ended December 31, 2022, net cash provided by financing activities was $29.0 million, consisting primarily of net proceeds from the issuance of our Series B redeemable convertible preferred shares, partially offset by payments of deferred offering costs.

During the year ended December 31, 2021, net cash provided by financing activities was $103.3 million, consisting primarily of net proceeds from the issuance of our Series B redeemable convertible preferred shares and Series Seed redeemable convertible preferred shares of Basecamp Bio.

During the year ended December 31, 2023, net cash provided by financing activities was $451.5 million, consisting primarily of proceeds from our IPO of $172.3 million, net of underwriting discounts and

commissions, gross proceeds from our Private Placement of $300.0 million, partially offset by payments of offering costs of $21.6 million.

Contractual Obligations

As of December 31, 2022, our contractual obligations consist of facilities lease payments totaling $0.3 million through October 31, 2023.

Critical Accounting Policies and Significant Judgments and Estimates

As of December 31, 2023, our contractual obligations consist of facilities lease payments totaling $6.1 million, with $1.8 million expected to be paid within the next 12 months.

Critical Accounting Policies

Our financial statements have been prepared in accordance with U.S.

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Actual results may materially differ from these estimates under different assumptions or conditions.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance.

For more detail on our significant accounting policies, refer to Note 2 to our consolidated financial statements included in Part II.

Item 8 “Financial Statements and Supplementary Data” of this Annual Report.

Share-Based Compensation

We use a fair value-based method to account for all share-based compensation arrangements with employees and non-employees, including share options and share awards.

Our determination of the fair value of share options on the date of grant utilizes the Black-Scholes option pricing model.

We recognize the fair value of the options granted on a straight-line basis over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period, which usually is the vesting period.

We account for forfeitures as they occur.

Estimates of the fair value of equity awards as of the grant date using valuation models such as the Black-Scholes option pricing model are affected by assumptions with a number of complex variables.

Changes in certain assumptions can materially affect the fair value and ultimately the amount of share-based

compensation expense recognized.

These inputs are subjective and generally require significant analysis and judgment to develop.

The assumptions are as follows:

● Fair Value of Ordinary Shares— see the subsection titled “—Ordinary Shares Valuation” below.

● Expected Term —The expected term represents the period that the share-based awards are expected to be outstanding.

The expected term is calculated using the simplified method which is used when there is insufficient historical data about exercise patterns and post-vesting employment termination behavior.

The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting.

The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method.

For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term.

● Expected Volatility —For all share options granted to date, we estimated the volatility data based on a study of publicly traded industry peer companies as we did not have any trading history for our ordinary shares.

For purposes of identifying these peer companies, we considered the industry, stage of development, size and financial leverage of potential comparable companies.

For each grant, we measured historical volatility over a period equivalent to the expected term.

We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own share price becomes available.

● Risk-Free Interest Rate —The risk-free interest rate is based on the U.S.

Treasury yield in effect at the time of the grant for zero-coupon U.S.

Treasury notes with remaining terms similar to the expected term of the options.

● Expected Dividend Yield —We assumed the expected dividend to be zero as we have never paid dividends and have no current plans to do so.

See Note 11 to our audited consolidated financial statements included in Part II.

Item 8 “Financial Statements and Supplementary Data” of this Annual Report for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2022 and 2021.

Ordinary Shares Valuation

Prior to the completion of our IPO, the estimated fair value of the ordinary shares underlying our share options and share awards was determined at each grant date by our board of directors, with input from management and an independent third-party valuation firm.

All options to purchase shares of our ordinary shares are intended to be exercisable at a price per share not less than the per-share fair value of our ordinary shares underlying those options on the date of grant.

In the absence of a public trading market for our ordinary shares, on each grant date, we develop an estimate of the fair value of our ordinary shares based on the information known to us on the date of grant, upon a review of any recent events and their potential impact on the estimated fair value per share of the ordinary shares, and in part on contemporaneous input from an independent third-party valuation firm.

Our estimate of fair value is reviewed and approved by our board of directors.

We determined our valuations of our ordinary shares in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).

We based the assumptions used to determine the estimated fair value of our ordinary shares on numerous objective and subjective factors, combined with management judgment, including:

● our most recently available valuations of our ordinary shares performed by an independent third-party valuation firm;

● the prices at which we sold shares of our redeemable convertible preferred shares;

● the rights, preferences and privileges of our redeemable convertible preferred shares relative to those of our ordinary shares;

● lack of marketability of our common shares as a private company;

● our stage of development and business strategy, and material risks related to our business;

● our financial condition and operating results, including our levels of available capital resources;

● the progress of our research and development efforts;

● the hiring of key personnel and the experience of management;

● the likelihood of achieving a liquidity event given prevailing market conditions;

● external market conditions affecting the pharmaceutical and biotechnology industry and trends within the industry;

● the valuation of comparable public companies.

For all options granted through December 31, 2022, our board determined the enterprise value based on the Market Approach, Option Pricing Method (“OPM”) and Probability Weighted Expected Return Method (“PWERM”) or a weighted combination of the OPM and PWERM methods.

Under the Market Approach, we estimate the value based upon our prior sales of preferred stock to unrelated third parties.

We then apply these derived multiples or values to our financial metrics to estimate our market value.

The allocation of these enterprise values to each part of our capital structure, including our ordinary shares, was done based on the OPM.

The OPM treats the rights of the holders of preferred and ordinary shares as equivalent to call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of preferred shares, as well as their rights to participation and conversion.

Thus, the estimated value of the ordinary share can be determined by estimating the value of its portion of each of these call option rights.

The OPM derives the implied equity value of a company from a recent transaction involving our own securities issued on an arms-length basis.

Under the PWERM, the value is estimated based upon analysis of future values for the enterprise under varying scenarios, and probabilities are ascribed to these scenarios based on expected future outcomes.

Subsequent to our IPO, the fair value of our ordinary shares is determined based on our closing market price of the Company’s ADS, which each represents three ordinary shares.

Accrued Research and Development Expenses

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To date, our estimated accruals have not differed materially from the actual costs.

Redeemable Convertible Preferred Shares

We record all shares of our redeemable convertible preferred shares at their respective fair values on the dates of issuance, net of issuance costs.

The fair value of Series B-1 redeemable convertible preferred shares issued in the Basecamp Bio share exchange agreement was estimated using various fair value measures of classes of preferred stock calculated as part of the valuation of our ordinary shares.

In the event of the voluntary or involuntary liquidation, dissolution or winding up of our company, or a liquidation event

such as a merger, acquisition and sale of all or substantially all of our assets, each of which we refer to as a deemed liquidation event, proceeds will be distributed in accordance with the liquidation preferences set forth in our amended and restated memorandum and articles of association unless the holders of redeemable convertible preferred shares have converted their redeemable convertible preferred shares into ordinary shares.

Therefore, the redeemable convertible preferred shares are recorded in mezzanine equity on our balance sheets as events triggering the liquidation preferences are not solely within our control.

We made an accounting policy election to recognize changes in the redemption value of redeemable convertible preferred shares immediately as they occur and adjust the carrying value of redeemable convertible preferred shares to equal its redemption value at the end of each reporting period.

JOBS Act Accounting Election and Smaller Reporting Company Status

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We may continue to be a smaller reporting company even after we are no longer an emerging growth company.

We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our ordinary shares held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our ordinary shares held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our ordinary shares held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

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