What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-16 · 136 added, 94 removed, 169 unchanged (58% of the section changed)

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In addition to historical financial information, some of the information contained in the following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements.

These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

All statements other than statements of historical facts, including statements regarding our future results of operations and financial position, business strategy, current and prospective products, product approvals, research and development costs, current and prospective collaborations and strategic transactions, timing and likelihood of success, plans and objectives of management for future operations and future results of current and anticipated products, are forward-looking statements.

These statements involve known and unknown risks, uncertainties, assumptions and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,””should,””seek,”“predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.

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We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations.

These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the Securities and Exchange

Commission (SEC) on March 25, 2021 and other risks described in our prior reports filed with the SEC.

These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions that are difficult to predict.

Factors that could cause actual results to differ include, but are not limited to, those risks and uncertainties associated with:

the impact of the COVID-19 pandemic on Immunome’s business, operations, strategy, goals and anticipated milestones;

the fact that research and development data are subject to differing interpretations and assessments, including during the peer review/publication process, in the scientific community generally, and by regulatory authorities;

whether the data will be published in a scientific journal and, if so, when and with what modifications;

the uncertainties inherent in research and development, including Immunome’s ability to execute on its strategy including with respect to the timing of its R&D efforts, IND filings, initiation and completion of any clinical studies and other anticipated milestones;

the effectiveness of Immunome’s antibody cocktail, including the possibility that further preclinical data and any clinical trial data may be inconsistent with the data used for selection of the cocktail;

Immunome’s ability to fund operations;

the competitive landscape;

and the additional risks and uncertainties set forth more fully under the caption “Risk Factors” in Immunome’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 25, 2021, and elsewhere in Immunome’s filings and reports with the SEC.

The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

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Since our inception in 2006, we have devoted substantially all our resources to research and development, raising capital, building our management team and building our intellectual property portfolio.

To date, we have financed our operations primarily through the sale of our common stock, Series A convertible preferred stock and warrants and convertible promissory notes.

Through June 30, 2021, we raised an aggregate of $122.9 million from the sale of our Series A convertible preferred stock and warrants and convertible promissory notes, and in April 2020, we received a $0.5 million loan, or the PPP Loan, pursuant to the Paycheck Protection Program, or the PPP, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act implemented by the U.S.

Small Business Administration, which loan was forgiven on May 21, 2021.

On October 6, 2020, we closed the IPO, in which we issued and sold 3,250,000 shares of our common stock at a public offering price of $12.00 per share.

On October 13, 2020, the underwriters exercised their option to purchase an additional 487,500 shares of our common stock at a purchase price of $12.00 per share.

We received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses.

On April 28, 2021, we sold 1,000,000 units, each comprising one share of our common stock and one warrant for one-half a share of common stock in a private placement and at a price of $27.00 per share for net proceeds of $26.4 million.

In July 2021, we announced that our three-antibody cocktail (IMM-BCP-01) has demonstrated potent neutralizing activity against the SARS-CoV-2 Delta variant in pre-clinical pseudovirus testing.

Furthermore, IMM-BCP-01 showed in-vitro activity via non-neutralizing mechanisms, such as complement fixation, which we expect will enable viral clearance.

To date, we have financed our operations through equity financing, convertible notes and DOD funding.

We are a development stage company, and all our programs are in a preclinical stage of development.

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Since inception we have incurred significant operating losses.

Our net losses for the three months ended June 30, 2021 and 2020 were $5.2 million and $2.7 million, respectively, and $9.1 million and $5.4 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, we had a cash balance of $59.8 million.

Our net losses for the three months ended September 30, 2021 and 2020 were $7.7 million and $8.4 million, respectively, and $16.9 million and $13.8 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, we had a cash balance of $56.2 million.

We expect to continue to incur losses for the foreseeable future.

We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities related to our portfolio of programs as we continue our preclinical development of product candidates;

We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing research and development activities related to our portfolio of programs as we continue our preclinical development of product candidates;

advance these product candidates toward clinical development;

further develop our product candidates;

perform research activities as we seek to discover and develop additional product candidates;

continue to perform research activities as we seek to discover and develop additional product candidates;

carry out maintenance, expansion, enforcement, defense, and protection of our intellectual property portfolio;

and hire research and development, clinical and commercial personnel.

If we cannot obtain the necessary funding on favorable terms, if at all, we will need to delay, scale back or eliminate some or all of our research and development programs or enter into collaborations with third parties to commercialize potential products or technologies that we might otherwise seek to develop or commercialize independently;

consider other various strategic alternatives, including a merger or sale of the Company;

and hire research and development, clinical and administrative personnel.

If we cannot obtain the necessary funding on favorable terms, if at all, we will need to delay, scale back or eliminate some or all of our research and development programs.

We would consider other various strategic alternatives, including a merger or sale of the Company;

or cease operations.

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● continue research activities and preclinical studies;

● pursue regulatory approvals and implement other regulatory strategies for our current and future product candidates;

● commence clinical trials for product candidates;

● advance the development of our existing and future pipeline;

● take additional steps to advance our discovery engine and our existing and future pipeline;

● obtain, maintain, expand and protect our intellectual property portfolio;

● hire additional research and development, clinical, commercial and administrative personnel;

● pursue regulatory approvals and implement other regulatory strategies for our current and future product candidates;

● hire additional research and development, clinical and administrative personnel;

● scale up our clinical and regulatory capabilities;

● add operational, financial and management information systems and infrastructure to support our research and development programs, and any future commercialization efforts.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

As a result of these anticipated expenditures, we will need substantial additional financing to support our continuing operations and pursue our growth strategy.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations, regulatory, insurance and other expenses.

As a result of these anticipated expenditures and potential unanticipated, we will need substantial additional financing to support our continuing operations and pursue our growth strategy.

Until such time as we generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of any stockholder 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.

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The inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We expect that our cash as of June 30, 2021 will be sufficient to fund our operations through fiscal year 2022, and fund the planned Phase 1b studies for IMM-ONC-01 and IMM-BCP-01.

On October 1, 2021, we entered into a new Open Market Sale Agreement (“ATM Agreement”) with Jefferies, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell common shares having an aggregate offering price of up to $75.0 million through Jefferies acting as sales agent.

Through September 30, 2021, we raised an aggregate of $123.1 million in gross proceeds from sales of our common stock and warrants, Series A convertible preferred stock and warrants, the issuance of convertible promissory notes, the PPP loan and issuance of common stock through a Stock Purchase Agreement (“Stock Purchase Agreement”) with an individual investor.

On October 6, 2020, we closed the IPO, in which we issued and sold 3,250,000 shares of our common stock at a public offering price of $12.00 per share.

On October 13, 2020, the underwriters exercised their option to purchase an additional 487,500 shares of our common stock at a purchase price of $12.00 per share.

We received net proceeds of $41.7 million after deducting underwriting discounts and commissions of $3.1 million but before deducting other offering expenses.

In April 2020, we received a $0.5 million loan, or the PPP Loan, pursuant to the Paycheck Protection Program, or the PPP, under the Coronavirus Aid, Relief, and Economic Security Act implemented by the U.S.

Small Business Administration, which loan was forgiven on May 21, 2021.

We expect that our cash as of September 30, 2021 will be sufficient to fund our operations at least 12 months from the filing date of this Quarterly Report on Form 10-Q, including our planned Phase 1b studies for IMM-BCP-01 and IMM-ONC-01.

We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner than we currently expect.

See “— Liquidity and capital resources.” Due to the numerous risks and uncertainties associated with the development of our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

See “— Liquidity and capital resources.” Due to the numerous risks and uncertainties associated with the research and development of our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

Our Lead Discovery Programs

SARS-CoV-2 (“IMM-BCP-01”)

We are actively developing an antibody cocktail product candidate, comprising a combination of three effective anti-viral antibodies derived from the B cells of COVID-19 “super-responders.” The immune system employs multiple

viral clearance mechanisms to fight SARS-CoV-2 infection.

Our research is focused on identifying the antibodies directed at multiple distinct viral antigens to which such antibodies can bind to most effectively, neutralize and clear the virus from circulation.

If successful, we expect that our antibody cocktail product candidate could be used both as a treatment for individuals who have contracted SARS-CoV-2 and as a prophylactic to offer protection against the virus for individuals who are at risk of contracting SARS-CoV-2.

In accordance with our published research, unbiased interrogations of “super-responders” shows that more than half of the antibodies they make appear to be directed at SARS-CoV-2 antigens other than the spike protein.

We are conducting this program in collaboration with the DoD, which has asserted that this platform may be of strategic importance, due to its potential use in the current COVID-19 pandemic as well as in future viral outbreaks.

The IMM-BCP-01 program is focused on the original SARS-CoV-2 isolate and emerging variants.

We have identified a cocktail of three antibodies (“IMM-BCP-01”) based on preclinical testing and plan to submit an IND for the program in the fourth quarter of 2021.

Oncology (“IMM-ONC-01”)

Our lead oncology program is focused on IL-38, which we believe is a novel, tumor-derived immune checkpoint capable of promoting evasion of the immune system.

Antibodies directed at IL-38 were identified in a hybridoma library generated from the memory B cells of a patient with squamous head and neck cancer.

Data from cancer biopsy materials reveal that subsets of major solid tumors, including squamous cell cancers of the head and neck and of the lung, over-express IL-38.

This correlates with low levels of tumor-infiltrating T cells, a hallmark of immune suppression in these patients’ tumors.

Data obtained from our preclinical testing indicate that blocking IL-38 function using an inhibitory antibody appears to restore the immune response to the tumor and to result in anti-tumor activity in select animal models.

Our data suggests that anti-IL-38 antibodies could have therapeutic utility as single agents or in combination with other therapeutic modalities.

We have selected a lead anti-IL-38 antibody for initial clinical testing and plan to submit an IND for this program in the first quarter of 2022.

COVID-19 Pandemic

The ongoing COVID-19 pandemic will continue to impact our projected research and development timelines and its effect on our activities is uncertain.

In response to COVID-19, we have taken, and continue to take, proactive measures to prioritize health and safety, including of our employees and other personnel.

These measures included establishing a work-from-home policy for our employees, other than those performing or supporting business-critical operations, and implementing stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID- 19 pandemic.

In response to the COVID-19 pandemic, we have taken, and continue to take, proactive measures to prioritize health and safety, including of our employees and other personnel.

We have begun to implement a back-to-work policy;

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In addition, as part of our vendor management processes, we have ongoing dialogues with third-party service providers, which are intended to ensure that they continue to meet our criteria for business continuity.

The effect of the ongoing COVID-19 pandemic on our projected research and development timelines and activities is uncertain.

Notwithstanding the measures taken, the future impact of COVID-19, including its variants, on our industry, the healthcare system and our current and future operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

See “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 25, 2021 for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.

See “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 25, 2021 and elsewhere in our filings with the SEC for a discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.

Components of our results of operations

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● expenses incurred in connection with the advancement of our programs, including under agreements with consultants, contractors, contract research organizations and other third-party vendors and suppliers;

● the cost of developing and validating our quality and manufacturing process for use in our preclinical studies and potential future clinical trials;

● the cost of developing and validating our quality and manufacturing processes for use in our preclinical studies and potential future clinical trials;

● laboratory supplies and research materials and other infrastructure-related expenses;

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We expect that our research and development expenses will increase substantially in connection with our planned preclinical and future clinical development activities.

In July 2020, we entered into an Other Transaction Authority for Prototype Agreement (the DoD Agreement) with the DoD to fund our efforts in developing Biosynthetic Convalescent Plasma (BCP) to treat COVID-19.

In connection

with the DoD Agreement, we record expense reimbursements received from DoD as contra-research and development expenses in the same period the underlying expenses are incurred.

In July 2020, we entered into an Other Transaction Authority for Prototype Agreement (“the DoD Agreement”) with the DoD to fund our efforts in developing an antibody cocktail to treat COVID-19.

The DoD Agreement was modified in May 2021 to increase such funding.

In connection with the DoD Agreement, as modified, we record expense reimbursements received from DoD as contra-research and development expenses in the same period the underlying expenses are incurred.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation for personnel in our executive, intellectual property, business development, and administrative functions.

General and administrative expenses consist primarily of salaries and other related costs, including share-based compensation for personnel in our executive, business development, and administrative functions.

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

We anticipate that our general and administrative expenses will increase in the future to support increased research and development activities.

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

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

Change in fair value of warrant liability

Prior to our initial public offering, our outstanding warrants to purchase shares of our convertible preferred stock were classified as liabilities, recorded at fair value and were subject to remeasurement at each balance sheet date until they were exercised, expired or were otherwise settled.

The change in fair value of our preferred stock warrant liability

reflects a non-cash charge primarily driven by changes in the fair value of our underlying Series A preferred stock.

All outstanding warrants to purchase shares of our preferred stock were converted into warrants to purchase shares of our common stock upon consummation of our IPO.

Interest income (expense), net

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The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our results of operations will depend on future developments, which are highly uncertain, including new information that may emerge concerning the severity of COVID-19 and its variants or other public health crisis and actions taken to contain or prevent the further spread, among others.

Accordingly, we cannot fully predict the extent to which our business and results of operations will be affected.

Accordingly, we cannot fully predict the extent to which our business and results of operations will be affected by the pandemic.

For example, many clinical trial sites have been impacted by the pandemic, forcing them to delay enrollment in trials and it is unclear for how long this will last.

This may therefore impact our ability to commence clinical trials in the future.

Comparison of the three and six months ended June 30, 2021 and 2020

Three Months Ended June 30,

Six Months Ended June 30

Comparison of the three and nine months ended September 30, 2021 and 2020

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

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Loss from operations

Interest income (expense), net

Three months ended June 30, 2021

Change in fair value of warrant liability

Interest expense, net

Three months ended September 30, 2021

Research and development expenses

Research and development expenses were $3.2 million and $1.9 million for the three months ended June 30, 2021 and 2020, respectively.

Research and development expenses for the three months ended June 30, 2021 reflect the recognition of contra-research and development expenses related to the DoD Agreement in the amount of $4.1 million, which off-sets the expenses recognized in the period for the DoD Agreement.

Other non-DoD related research and development expenses increased $5.4 million for the three months ended June 30, 2021.

This increase was primarily the

result of an increase of $4.3 million in supplies and outsourced services for other research and development activities and an increase of $1.0 million in personnel-related costs due to an increase in headcount and stock-based compensation.

Research and development expenses were $4.5 million and $1.6 million, net of DoD reimbursement for the three months ended September 30, 2021 and 2020, respectively.

Research and development expenses increased by $7.5 million for the three months ended September 30, 2021.

This increase is primarily as a result of $6.7 million increase in supplies and outsourced resources and an increase in $0.8 million in personnel-related costs due to an increase in headcount and stock-based compensation.

Of this $7.5 million increase in research and development expenses, $4.6 million was offset due to an increase in contra-research and development expense for the three months ended September 30, 2021.

Contra-research and development expenses offsets the expenses recognized in the period for the DoD Agreement.

Research and development expenses are expected to increase in the future as we continue our current research programs, initiate new research programs, continue our preclinical development of product candidates and conduct future clinical trials for any of our product candidates.

General and administrative expenses

General and administrative expenses increased by $1.7 million to $2.5 million for the three months ended June 30, 2021 from $0.8 million for the three months ended June 30, 2020.

The increase was primarily a result of a $0.8 million increase in personnel-related costs due to an increase in headcount and stock-based compensation and a $0.7 million increase in professional fees, consulting services, insurance and legal expenses to support our operations as a public company, and a $0.2 million increase in facility-related costs.

Other income consists of forgiveness of the PPP Loan.

Other income increased $0.5 million for the three months ended June 30, 2021 from $0 in the prior year period.

General and administrative expenses increased by $2.0 million to $3.2 million for the three months ended September 30, 2021 from $1.2 million for the three months ended September 30, 2020.

The increase was primarily a result of a $1.2 million increase in personnel-related costs due to an increase in headcount and stock-based compensation and a $0.8 million increase in professional fees, consulting services, insurance and legal expenses to support our operations as a public company.

Change in fair value of warrant liability

For the three months ended September 30, 2020, we recognized a non-cash charge of $5.5 million due to the change in the fair value of the convertible preferred stock warrant liability.

The warrants became exercisable for shares of common stock upon the completion of the IPO in October 2020 as such, there was no change in fair value of warrant liability in 2021.

Interest income (expense), net

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Interest income consists of interest earned on our cash balances held with financial institutions.

We recognized interest income, net of expense, during the three months ended June 30, 2021 of $1,000 and attributable to the increase in our cash balance from our April 2021 common stock offering.

We recognized interest income $5,000, net of interest expense, during the three months ended June 30, 2020 and attributable to the cash proceeds receive in connection with the sale of our Series A preferred stock.

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Research and development expenses

Research and development expenses were $5.2 million and $4.0 million for the six months ended June 30, 2021 and 2020, respectively.

Research and development expenses for the six months ended June 30, 2021 reflect the recognition of contra-research and development expenses related to the DoD Agreement in the amount of $8.0 million, which off-sets the expenses recognized in the period for the DoD Agreement.

Other non-DoD related research and development expenses increased $9.3 million for the six months ended June 30, 2021.

This increase was primarily the result of a increase of $7.7 million in supplies and outsourced services for other research and development activities, an increase of $1.4 million in personnel-related costs due to an increase in headcount and stock-based compensation, and an increase of $0.2 million in facility-related costs.

Research and development expenses were $9.7 million and $5.7 million, net of DoD reimbursement for the nine months ended September 30, 2021 and 2020, respectively.

Research and development expenses increased by $16.8 million for the nine months ended September 30, 2021.

This increase was primarily as a result of $14.3 million increase in supplies and outsourced resources, an increase in $2.2 million in personnel-related costs due to an increase in headcount and stock-based compensation, and an increase in $0.3 million in facility-related costs.

Of this $16.8 million increase in research and development expenses, $12.8 million was offset to due to an increase in contra-research and development expense for the nine months ended September 30, 2021.

Contra-research and development expenses offsets the expenses recognized in the period for the DoD Agreement.

General and administrative expenses

General and administrative expenses increased by $3.1 million to $4.4 million for the six months ended June 30, 2021 from $1.3 million for the six months ended June 30, 2020.

The increase was primarily a result of a $1.0 million increase in personnel-related costs due to an increase in headcount and stock-based compensation and a $1.7 million increase in professional fees, consulting services, insurance and legal expenses to support our operations as a public company, and a $0.2 million increase in facility-related costs.

General and administrative expenses increased by $5.1 million to $7.6 million for the nine months ended September 30, 2021 from $2.5 million for the nine months ended September 30, 2020.

The increase was primarily a result of a $2.3 million increase in personnel-related costs due to an increase in headcount and stock-based compensation and a $2.7 million increase in professional fees, consulting services, insurance and legal expenses to support our operations as a public company.

Change in fair value of warrant liability

For the nine months ended September 30, 2020, we recognized a non-cash charge of $5.5 million due to the change in the fair value of the convertible preferred stock warrant liability.

The warrant liability was no longer outstanding after the October 2020 IPO.

Other income consists of forgiveness of the PPP Loan.

Other income increased $0.5 million for the six months ended June 30, 2021 from $0 in the prior year period.

Other income increased $0.5 million for the nine months ended September 30, 2021 from $0 in the prior year period.

Interest income (expense), net

We recognized interest income, net of expense, of $2,000 during the six months ended June 30, 2021 and attributable to the increase in our cash balance resulting from our April 2021 common stock offering.

We recognized interest expense of $17,000, net of interest income, during the six months ended June 30, 2020 as a result of our capital lease obligations and equipment loans outstanding.

We recognized interest expense, net of income, of $5,000 during the nine months ended September 30, 2021 and attributable to the capital lease obligations and equipment loans offset by the increase in our cash balance resulting from our April 2021 common stock offering.

We recognized interest expense of $27,000, net of interest income, during the nine months ended September 30, 2020 as a result of our capital lease obligations and equipment loans outstanding.

Liquidity and capital resources

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To date, we have funded our operations primarily with proceeds from the sales of common stock, preferred stock and warrants, the convertible promissory notes and the PPP Loan.

Through June 30, 2021, we raised an aggregate of $122.9 million in gross proceeds from sales of our common stock and warrants, Series A convertible preferred stock and warrants, the issuance of convertible promissory notes, and the PPP Loan.

As of June 30, 2021, we had $59.8 million in cash.

Through September 30, 2021, we raised an aggregate of $123.1 million in gross proceeds from sales of our common stock and warrants, Series A convertible preferred stock and warrants, the issuance of convertible promissory notes, the PPP Loan and issuance of common stock through a Stock Purchase Agreement with an individual investor.

As of September 30, 2021, we had $56.2 million in cash.

The Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 14, 2021, pursuant to which the Company may issue from time to time securities with an aggregate value of up to $200.0 million.

In October 2021 the Company entered into a new ATM Agreement with Jefferies LLC, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, the Company may elect, from time to time, to offer and sell common shares under the registration statement having an aggregate offering price of up to $75.0 million through Jefferies acting as sales agent.

The Company has not yet sold any shares under the ATM Agreement.

We will need to raise additional capital before we exhaust our current cash to continue to fund our research and development, including our plans for clinical and preclinical trials and new product development, as well as to fund operations generally.

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We can give no assurances that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs.

The following table summarizes our sources and uses of cash for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2021 and 2020:

Nine Months Ended September 30,

(in thousands)

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Operating activities

Net cash used in operating activities for the six months ended June 30, 2021 was $7.3 million, consisting primarily of our net loss of $9.1 million, offset by noncash charges of depreciation and amortization of $0.4 million, and shared-based compensation of $1.1 million and an increase in accrued expenses and other liabilities of $0.3 million and accounts payable of $0.5 million and a decrease in prepaid expenses and other assets of $0.1 million and increased by forgiveness of PPP Loan of $0.5 million.

Net cash used in operating activities for the six months ended June 30, 2020 was $3.5 million, consisting primarily of our net loss of $5.4 million, offset by noncash charges of depreciation and amortization expense $0.3 million and stock-based compensation of $0.2 million and increases in accounts payable and accrued expenses and other liabilities of $1.2 million due to our growth in expenditures and a decrease in prepaid expenses and other assets of $0.2 million.

Net cash used in operating activities for the nine months ended September 30, 2021 was $11.4 million, consisting primarily of our net loss of $16.9 million, offset by noncash charges of depreciation and amortization of $0.6 million, and shared-based compensation of $2.2 million and an increase in accrued expenses and other liabilities of $2.8 million

and accounts payable of $2.1 million and increased by forgiveness of PPP Loan of $0.5 million and an increase in prepaid expenses and other assets of $1.8 million.

Net cash used in operating activities for the nine months ended September 30, 2020 was $6.1 million, consisting primarily of our net loss of $13.8 million offset by noncash charges of depreciation and amortization expense $0.5 million, share-based compensation expense of $0.3 million and change in fair value of warrant liability of $5.5 million and increases in accounts payable and accrued expenses and other liabilities of $1.5 million due to our growth in expenditures.

Investing activities

During the six months ended June 30, 2021 and 2020, we used $39,000 and $0.4 million, respectively, for the purchase of property and equipment.

During the nine months ended September 30, 2021 and 2020, we used $65,000 and $0.5 million, respectively, for the purchase of property and equipment.

Financing activities

During the six months ended June 30, 2021, financing activities provided $27.3 million from proceeds from the sale of common stock and common stock warrants, the exercise of common stock warrants and stock options, offset by the payment of issuance costs, and for payments related to our equipment loan.

During the six months ended June 30, 2020, financing activities provided $11.0 million from the sale of our Series A convertible preferred stock and warrants and $0.5 million from the PPP Loan, offset by $0.3 million for payments related to our capital lease obligations and equipment loan payables and $27,000 for the payment of issuance costs related to the sale of Series A convertible preferred stock and warrants.

During the nine months ended September 30, 2021, financing activities provided $28.0 million of proceeds from the sale of common stock and common stock warrants, the exercise of common stock warrants and stock options, offset by the payment of issuance costs, and for payments related to our equipment loan.

During the nine months ended September 30, 2020, financing activities provided $11.0 million from the sale of our Series A convertible preferred stock and warrants and $0.5 million from the PPP loan, offset by $0.4 million for payments related to our capital lease obligations and equipment loan payables, $27,000 for the payment of issuance costs related to the sale of Series A convertible preferred stock and warrants and $0.3 million for the payment of IPO costs.

Funding requirements

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● ultimately establish a sales, marketing, and distribution infrastructure to commercialize any medicines for which we may obtain marketing approval;

● hire additional personnel including research and development, clinical and commercial personnel;

● hire additional personnel including research and development, clinical and administrative personnel;

● add operational, financial, and management information systems and personnel, including personnel to support our product development;

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● continue to operate as a public company.

We expect that our existing cash at June 30, 2021 will enable us to fund our current and planned operating expenses and capital expenditures through fiscal year 2022.

Beyond that date, the Company will need additional financing to support its continuing operations and pursue its growth strategy.

We expect that our existing cash at September 30, 2021 will enable us to fund our current and planned operating expenses and capital expenditures at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

The Company will need additional financing to support its continuing operations and pursue its development strategy.

We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner that we currently expect.

Because of the numerous risks and uncertainties associated with the development of our programs, we are unable to estimate the

amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

Because of the numerous risks and uncertainties associated with the development of our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

Our future funding requirements will depend on many factors including:

● the costs of continuing to develop our discovery engine;

● the costs of acquiring licenses for the expansion of product development;

● the scope, progress, results, and costs of discovery, preclinical development, laboratory testing, manufacturing and clinical trials for the product candidates we may develop;

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

● the costs of acquiring licenses, should we choose to do so, for the expansion of product development;

● the scope, progress, results, and costs of discovery, preclinical development, laboratory testing, manufacturing and clinical trials for the product candidates we are developing and may develop;

● the costs, timing, and outcome of regulatory review of the product candidates we may develop;

● the costs of future activities, including product sales, medical affairs, marketing, manufacturing, distribution, coverage and reimbursement for any product candidates for which we receive regulatory approval;

● the success of our intellectual property portfolio;

● our ability to establish and maintain additional collaborations on favorable terms, if at all;

● the achievement of milestones or occurrence of other developments that trigger payments under any additional collaboration agreements we obtain;

● the extent to which we acquire or in-license products, intellectual property, and technologies;

● the costs of future activities, including product sales, medical affairs, marketing, manufacturing, distribution, market access for any product candidates for which we receive regulatory approval;

● our ability to establish and maintain collaborations and strategic alliances on favorable terms, if at all, and achieve milestones or meet other requirements that trigger payments under those transactions;

● and achieve milestones or meet other requirements that trigger payments under those transactions;

● the extent to which we acquire or in-license products, intellectual property, and technologies and any payments required under those arrangements;

● the costs of continuing to operate as a public company.

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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.

If we are unable to raise additional funds through equity or debt financings or other arrangements 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.

prefer to develop and market ourselves.

If we are unable to raise additional funds through equity or debt financings 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 product candidates that we would otherwise prefer to develop and market ourselves.

Critical accounting policies and use of estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United

The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements.

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The net asset approach is predicated on the assumption that a prudent buyer would pay no more than it would cost to purchase the assets (tangible and intangible) of a company at current market prices.

This approach requires estimating the individual market values of our assets and liabilities to derive an adjusted enterprise value.

This approach requires estimating the individual market values of our assets and liabilities to derive an adjusted enterprise

The enterprise values determined by the net asset approach were then allocated to our common stock using the Option Pricing Method, or OPM.

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The OPM uses the Black-Scholes option-pricing model to determine the price of the call option.

appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative.

The OPM is appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative.

Beginning in May 2020, we used the probability-weighted expected return method to determine the value of our common stock.

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Recently issued accounting standards

There are currently no recently issued accounting standards which management expects will impact the Company’s financial position, operations or cash flows.

In February 2016, the FASB issued ASC Topic 842, Leases, (“Topic 842”).

This standard requires all entities that lease assets with terms of more than 12 months to capitalize the assets and related liabilities on the balance sheet.

In June 2020, the FASB issued ASU 2020-05, which amended the effective date of Topic 842 until January 1, 2022.

Upon adoption, the standard requires the use of a modified retrospective transition approach for its adoption.

The Company is currently evaluating the effect Topic 842 will have on its consolidated financial statements and related disclosures.

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

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This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

Therefore, the reported results of operations contained in our financial statements may not be directly comparable to those of other public companies.

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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-Q

Item 2. Management’s Discussion and Analysis