Immunome Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10 - Q, should be read in conjunction with our unaudited interim financial statements and related notes thereto included elsewhere herein. 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 express or implied statements regarding Immunome’s beliefs and expectations regarding the advancement of its platform and programs, execution of its regulatory, research, clinical and strategic plans and anticipated upcoming milestones for its platform and programs, including expectations regarding, among other things, the timing and results of its preclinical studies and clinical trials, clinical plans, general regulatory actions, the translation of preclinical data into clinical safety and efficacy, the therapeutic potential and benefits of our product candidates, the possible need and demand for its product candidates , 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. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events, financial trends and other matters 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 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; Immunome’s ability to execute on its strategy, including with respect to its R&D efforts, IND submissions and other regulatory filings, timing of these filings and the timing and nature of governmental authority feedback regarding the same, initiation and completion of any clinical studies, confirmatory testing and other anticipated milestones as and when anticipated; the effectiveness of Immunome’s product candidates, including the possibility that further preclinical data and any clinical trial data may be inconsistent with the data used for advancing the product candidates and that further variants of concern could emerge; Immunome’s ability to fund operations and raise capital; Immunome’s reliance on vendors; 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 28, 2022, 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. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. In addition, we may discuss our current and potential future product candidates that have not yet undergone clinical trials or been approved for marketing by the U.S. Food and Drug Administration or other governmental authority, including expectations about their therapeutic potential and benefits thereof. No representation is made as to the safety or effectiveness of these current or potential future product candidates for the use for which such product candidates are being studied. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. Overview 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 sales of our common stock, Series A convertible preferred stock and warrants, warrant exercises, the issuance of convertible promissory notes, and the Paycheck Protection Program loan (“PPP loan”) that was forgiven in May 2021. In addition, in July 2020, the Company entered into an Other Transaction Authority for Prototype 17 Table of Contents Agreement (OTA Agreement), with the Department of Defense (DoD) to fund the Company’s efforts in developing an antibody cocktail therapeutic to treat COVID-19. The amount of funding available to the Company under this expense reimbursement contract was $13.3 million. In May 2021, the Company and the DoD amended the OTA Agreement, pursuant to which the DoD award was increased from $13.3 million to $17.6 million. To date, we have not generated any revenue from product sales and do not expect to generate revenue from the sale of products for the foreseeable future. Since inception we have incurred significant operating losses. Our net losses for the three months ended March 31, 2022 and 2021 were $11.7 million and $3.9 million, respectively. The remaining available expense reimbursement under the OTA Agreement is $0.2 million as of March 31, 2022. As of March 31, 2022, we had a cash balance of $42.9 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 research and development activities related to our portfolio of programs as we continue our IMM-BCP-01 clinical development and IMM-ONC-01 preclinical development of product candidates, and plan to file an IND for ONC-01 later in 2022. We also plan 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 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 may also need to consider other various strategic alternatives, including a merger or sale of the Company; or cease operations. If we engage in collaborations, we may receive lower consideration upon commercialization of such products than if we had not entered into such arrangements or if we entered into such arrangements at later stages in the product development process. We currently have no sources of revenue, and our ability to continue to fund our future business plans is dependent on our ability to raise capital to fund our present and future business plans. Additionally, volatility in the capital markets, the competitive landscape and general economic conditions in the United States may be a significant obstacle to raising the required funds. We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities, particularly if and as we: ● continue research and development activities, including pre-clinical and clinical development; ● pursue regulatory approvals and implement other regulatory strategies for our current and future product candidates; ● 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 and administrative personnel; ● scale up and expand our clinical and regulatory capabilities; and ● add operational, financial and management information systems and infrastructure to support our research and development programs, and any future commercialization efforts. As a result of these anticipated expenditures and potential unanticipated expenditures, 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. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making 18 Table of Contents acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. 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. We may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. 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. Through March 31, 2022, we raised an aggregate of $125.1 million in gross proceeds from sales of our common stock, Series A convertible preferred stock and warrants, warrant and stock option exercises, the issuance of convertible promissory notes, and the PPP loan. On October 1, 2021, we entered into an Open Market Sale Agreement (“ATM Agreement”) with Jefferies Group 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 having an aggregate offering price of up to $75.0 million through Jefferies Group LLC acting as sales agent. The Company has not yet sold any shares under the ATM Agreement. We expect that our cash as of March 31, 2022 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 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, comprising a combination of three effective anti-viral antibodies derived from the B cells of COVID-19 patients that exhibit high neutralizing titers. IMM-BCP-01 targets non-overlapping regions of the Spike protein of SARS-CoV-2 which include highly conserved, subdominant epitopes. The cocktail promotes both ACE2 and non-ACE2 dependent neutralization and induces natural viral clearance mechanisms such as antibody dependent cellular cytotoxicity, complement activation and phagocytosis in pre-clinical testing. If successful in clinical testing, 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. 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 broadly focused on the emerging variants of SARS-CoV-2 . We submitted an IND application for the IMM-BCP-01 program to the US FDA, and following a clinical hold which was resolved in Q1 2022, we received clearance to proceed with our Ph1b clinical trial for the treatment of SARS-CoV-2. Patient recruitment efforts are underway. ​ 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. IL-38 was identified as the target of an antibody isolated from a hybridoma library generated from the memory B cells of a patient with squamous head and neck cancer. Query of public and proprietary databases of cancer gene expression revealed over-expression of IL-38 in multiple solid tumors. Further, a correlation with low levels of tumor-infiltrating T cells, a hallmark of immune suppression in some of these patients’ tumors, and high IL-38 expression was also observed, suggesting a role for IL-38 as an immune checkpoint. Data obtained from preclinical testing indicated that blocking IL-38 function using inhibitory antibodies increased the immune response to the tumor and resulted in anti-tumor activity in select animal models, suggesting that anti-IL-38 19 Table of Contents antibodies could have therapeutic utility as single agents or in combination with other therapeutic modalities. Our recent analysis further confirms IL-38 expression is frequently elevated in samples of specific patient tumor subtypes, such as head and neck and gastroesophogeal cancers. We believe that this information will help guide the selection of patient cohorts for clinical testing, thereby improving the probability of clinical success. We plan to submit our IND application for the IMM-ONC-01 program with the FDA in the second half of 2022. Other Programs and Platform ​ In addition to the already described lead discovery programs, we will continue to invest in our proprietary discovery engine to expand our pipeline. The high output of antibody-target pairs resulting from our discovery engine may provide us with additional insights into the immune response against cancer and infectious diseases. We intend to continue to invest in this platform, to evaluate novel antibody-target pairs and to develop a pipeline of antibody therapeutics as single agents or in combination with other therapeutics or technologies to yield product candidates, such as Antibody-Drug Conjugates (ADCs). We anticipate that our discovery engine has the ability to advance one to two programs into IND-enabling studies per year. We also intend to continue to explore additional strategic partnerships and collaborations to expand our opportunities and capabilities. We intend to continue to form strategic partnerships with government agencies and with other third parties to accelerate our research and development efforts, as exemplified by our other transaction authority for prototype agreement with the DoD related to COVID-19. The insights we obtain may also enable strategic partnerships with other entities, including pharmaceutical and biotechnology companies. We also intend to continue collaborating with various vendors, manufacturers, and other service providers to complement the capabilities needed to continue to develop and commercialize our products. Additionally, we plan to expand our intellectual property estate and infrastructure needed to discover and advance our platform and product candidates. We may in-license or acquire complementary intellectual property as needed or required, and we may continue to build our know-how and trade secrets. We may pursue both therapeutic and diagnostic applications of our antibodies through composition of matter and/or method of use patents. While our initial focus areas are in oncology and infectious disease, we may invest in intellectual property in other therapeutic areas as well. 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. 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. We have begun to implement a back-to-work policy; our approach to transitioning back to the office is tailored to the role of each team member and evolves as the specific conditions associated with the COVID-19 pandemic continue to evolve. We will continue to monitor guidance and regulations from the Centers for Disease Control and local health authorities and will adjust our onsite rules and policies in accordance with this guidance and regulations. We have also taken, and continue to take, proactive measures to maintain business continuity in the face of the COVID-19 pandemic. Communication throughout our organization has remained active during the pandemic. 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 28, 2022 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. 20 Table of Contents Components of our results of operations Research and development expenses Research and development expenses consist of costs incurred in performing research and development activities, which include: ● personnel-related expenses, including salaries, bonuses, benefits and share-based compensation for employees engaged in research and development functions; ● 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; ● expenses to conduct future clinical trials including regulatory and quality assurance; ● the cost of developing and validating our manufacturing process for use in our preclinical studies and future clinical trials; ● laboratory supplies and research materials and other infrastructure-related expenses; and ● facilities, depreciation and amortization and other expenses which include direct and allocated expenses. We expense research and development costs as incurred. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are consumed. Research and development activities are central to our business model. 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 “OTA Agreement”) with the DoD to fund our efforts in developing Biosynthetic Convalescent Plasma (BCP) to treat COVID-19. The OTA Agreement was modified in May 2021 to increase such funding. In connection with the OTA Agreement, we record expense reimbursements received from the 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, 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 and progressed research and development activities. Interest income (expense), net Interest income (expense), net consists of interest expense related to our capital lease obligations and equipment loans payable, offset by interest income earned on our cash. 21 Table of Contents Results of operations 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 by the pandemic. Comparison of the three months ended March 31, 2022 and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ ​ ​ ​ 2022 2021 Change ​ ​ (in thousands) Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 8,078 ​ $ 1,979 ​ $ 6,099 General and administrative ​ 3,576 ​ 1,918 ​ 1,658 Total operating expenses ​ 11,654 ​ 3,897 ​ 7,757 Loss from operations ​ (11,654) ​ (3,897) ​ (7,757) Interest income (expense), net ​ 1 ​ (1) ​ 2 Net loss ​ $ (11,653) ​ $ (3,898) ​ $ (7,755) ​ Research and development expenses Research and development expenses were $8.1 million and $2.0 million, net of DoD reimbursement for the three months ended March 31, 2022 and 2021, respectively. Research and development expenses increased by $6.1 million for the three months ended March 31, 2022. This increase is primarily as a result of $1.8 million increase in outsourced research and raw materials relating to the oncology program. Personnel-related costs increased by $0.9 million due to incremental headcount. In addition, contra-research and development expense reduced by $3.4 million for the three months ended March 31, 2022 as a result of a decrease in reimbursable BCP-01 related expenses through the DoD agreement. 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 our programs and product candidates. General and administrative expenses General and administrative expenses increased by $1.7 million to $3.6 million for the three months ended March 31, 2022 from $1.9 million for the three months ended March 31, 2021. The increase was primarily a result of a $1.3 million increase in personnel-related costs due to an increase in headcount and stock-based compensation and a $0.3 million increase in professional fees and insurance. Interest income (expense), net Interest expense consists of interest related to equipment loan payables. Interest income consists of interest earned on our cash balances held with financial institutions. Liquidity and capital resources Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses for the foreseeable future as continue our preclinical development of product candidates and conduct future clinical trials for our product candidates. Through March 31, 2022, we raised an aggregate of $125.1 million in 22 Table of Contents gross proceeds from sales of our common stock, Series A convertible preferred stock and warrants, warrant and stock option exercises, the issuance of convertible promissory notes, and the PPP loan that was forgiven in May 2021. As of March 31, 2022, we had $42.9 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 an Open Market Sale Agreement (“ATM Agreement”) with Jefferies Group 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 Group LLC 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. As and if necessary, we will seek to raise additional funds through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. 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. Cash flows The following table summarizes our sources and uses of cash for the three months ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2022 2021 ​ ​ (in thousands) ​ Cash used in operating activities ​ $ (6,376) ​ $ (3,535) ​ Cash used in investing activities ​ (6) ​ (31) Cash provided by financing activities ​ 32 ​ 76 Net decrease in cash and restricted cash ​ $ (6,350) ​ $ (3,490) ​ ​ Operating activities Net cash used in operating activities for the three months ended March 31, 2022 was $6.4 million, consisting primarily of our net loss of $11.7 million and decreases of accrued expenses and other liabilities of $0.9 million, offset by net noncash charges of $1.4 million for stock compensation expense, depreciation and amortization of right-of-use asset, decreases in prepaid expenses and other assets of $4.0 million, and increases in accounts payable of $0.8 million. Net cash used in operating activities for the three months ended March 31, 2021 was $3.5 million, consisting primarily of our net loss of $3.9 million, an increase in prepaid expenses and other assets of $1.7 million and a decrease in accrued expenses and other liabilities of $0.2 million. These uses of cash were offset by noncash charges of depreciation and amortization expense $0.2 million and share-based compensation expense of $0.3 million and an increase in accounts payable of $1.8 million due to our growth in expenditures. Investing activities During the three months ended March 31, 2022 and 2021, we used $6,000 and $31,000, respectively, for the purchase of property and equipment. Financing activities During the three months ended March 31, 2022, financing activities provided $32,000 from exercise of stock options. During the three months ended March 31, 2021, financing activities provided $0.1 million from the exercise of common stock warrants and stock options, offset by $35,000 for payments related to our equipment loan. 23 Table of Contents Funding requirements Our operating expenses are expected to increase substantially as we continue to advance our portfolio of programs. Specifically, our expenses will increase if and as we: ● further develop our discovery engine; ● continue our research and development programs for our current and any future product candidates from our current programs; ● seek to identify additional research programs and additional product candidates; ● initiate non-clinical testing and clinical trials for our product candidates; ● maintain, expand, enforce, defend, and protect our intellectual property portfolio and provide reimbursement of third-party expenses related to our patent portfolio; ● seek marketing approvals for any of our product candidates that successfully complete clinical trials; ● 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 administrative personnel; ● add operational, financial, and management information systems and personnel, including personnel to support our product development; ● acquire or in-license products, intellectual property, and technologies; and ● continue to operate as a public company. We expect that our existing cash at March 31, 2022 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. Our future funding requirements will depend on many factors including: ● the costs of continuing to develop our discovery engine; ● 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 current and future product candidates; ● the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights, and defending intellectual property-related claims and the success of our intellectual property portfolio; 24 Table of Contents ● 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 license agreements and our collaborations; ● 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; and ● the costs of operating as a public company. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of any purchaser 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 common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. 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. 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 States. 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. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 to our audited financial statements appearing in our Annual Report filed on Form 10-K with the SEC on March 28, 2022, we believe that the following accounting policies are the most critical to the judgments and estimates used in the preparation of our financial statements. 25 Table of Contents Share-based compensation We recognize the grant-date fair value of share-based awards issued as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The fair value of stock options is estimated at the time of grant using the Black-Scholes option pricing model, which requires the use of inputs and assumptions such as the fair value of the underlying common stock, exercise price of the option, expected term, risk-free interest rate, expected volatility and dividend yield. The inputs and assumptions used to estimate the fair value of share-based payment awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different inputs and assumptions, our share-based compensation expense could be materially different for future awards. Expected volatility is a subjective assumption that is estimated. The expected volatility was based on the historical stock volatility of several of our comparable publicly traded companies over a period of time equal to the expected term of the options, as we do not have sufficient trading history to use the volatility of our own common stock. Accrued research and development expenses As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders and communicating with personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us on a pre-determined schedule or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of these estimates with the service providers and make adjustments, if necessary. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. Recently Adopted Accounting Standards ​ On January 1, 2022, the Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which establishes ASC 842 and supersedes the lease accounting guidance under ASC 840. The standard generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and provide enhanced disclosures on the amount, timing, and uncertainty of cash flows arising from lease arrangements. The Company adopted ASC 842 using the modified retrospective approach. The Company elected the package of practical expedients available for existing contracts, which allowed the Company to carry forward our historical assessments of lease identification, lease classification, and initial direct costs. The Company also elected a policy to not apply the recognition requirements of ASC 842 for short-term leases with a term of 12 months of less. As of January 1, 2022, the effective date, the Company identified one operating lease arrangement relating to the Company’s headquarter facility and a short-term lease relating to laboratory equipment. The adoption of ASC 842 resulted in a recognition of an ROU asset and lease liability of $0.2 million on the Company’s balance sheet relating to the leases as of January 1, 2022. The adoption of the standard did not have a material effect on the Company’s condensed statements of operations and condensed statements of cash flows. Recently Issued Accounting Pronouncements ​ In November 2021, the FASB issued ASU Topic 832, Disclosures by Business Entities about Government Assistance (“Topic 832”). This standard requires annual disclosures about transactions with a government that have 26 Table of Contents been accounted for by analogizing to a grant or contribution accounting model to increase transparency about the types of transactions, the accounting for the transactions, and the effect of the transactions on an entity’s financial statements. The effective date of Topic 832 is for financial statements issued for annual periods beginning after December 15, 2021. The Company is currently evaluating the effect Topic 832 will have on its financial statements and related disclosures. JOBS Act We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company earlier if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1.0 billion of non-convertible debt securities over a three-year period. For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. We may choose to take advantage of some, but not all, of the available exemptions. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk The information under this item is not required to be provided by smaller reporting companies.