What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-05 compared with 2022-11-14 · 154 added, 154 removed, 143 unchanged (68% 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 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.

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 its programs and development candidates, the possible need and demand for its programs and development 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.

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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, continuation 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;

the effectiveness of Immunome’s programs and development candidates, including the possibility that further preclinical data and any clinical trial data may be inconsistent with the data used for advancing the programs and development candidates and that further variants of concern could emerge;

Immunome’s ability to fund operations and raise capital;

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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.

In addition, we may discuss our programs and development 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.

No representation is made as to the safety or effectiveness of these programs and development candidates for the use for which such programs and development 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.

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 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.

As of September 30, 2022, the Company has received $17.4 million in expense reimbursement from the DoD under the OTA Agreement.

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.

collaborations.

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, the Paycheck Protection Program loan, or the PPP loan, that was forgiven in May 2021, and strategic partnerships with AbbVie Global Enterprises Ltd., or AbbVie, and the Department of Defense, or the DoD.

To date, we have not generated any revenue from commercial sales and do not expect to generate revenue from commercial sale of products for the foreseeable future.

Since inception we have incurred significant operating losses.

Our net losses for the three months ended September 30, 2022 and 2021 were $8.5 million and $7.7 million, respectively, and $29.1 million and $16.9 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, we had cash and cash equivalents of $27.1 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 development of our product candidates, IMM-ONC-01 and IMM-BCP-01, respectively.

Our net losses for the three months ended March 31, 2023 and 2022 were $4.3 million and $11.7 million, respectively.

As of March 31, 2023, we had cash and cash equivalents of $44.4 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue advancement of our programs and develop product candidates.

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

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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;

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

We may also need to consider various strategic alternatives, including a merger or sale of the Company;

or reduce or cease operations.

If we engage in collaborations, we may receive lower consideration upon commercialization of such products or technologies than if we had not entered into such arrangements or if we entered into such arrangements at later stages in the research and 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.

Other than the current and potential future sources of funding under the Collaboration Agreement with AbbVie, we currently have no other 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;

We expect to continue to incur significant expenses in connection with ongoing activities, particularly if and as we:

● continue research and development activities;

● pursue regulatory approvals and implement other regulatory strategies for our programs;

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

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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.

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 programs and development 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 September 30, 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, we may elect, from time to time, to offer and sell shares of common stock under our existing shelf 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 or the shelf registration statement.

We expect that our cash as of September 30, 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 development activities for IMM-BCP-01 and IMM-ONC-01.

We expect that our cash as of March 31, 2023 will be sufficient to fund our operations at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

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

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 programs and development candidates.

Our current programs and strategic collaboration

Oncology (IMM-ONC-01)

Our lead oncology program targets IL-38, which we believe is a novel, negative regulator of inflammation capable of promoting tumor 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 (Tempus) databases of cancer gene expression revealed over-expression of IL-38 in multiple solid tumors.

Further, a correlation with low levels of tumor-infiltrating immune effector 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 modulator.

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 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 select patient tumor subtypes, in cancers such as head and neck, lung and gastroesophageal.

We believe that this information could potentially guide patient selection for early clinical testing and may improve the overall probability of demonstrating clinical utility, thereby improving the probability of clinical success.

We plan to submit our IND application for the IMM-ONC-01 program by mid-2023.

SARS-CoV-2 (IMM-BCP-01)

We are actively developing an antibody cocktail derived from the B cells of COVID-19 patients who exhibited high neutralizing titers.

We developed an antibody cocktail derived from the B cells of COVID-19 patients who exhibited 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.

The IMM-BCP-01 program is broadly focused on the emerging variants of SARS-CoV-2.

IMM-BCP-01 retains neutralization activity, in preclinical testing, against the Omicron variant and its dominant sub-lineages, including the BA.4/.5 variants which account for the majority of current cases.

We submitted an IND application for the IMM-BCP-01 program to the U.S.

FDA in November 2021 and initiated the Phase 1b study of IMM-BCP-01 in patients infected with SARS-CoV-2 in June 2022 .

We expect to obtain topline safety and PK data by the end of the year and announce those results in the beginning of 2023.

Oncology (“IMM-ONC-01”)

Our lead oncology program is focused on IL-38, which we believe is a novel, negative regulator of inflammation capable of promoting tumor 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 (Tempus) databases of cancer gene expression revealed over-expression of IL-38 in multiple solid tumors.

Our recent analysis further confirms IL-38 expression is frequently elevated in samples of select patient tumor subtypes, in cancers such as head and neck, lung and gastroesophageal.

We believe that this information could potentially guide patient selection for early clinical testing and may improve overall probability of demonstrating clinical utility, thereby improving the probability of clinical success.

We plan to submit our IND application for the IMM-ONC-01 program by mid-2023.

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 believe our discovery engine has the ability to generate one to two development candidates 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.

On January 6, 2023, we announced that it successfully completed dosing of the first cohort of patients in a Phase 1b study with no significant treatment-related adverse events.

We have decided to seek a partner in order to continue the trial and for any further development activities.

Other Programs and Platforms

In addition to the already described current 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 other 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 utilize technologies to yield development candidates with therapeutic modalities, such as Antibody-Drug Conjugates, or ADCs.

Additionally, we plan to expand our intellectual property estate and infrastructure needed to discover and advance our platform and programs.

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.

While our initial focus area is oncology, we may invest in intellectual property in other therapeutic areas as well.

We believe that our technology has broad utility and could enable the formation of attractive strategic partnerships, as exemplified by our OTA Agreement with the DoD and the Collaboration Agreement with AbbVie.

Therefore, to maximize the value of our platform we may, from time to time, contemplate and enter into various forms of collaborative agreements related to our platform, our programs and/or development candidates with third parties, including other companies, government agencies, academic institutions and non-profit groups.

Collaboration Agreement with AbbVie

On January 4, 2023, we entered into a collaboration and option agreement, or the Collaboration Agreement with AbbVie.

As part of the agreement, we will use our proprietary discovery engine to discover and validate targets derived from patients with three specified tumor types, and antibodies that bind to such targets, which may be the subject of further development and commercialization by AbbVie.

The research term is at least 66 months, subject to extension in certain circumstances by specified extension periods.

Pursuant to the terms of the Collaboration Agreement, with respect to each novel target-antibody pair we generate that meets certain mutually agreed criteria (each, a Validated Target Pair or VTP), we granted to AbbVie an exclusive option (up to a maximum of 10 in total) to purchase all rights in and to such Validated Target Pair, for all human and non-human diagnostic, prophylactic and therapeutic uses throughout the world, including without limitation the development and commercialization of certain products derived from the assigned Validated Target Pair and directed to the target comprising such VTP (Products).

No rights are granted by us to AbbVie under any of our platform technology covering our discovery engine.

Until the expiration of the research term, we are not permitted to conduct any activities in connection with targets or antibodies derived from patients with the specified tumor types, whether independently or with other third parties, except in limited circumstances with respect to certain target-antibody pairs that are no longer subject to the collaboration with AbbVie.

In addition, during the term of the Collaboration Agreement, we are not permitted to develop products directed to targets that are included in VTPs purchased by AbbVie, or to which AbbVie still has rights under the Collaboration Agreement, whether independently or with other third parties.

Under the Collaboration Agreement, AbbVie paid us an upfront payment of $30.0 million in January 2023 and may pay us certain additional platform access payments in the aggregate amount of up to $70.0 million based on our use of our discovery engine in connection with activities under each stage of the research plan, and delivery of VTPs to AbbVie.

AbbVie will also pay an option exercise fee in the low single digit millions for each of the up to 10 VTPs for which it exercises an option.

If AbbVie progresses development and commercialization of a Product, AbbVie will pay us development and first commercial sale milestones of up to $120.0 million per target, and sales milestones based on achievement of specified levels of net sales of Products of up to $150.0 million in the aggregate per target, in each case, subject to specified deductions in certain circumstances.

On a Product-by-Product basis, AbbVie will pay us tiered royalties on net sales of Products at a percentage in the low single digits, subject to specified reductions and offsets in certain circumstances.

AbbVie’s royalty payment obligation will commence, on a Product-by-Product and country-by-country basis, on the first commercial sale of such Product in such country and will expire on the earlier of (a) (i) the ten (10)-year anniversary of such first commercial sale for such Product in such country, or (ii) solely with respect to a Product that incorporates an antibody comprising a VTP (or certain other antibodies derived from such delivered antibody), the expiration of all valid claims of patent rights covering the composition of matter of any such antibody (whichever out of (i) or (ii) is later), and (b) the expiration of regulatory exclusivity for such Product in such country.

We are potentially eligible to receive up to approximately $2.8 billion from AbbVie under the Collaboration Agreement from the sources described above.

The Collaboration Agreement will expire upon the expiration of the last to expire royalty payment obligation with respect to all Products in all countries, subject to earlier expiration if all option exercise periods for all Validated Target Pairs expire without AbbVie exercising any option.

In addition, the research term will terminate if AbbVie does not elect to make certain platform access payments at specified points during the research term, in order for us to continue the

target discovery activities under the collaboration.

The Collaboration Agreement may be terminated by (a) either party upon the other party’s uncured material breach, or upon any insolvency event of the other party, (b) AbbVie for convenience upon a specified period prior written notice, or (c) AbbVie for our breach of representations and warranties with respect to debarment or compliance with anti-bribery and anti-corruption laws.

If AbbVie has the right to terminate the Collaboration Agreement for our uncured material breach or a breach of representations and warranties with respect to debarment or compliance with anti-bribery and anti-corruption laws, AbbVie may elect to continue the Collaboration Agreement, subject to certain specified reductions applicable to certain of AbbVie’s payment obligations (with a specified floor on such reductions).

COVID-19 pandemic

The ongoing COVID-19 pandemic is evolving, and to date has led to the implementation of various responses from time to time, including government-imposed quarantines, travel restrictions, and other public health safety measures.

We have and will continue to closely monitor the spread of COVID-19 and its variants, and plan to continue taking proactive measures to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the ongoing COVID-19 pandemic.

We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of the health and safety of our employees and other personnel in light of COVID-19 and variants thereof.

The extent to which COVID-19 ultimately impacts our business, results of operations or financial condition will depend on future developments, which, despite progress in vaccination efforts, remain highly uncertain and cannot be predicted with confidence, such as the duration of the COVID-19 pandemic, new strains of the virus, including any future variants that may emerge, which may impact rates of infection and vaccination efforts, developments or perceptions regarding the

safety of vaccines, new information that may emerge concerning the severity of COVID-19, the direct and indirect economic effects of the pandemic and containment measures, including increases in inflation, supply chain disruption, labor shortage and shifting demand, and any additional preventative and protective actions taken to contain the pandemic or treat its impact, among others.

The estimates of the impact on the Company’s business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

The ongoing COVID-19 pandemic continues to affect economies and businesses around the world.

The extent and duration of such effects remain uncertain and difficult to predict, particularly as virus variants continue to spread.

We are actively monitoring and managing our response and assessing actual and potential impacts to our operating results and financial condition, as well as developments in our business, which could further impact the developments, trends and expectations described below.

See “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 16, 2023 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

Collaboration revenue

We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future.

To date, we have generated our revenue through the Collaboration Agreement with AbbVie.

We recognize revenue over the expected performance period under this agreement.

We expect that revenues for the foreseeable future will be derived primarily from this agreement and any additional collaborations that we may enter into.

We have not received any royalties under the Collaboration Agreement with AbbVie to date.

Research and development expenses

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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 clinical development activities.

In July 2020, we entered into the OTA Agreement with the DoD to fund the development of IMM-BCP-01 to treat COVID-19.

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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.

Under the provisions of the CARES Act signed into law on March 27, 2020 and the subsequent extension of the CARES Act, the Company was deemed eligible to receive the employee retention credit subject to certain criteria.

The Company recognized the employee retention credit as contra-expense to personnel related costs in research and development expenses in the condensed statements of operations.

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.

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.

Under the provisions of the CARES Act signed into law on March 27, 2020 and the subsequent extension of the CARES Act, the Company was eligible for a refundable employee retention credit subject to certain criteria.

The Company recognized the employee retention credit as contra-expense to personnel related costs in general and administrative expenses in the condensed statements of operations.

Interest income (expense), net

Interest income (expense), net consists of interest expense related to loans payable, offset by interest income earned on our cash.

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.

Interest income

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

Results of operations

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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 and nine months ended September 30, 2022 and 2021

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

(in thousands)

Comparison of the three months ended March 31, 2023 and 2022

Three Months Ended March 31,

(in thousands)

Collaboration revenue

Operating expenses:

Research and development

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Loss from operations

Interest income (expense), net

Three months ended September 30, 2022 and 2021

Research and development expenses

Research and development expenses were $5.2 million and $4.5 million, net of DoD reimbursement for the three months ended September 30, 2022 and 2021, respectively.

Research and development expenses increased by $0.7 million for the three months ended September 30, 2022.

This increase is primarily due to a $5.3 million reduction of contra-research and development expense as a result of a reduction in BCP-01 program spending and reimbursable related expenses under the DoD agreement during the three months ended September 30, 2022.

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

Personnel-related costs increased by $0.2 million due to an increase in headcount and stock-based compensation offset by a $4.7 million decrease in outsourced research and materials and a $0.1 million decrease in facility related costs.

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 current and future clinical trials for our programs and product candidates.

General and administrative expenses

General and administrative expenses increased by $0.1 million to $3.3 million for the three months ended September 30, 2022 from $3.2 million for the three months ended September 30, 2021.

The increase was primarily a result of a $0.3 million increase in personnel-related costs due to an increase in headcount and stock-based compensation offset by a $0.2 million decrease in professional fees, general fees and facility related costs.

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.

Nine months ended September 30, 2022 and 2021

Interest income

Three months ended March 31, 2023 and 2022

Collaboration revenue

In January 2023, we entered into the Collaboration Agreement with AbbVie and recognized collaboration revenue of $2.4 million for the three months ended March 31, 2023.

No collaboration revenue was recognized for the three months ended March 31, 2022.

Research and development expenses

Research and development expenses were $19.0 million and $9.7 million, net of DoD reimbursement for the nine months ended September 30, 2022 and 2021, respectively.

Research and development expenses increased by $9.3 million for the nine months ended September 30, 2022.

This increase is primarily due to a $12.7 million reduction of contra-research and development expense as a result of a reduction in BCP-01 program spending and reimbursable related expenses under the DoD agreement during the nine months ended September 30, 2022.

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

Personnel-related costs increased by $1.4 million due to an increase in headcount and stock-based compensation.

These increases in personnel-related costs were offset by $0.6 million in contra-expense to personnel related costs relating to the CARES Act employee retention credit.

In addition, outsourced research and raw materials decreased by $3.9 million and facility related costs decreased by $0.3 million.

Research and development expenses were $3.9 million and $8.1 million for the three months ended March 31, 2023 and 2022, respectively.

Research and development expenses decreased by $4.2 million for the three months ended March 31, 2023.

Of the $4.2 million decrease in research and development expenses, BCP-01 program related expenses decreased by $2.4

million, net of contra expense, as a result of our decision to seek a partner in order to continue the BCP-01 trial and further development activities.

ONC-01 program related expenses decreased by $2.0 million as a result of a decrease in product development activities.

Personnel-related expenses decreased by $0.2 million primarily as a result of a decrease in retention bonuses.

These decreases were offset by an increase of $0.4 million in outsourced research and materials relating to the AbbVie collaboration.

General and administrative expenses

General and administrative expenses increased by $2.5 million to $10.1 million for the nine months ended September 30, 2022 from $7.6 million for the nine months ended September 30, 2021.

The increase was primarily a result of a $2.5 million increase in personnel-related costs due to an increase in headcount and stock-based compensation offset by $0.2 million in contra-expense to personnel related costs relating to the CARES Act employee retention credit.

In addition, professional fees and other general expenses increased by $0.2 million for the nine months ended September 30, 2022.

Interest income (expense), net

Interest expense consists of interest related to loan payables.

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

Other income for the nine months ended September 30, 2021 consists of forgiveness of the PPP Loan.

General and administrative expenses were $2.9 million and $3.6 million for the three months ended March 31, 2023 and 2022, respectively.

General and administrative expenses decreased by $0.7 million for the three months ended March 31, 2023.

The decrease was primarily a result of a $0.3 million decrease in professional fees including consulting and legal related costs and $0.4 million decrease in general expenses including insurance.

Interest income

Interest income was $0.2 million and $1,000 for the three months ended March 31, 2023 and 2022, respectively.

Interest income increased by $0.2 million for the three months ended March 31, 2023 as a result of increased interest rates on our cash balances held with a financial institution.

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 current and future clinical trials for our product candidates.

As of September 30, 2022, we had $27.1 million in cash and cash equivalents.

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, we 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.

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

The Company has not yet sold any shares under the ATM Agreement or the shelf registration statement.

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.

We expect to incur significant expenses and operating losses for the foreseeable future as we continue advancement of our programs and development candidates.

Through March 31, 2023, we raised an aggregate of $155.1 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, the Paycheck Protection Program, or PPP, loan that was forgiven in May 2021, and strategic partnerships with AbbVie Global Enterprises Ltd, or AbbVie and the Department of Defense, or the DoD.

In January 2023, we received a $30.0 million upfront payment from AbbVie under the collaboration and option agreement, or the Collaboration Agreement.

In addition, we received $17.6 million in expense reimbursement from the DoD under the Other Transaction Authority for Prototype Agreement, or the OTA Agreement, from inception through 2022.

On October 1, 2021, we entered into an Open Market Sale Agreement, or the ATM Agreement, with Jefferies Group LLC, which provides that, upon the terms and subject to the conditions and limitations in the ATM Agreement, we may elect, from time to time, to offer and sell shares of common stock under the registration statement having an aggregate offering price of up to $75.0 million through Jefferies Group LLC acting as sales agent.

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

Through March 31, 2023, we sold 5,925 shares of common stock under the ATM Agreement resulting in net proceeds of approximately $34,000.

We can elect to sell additional shares under the ATM Agreement or shelf registration statement.

In addition, on January 4, 2023, we entered into the Collaboration Agreement with AbbVie directed to the discovery of up to 10 novel target-antibody pairs leveraging our discovery engine.

We are potentially eligible to receive up to approximately $2.8 billion from AbbVie under the Collaboration Agreement from the sources described in the section “Our current programs and strategic collaboration”.

There are no assurances that we will receive additional payments from AbbVie beyond the $30.0 million upfront payment.

We will need to raise additional capital before we exhaust our current cash to continue to fund our research and development, including our plans to continue advancement of our programs and development candidates and new product development, as well as to fund operations.

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.

The following table summarizes our sources and uses of cash for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

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 three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(in thousands)

Cash used in operating activities

Cash provided by (used in) operating activities

Cash used in investing activities

Cash provided by financing activities

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

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

Operating activities

Net cash used in operating activities for the nine months ended September 30, 2022 was $22.0 million, consisting primarily of our net loss of $29.1 million and net decreases of accrued expenses and other liabilities and accounts payable of $2.4 million, offset by net noncash charges of $4.3 million for stock compensation expense, depreciation and amortization of right-of-use asset and decreases in prepaid expenses and other assets of $5.2 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, increases in prepaid expenses and other assets of $1.8 million, and forgiveness of PPP Loan of $0.5 million, offset by noncash charges of $2.9 million for stock compensation expense, depreciation and amortization, and increases in accrued expenses and other liabilities of $2.8 million and accounts payable of $2.1 million.

Net cash provided by operating activities for the three months ended March 31, 2023 was $24.2 million, consisting primarily of increases in deferred revenue of $27.6 million, noncash charges of $1.4 million for share-based compensation expense, depreciation and amortization of right-of-use asset, and increases in accounts payable of $0.7 million, and decreases in prepaid expenses and other current assets of $0.2 million, offset by our net loss of $4.3 million and net decreases of accrued expenses and other current liabilities and other long-term liabilities of $1.5 million.

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 share-based 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.

Investing activities

During the nine months ended September 30, 2022 and 2021, we used $0.2 million and $0.1 million, respectively, for the purchase of property and equipment.

During the three months ended March 31, 2023 and 2022, we used $0.1 million and $6,000, respectively, for the purchase of property and equipment.

Financing activities

During the nine months ended September 30, 2022, financing activities provided $32,000 from exercise of stock options.

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 three months ended March 31, 2023, financing activities provided approximately $34,000 in net proceeds from the sales of common stock under the ATM agreement.

During the three months ended March 31, 2022, financing activities provided $32,000 from exercise of stock options.

Funding requirements

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● 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;

● continue non-clinical testing and clinical testing for our product candidates;

● continue our research and development programs for our programs and development candidates;

● seek to identify additional programs and development 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;

● seek marketing approvals for any of our programs and development candidates that successfully complete clinical trials;

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

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● continue to operate as a public company.

We expect that our existing cash at September 30, 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 research and development strategy.

We expect that our existing cash at March 31, 2023 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.

We will need additional financing to support its continuing operations and pursue its research and development strategy.

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.

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:

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● 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 scope, progress, results, and costs of discovery, preclinical development, laboratory testing, manufacturing and clinical trials for programs and development 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;

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

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

● the success of our license agreements and our collaborations;

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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 research and 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 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 programs and development candidates that we would otherwise prefer to develop and market ourselves.

Critical accounting policies and use of estimates

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We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We evaluate our

estimates and assumptions on an ongoing basis.

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 16, 2023, we believe that the following accounting policies are the most critical to the judgments and estimates used in the preparation of our financial statements.

Collaboration revenue

In January 2023, we entered into the Collaboration Agreement with AbbVie, which was determined to be within the scope of ASC 606.

We evaluate our collaborative arrangements pursuant to ASC 808, Collaborative Arrangements, or ASC 808, and ASC 606, Revenue from Contracts with Customers, or ASC 606.

We consider the nature and contractual terms of collaborative arrangements and assesses whether the arrangement involves a joint operating activity pursuant to which we are an active participant and is exposed to significant risks and rewards with respect to the arrangement.

If we are an active participant and are exposed to significant risks and rewards with respect to the arrangement, the we account for the arrangement as a collaboration under ASC 808.

If we are not exposed to significant risks and rewards and the contract is with a customer, we account for the collaboration under ASC 606.

Payments pursuant to collaborative arrangements may include non-refundable upfront payments, research option and license option payments, milestone payments upon the achievement of significant regulatory and development

events, commercial sales milestones, and royalties on product sales.

The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under a collaboration arrangement, we apply the five-step model of ASC 606:

(i) identify the contract with a customer;

(ii) identify the performance obligations in the contract, including whether they are capable of being distinct;

(iii) determine the transaction price, including the constraint on variable consideration;

(iv) allocate the transaction price to the performance obligations;

and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

We apply significant judgment when evaluating whether contractual obligations represent distinct performance obligations, allocating transaction price to performance obligations within a contract, determining when performance obligations have been met, and assessing the recognition of variable consideration.

When consideration is received prior to us completing our performance obligation under the terms of a contract, a contract liability is recorded as deferred revenue.

Deferred revenue expected to be recognized as revenue within the twelve months following the balance sheet date is classified as a current liability.

Share-based compensation

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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.

Expected volatility is a subjective assumption based on the historical stock volatility of several of our comparable publicly traded companies over a period of time equal to the expected term.

Accrued research and development expenses

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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 condensed 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 condensed 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 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.

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

Recently adopted accounting standard

On January 1, 2023, we adopted ASU No.

2016-13, Measurement of Credit Losses on Financial Instruments .

This standard amended its guidance on the recognition of impairment losses of certain financial instruments.

The ASU established the current expected credit loss model, which is based on expected losses rather than incurred losses.

Adoption of this standard had no impact on our condensed financial statements.

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

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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