What changed in this filing

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Item 1. Financial Statements

2024-05-14 compared with 2023-11-09 · 328 added, 382 removed, 110 unchanged (87% of the section changed)

1 unchanged sentence

IMMUNOME, INC.

Condensed Balance Sheets

(In thousands, except share data)

September 30, 2023

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

March 31, 2024

December 31, 2023

1 unchanged sentence

Cash and cash equivalents

Marketable securities

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Operating right-of-use asset, net

Operating right-of-use assets

Restricted cash

Deferred offering costs

Other long-term assets

Liabilities and stockholders’ equity

5 unchanged sentences

Deferred revenue, non-current

Deposit liability

Other long-term liabilities

Operating lease liabilities, net of current portion

Total liabilities

3 unchanged sentences

10,000,000 shares authorized;

no shares issued or outstanding at September 30, 2023 and December 31, 2022, respectively

no shares issued or outstanding at March 31, 2024 and December 31, 2023

Common stock, $ 0.0001 par value;

200,000,000 shares authorized;

12,202,516 and 12,128,843 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

300,000,000 and 200,000,000 shares authorized at March 31, 2024 and December 31, 2023, respectively;

59,694,243 and 43,251,778 shares issued and outstanding at March 31, 2024 and December 31, 2023 , respectively

Additional paid-in capital

Accumulated other comprehensive income

Accumulated deficit

1 unchanged sentence

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these unaudited condensed financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements .

IMMUNOME, INC.

Condensed Statements of Operations

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Collaboration revenue

Operating expenses:

In-process research and development

Research and development

3 unchanged sentences

Interest income

Deemed dividend arising from warrant modification

Net loss attributable to common stockholders

Per share information:

Net loss per share of common stock, basic and diluted

Weighted-average common shares outstanding, basic and diluted

The accompanying notes are an integral part of these unaudited condensed financial statements.

Net loss per share, basic and diluted

Weighted-average shares outstanding, basic and diluted

Comprehensive loss:

Unrealized loss on marketable securities

Comprehensive loss

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements .

IMMUNOME, INC.

Condensed Statements of Changes in Stockholders’ Equity

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

Stockholders’ equity

Balance at June 30, 2023

Comprehensive

Stockholders'

Balance at December 31, 2023

Share-based compensation expense

Vesting of restricted stock awards

Balance at September 30, 2023

Stockholders’ equity

Balance at January 1, 2023

Issuance of common stock under Zentalis License Agreement

Issuance of common stock under the Ayala Asset Purchase Agreement

Issuance of common stock for public offering, net of commissions and offering costs of $ 14,592

Exercise of stock options

Exercise of common stock warrants

Unrealized loss on marketable securities

Balance at March 31, 2024

Stockholders'

Balance at December 31, 2022

Share-based compensation expense

2 unchanged sentences

Vesting of restricted stock awards

Balance at September 30, 2023

Stockholders’ equity

Balance at June 30, 2022

Share-based compensation expense

Exercise of stock options

Balance at September 30, 2022

Stockholders’ equity

Balance at January 1, 2022

Share-based compensation expense

Exercise of stock options

Balance at September 30, 2022

The accompanying notes are an integral part of these unaudited condensed financial statements.

Balance at March 31, 2023

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements .

IMMUNOME, INC.

Condensed Statements of Cash Flows

Condensed Consolidated Statements of Cash Flows

(In thousands)

Nine Months ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

Amortization of right-of-use asset

Write-off of deferred offering costs

Share-based compensation

Accretion of discount related to marketable securities

Share-based compensation expense

Charge for purchase of in-process research and development assets

Changes in operating assets and liabilities:

3 unchanged sentences

Deferred revenue

Other long-term liabilities

Net cash provided by (used in) operating activities

Operating lease liabilities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Cash paid in connection with Ayala asset acquisition

Cash paid in connection with Zentalis license agreement

Purchases of property and equipment

1 unchanged sentence

Cash flows from financing activities:

Proceeds from public offering

Payment of offering costs

Prepayments from PIPE transaction recorded as deposit liability

Proceeds from exercise of stock options

Proceeds from exercise of common stock warrants

Proceeds from issuance of common stock under ATM, net

Net cash provided by financing activities

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

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Supplemental disclosures of cash flow information:

Operating lease right-of-use asset and lease liability recorded due to lease extension

Reconciliation of cash and cash equivalents and restricted cash:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents, and restricted cash

Supplemental disclosures of non-cash investing and financing activities:

Issuance of common stock in exchange for in-process research and development

Liabilities assumed in Ayala asset acquisition

Purchase of in-process research and development assets in accounts payable

Public offering costs included in accounts payable

Issuance of common stock to certain board of directors in lieu of accrued compensation

Deferred offering costs in accrued expenses and other current liabilities

Property and equipment included in accounts payable

The accompanying notes are an integral part of these unaudited condensed financial statements.

Purchases of property and equipment in accounts payable

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements .

IMMUNOME, INC.

Notes to Condensed Financial Statements

Notes to Condensed Consolidated Financial Statements

Nature of the business

Immunome, Inc., or the Company, is a biotechnology company dedicated to developing first-in-class and best-in-class targeted cancer therapies.

The Company believes that pursuing underexplored targets with appropriate drug modalities leads to transformative therapies.

The Company’s proprietary memory B cell hybridoma technology allows for the rapid screening and functional characterization of novel antibodies and targets.

The Company was incorporated as a Pennsylvania corporation on March 2, 2006, and was converted to a Delaware corporation on December 2, 2015.

Since its inception, the Company has devoted substantially all its resources to research and development, raising capital, building its management team, extending its intellectual property portfolio, and executing strategic partnerships and transactions.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, risks associated with research, development, and manufacturing activities, uncertain results of preclinical and clinical testing, development of new technological innovations and products by competitors, dependence on key personnel, partners and third-party vendors, protection of proprietary technology, compliance with government regulations, regulatory approval of products and the ability to secure additional capital to fund operations.

On October 2, 2023, the Company completed its merger with Morphimmune Inc., or Morphimmune.

Under the terms of the Agreement and Plan of Merger and Reorganization dated as of June 28, 2023, or the Merger Agreement, among the Company, Morphimmune and Ibiza Merger Sub, Inc., a wholly owned subsidiary of the Company, or Merger Sub, Morphimmune merged with and into Merger Sub, with Morphimmune surviving as a wholly-owned subsidiary of Immunome, or the Merger.

Morphimmune is a preclinical biotechnology company focused on developing targeted oncology therapeutics.

Morphimmune’s Targeted Effector platform uses small molecule ligands to selectively deliver drug payloads to diseased cells.

Morphimmune believes this approach reduces toxicity and increases the efficacy of effector molecules, thereby improving outcomes for patients.

The Company has incurred net losses since inception, including net losses of $ 14.2 million and $ 29.1 million for the nine months ended September 30, 2023 and 2022, respectively, and it expects to generate losses from operations for the foreseeable future primarily due to research and development costs for its programs and development candidates.

As of September 30, 2023, the Company had an accumulated deficit of $ 130.2 million.

Through September 30, 2023, the Company raised an aggregate of $ 155.1 million in gross proceeds from sales of 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.

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

In June 2023 in connection with the Merger Agreement, the Company entered into subscription agreements with certain investors pursuant to which the Company would sell shares of its common stock, immediately following the completion of the Merger, in exchange for gross proceeds of $ 125.0 million.

On October 2, 2023, the Company issued and sold 21,690,871 shares of its common stock pursuant to the subscription agreements in a Private Investment in

Public Equity, or PIPE, transaction.

The Company received gross proceeds of $ 125.0 million, $61.0 million of which was received on or prior to September 30, 2023 and recorded as a deposit liability on the September 30, 2023 balance sheet.

The remaining $ 64.0 million of proceeds were received in October 2023.

On January 4, 2023, the Company entered into the Collaboration Agreement with AbbVie, or the Collaboration Agreement, directed to the discovery of up to 10 novel target-antibody pairs leveraging the Company’s discovery engine.

The Company is potentially eligible to receive up to approximately $ 2.8 billion from AbbVie under the Collaboration Agreement from the sources described in Note 3.

There are no assurances that the Company will receive additional payments from AbbVie beyond the $ 30.0 million upfront payment received in January 2023.

On October 1, 2021, the Company 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, the Company 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, or Jefferies.

Through September 30, 2023, the Company the Company has sold 5,925 shares of common stock under the ATM Agreement resulting in net proceeds of approximately $ 34,000 .

During the three-month period ended September 30, 2023, we did not issue or sell any shares of our common stock under the ATM Agreement.

On November 8, 2023, the Company provided notice of termination of the ATM Agreement to Jefferies.

The Company had cash and cash equivalents of $ 90.6 million at September 30, 2023, which included $ 61.0 million of deposits related to the PIPE transaction.

The Company expects that its cash, including the remaining proceeds received in connection with the closing of the PIPE transaction on October 2, 2023, will enable it to fund its operating expenses and capital expenditure requirements for at least 12 months from the filing date of this Quarterly Report on Form 10-Q;

more funding will be necessary to fund additional research and development and operations in order to pursue the Company’s growth strategy.

If the Company cannot obtain the necessary funding, it will need to delay, scale back or eliminate some or all of its research and development programs, enter into collaborations with third parties relative to potential programs, products or technologies that it might otherwise seek to progress independently (or enter into these collaborations sooner than it might otherwise have intended to), or reduce or cease operations.

Further, as a part of its strategy, the Company may consider various other alternatives, including a merger or sale of the Company.

If the Company engages in any of these types of transactions under these circumstances, it may receive lower consideration than if it had not entered into such arrangements or if it entered into such arrangements at later stages.

Additionally, volatility in the capital markets generally and the biotechnology sector specifically, as well as general economic conditions in the United States may be a significant obstacle to raising the required funds on satisfactory terms, if at all.

Operations of the Company are subject to certain risks and uncertainties including various internal and external factors that will affect whether and when the Company’s programs and development candidates become approved drugs and how significant their market share will be, many of which are outside of the Company’s control.

The length of time and cost of developing and commercializing these programs and development candidates and/or failure of them at any stage of the drug approval process will materially affect the Company’s financial condition and future operations.

Immunome, Inc., or the Company, is a biopharmaceutical company focused on the development of targeted oncology therapies.

The Company believes that the pursuit of novel or underexplored targets will be central to the next generation of transformative therapies, and it is dedicated to developing targeted cancer therapies with first-in-class and best-in-class potential.

The Company’s goal is to establish a broad pipeline of preclinical and clinical assets and successfully develop such assets into approved products for commercialization.

To support that goal, the Company invests heavily in both business development and internal discovery platforms.

Immunome is advancing a program pipeline comprising one clinical and three preclinical assets.

The clinical asset is AL102, an investigational gamma secretase inhibitor, or GSI, currently under evaluation in a Phase 3 trial for the treatment of desmoid tumors that was acquired from Ayala Pharmaceuticals, Inc.

on March 25, 2024.

The preclinical assets are IM-1021, a receptor tyrosine kinase-like orphan receptor 1, or ROR1, antibody-drug conjugate, or ADC;

IM-3050, a fibroblast activation protein, or FAP, targeted radioligand therapy, or RLT, candidate;

and IM-4320, an anti-IL-38 immunotherapy candidate.

On October 2, 2023, the Company completed its merger with Morphimmune Inc., or Morphimmune, a preclinical biotechnology company focused on developing targeted oncology therapies, and Morphimmune became a wholly owned subsidiary of Immunome.

The Company has incurred significant operating losses since inception and expects to continue to incur losses from operations for the foreseeable future as it pursues development of its therapeutic candidates and other programs.

As of March 31, 2024, the Company had an accumulated deficit of $ 352.3 million, non-restricted cash and cash equivalents of $ 269.7 million, and marketable securities of $ 40.0 million.

The Company has not generated any product revenue to date and does not expect to generate product revenue until it successfully completes development and obtains regulatory approval for at least one of its product candidates.

Through March 31, 2024, the Company has funded its operations primarily through sales of equity securities and strategic partnerships and transactions as well as expense reimbursement s from a government contract that ended in 2022 .

The Company expects that its existing cash, cash equivalents and marketable securities at March 31, 2024 are sufficient to fund its current and planned operating expenses and capital expenditures for at least 12 months from the filing date of this Quarterly Report on Form 10-Q.

Beyond that date, the Company may need to raise additional capital through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements to achieve its longer-term business objectives.

Summary of significant accounting policies

Basis of presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted, or GAAP, in the United States.

Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates, or ASU, promulgated by the Financial Accounting Standards Board, or FASB.

Unaudited interim results

These unaudited condensed financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and the notes thereto included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 16, 2023.

The accompanying condensed financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022 are unaudited but have been prepared on the same basis as the annual audited financial statements and include all adjustments that management believes to be necessary for a fair presentation of the periods presented.

Interim results are not necessarily indicative of results for a full year.

Condensed balance sheet amounts as of December 31, 2022 have been derived from the audited financial statements as of that date.

The accompanying unaudited interim financial statements have been prepared in accordance with the accounting principles generally accepted in the United States, or GAAP, and following the requirements of the Securities and Exchange Commission, or the SEC, for interim reporting.

Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

Accordingly, these unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and related notes included in the Company’s Form 10-K filed with the SEC on March 28, 2024, which provide a more complete discussion of the Company’s accounting policies and certain other information.

The December 31, 2023 condensed consolidated balance sheet has been derived from the Company’s annual financial statements.

These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments that management believes to be necessary for a fair presentation of the Company’s financial information.

Interim results are not necessarily indicative of results for a full year or any future interim period.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses.

The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances.

Significant estimates and assumptions reflected in these condensed financial statements include, but are not limited to, the expected volatility used to estimate fair value of stock options, accrued research and development expenses, and the estimated costs which drive the revenue recognition for the Collaboration Agreement with AbbVie.

Estimates and assumptions are periodically reviewed in light of changes in circumstances, facts and experience.

Changes in estimates are recorded in the period in which they become known.

Actual results could differ from these estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed consolidated financial statements and the accompanying notes.

The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate.

Actual results could materially differ from those estimates.

The Company’s significant accounting estimates include, but are not necessarily limited to, the expected volatility used to estimate fair value of stock options, accrued research and development expenses, the fair value of acquired in-process research and development assets, and revenue recognition.

Segment and geographic information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or the CODM, or decision-making group, in deciding how to allocate resources and in assessing performance.

The CODM is the Company’s Chief Executive Officer.

The Company views its operations as, and manages its business in, one operating segment operating exclusively in the United States of America.

Fair value of financial instruments

ASC Topic 820, Fair Value Measurement , or ASC 820, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).

Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the assets or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered value hierarchy that distinguishes between the following:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

Level 3 — Unobservable inputs for the asset or liability (i.e.;

supported by little or no market activity).

Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgement.

Accordingly, the degree of judgement exercised by the Company

in determining fair value is greatest for instruments categorized as Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Cash and cash equivalents and restricted cash are Level 1 assets as of September 30, 2023 and December 31, 2022.

Restricted cash

Restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facilities.

Cash will be released from restriction upon termination of the lease.

Restricted cash was $ 0.1 million at both September 30, 2023 and 2022, respectively.

The following table provides a reconciliation of the components of cash and cash equivalents and restricted cash presented in the condensed statements of cash flows:

(in thousands)

September 30, 2023

September 30, 2022

Cash and cash equivalents

Restricted cash

Operating segments are defined as components of an entity about which separate discrete information is available and regularly reviewed by the chief operating decision maker, its Chief Executive Officer, in deciding how to allocate resources and in assessing performance.

The Company has determined that it operates as one operating and reporting segment exclusively in the United States.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents.

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and marketable securities.

The Company maintains deposits in a financial institution in excess of government insured limits.

Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at a financial institution that management believes to be of high credit quality, and the Company has not experienced any losses on these deposits.

Equity issuance costs

The Company capitalized costs that were directly associated with establishing the ATM Agreement and shelf registration statement in 2021.

These costs will remain capitalized until such financings are consummated, at which time such costs will be recorded against the gross proceeds from the applicable financing.

If a financing is abandoned, deferred offering costs are expensed.

Ongoing costs that are directly associated with the ATM Agreement are expensed as incurred.

During the quarter ended September 30, 2023, the Company expensed the remaining $ 0.3 million of deferred offering costs related to the ATM when it decided to abandon any future use of the ATM.

On November 8, 2023, the Company provided notice of termination of the ATM Agreement to Jefferies.

During the quarter ended September 30, 2023, the Company capitalized $ 0.1 million of costs that were directly associated with the PIPE transaction.

These costs will be recorded against the gross proceeds from the PIPE transaction when it closed in October 2023.

Deferred offering costs were $ 0.1 million as of September 30, 2023 and $ 0.3 million as of December 31, 2022 on the condensed balance sheets.

Government assistance programs

The Company accounts for amounts received under its DoD expense reimbursement contract as contra-research and development expenses in the condensed statements of operations.

Collaboration revenue

The Company evaluates its collaborative arrangements pursuant to ASC 808, Collaborative Arrangements, or ASC 808, and ASC 606, Revenue from Contracts with Customers, or ASC 606.

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

If the Company is an active participant and is exposed to significant risks and rewards with respect to

the arrangement, the Company accounts for the arrangement as a collaboration under ASC 808.

If it is not exposed to significant risks and rewards and the contract is with a customer, the Company accounts 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 the Company fulfills its obligations under a collaboration arrangement, the Company applies 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.

The Company applies 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 the Company completing its 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.

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

Please see Note 3 for further information related to the accounting for the Collaboration Agreement.

Research and development costs

Research and development costs are charged to expense as incurred.

Research and development costs consist of costs incurred in performing research and development activities, including salaries and bonuses, share-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, preclinical and clinical development expenses, including manufacture and testing of clinical supplies, consulting and other contracted services.

Additionally, under the terms of the license agreements described in Note 7, the Company is obligated to make future payments should certain development and regulatory milestones be achieved.

Costs for certain research and development activities are recognized based on the terms of the individual arrangements, which may differ from the timing of receipt of invoices and payment of invoices and are reflected in the condensed financial statements as a prepaid or accrued expense.

Share-based compensation

The Company’s share-based compensation program allows for grants of stock options and restricted stock awards.

Grants are awarded to employees and non-employees, including directors.

The Company accounts for its share-based compensation awards granted to employees and nonemployees based on the estimated fair value on the date of grant and recognized compensation expense of those awards over the requisite service period, which is the vesting period of the respective award.

The Company accounts for forfeitures as they occur.

For share-based awards with service-based vesting conditions, the Company recognized compensation expense on a straight-line basis over the service period.

The Company classified share-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

The Company estimates the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii)

the risk-free interest rate and (iv) expected dividends.

Due to the lack of Company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and biopharmaceutical industry focus.

The historical volatility is calculated based on a period of time commensurate with the expected term assumption.

The Company uses the simplified method to calculate the expected term for options granted to employees and non-employees whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the options due to its lack of sufficient historical data.

The risk-free interest rate is based on U.S.

Treasury securities with a maturity date commensurate with the expected term of the associated award.

The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

The exercise price is the fair value of the common stock as of the measurement date.

Management also believes that the Company is not exposed to significant credit risk as it relates to marketable securities because the Company only invests in U.S government securities.

Restricted cash

Restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facility in Bothell, Washington.

Cash will be released from restriction upon termination of the lease.

Restricted cash was $ 0.1 million at both March 31, 2024 and December 31, 2023.

Asset acquisitions

Acquisitions of assets or a group of assets that do not meet the definition of a business are accounted for as asset acquisitions, with a cost accumulation model used to determine the cost of the acquisition.

Common stock issued as consideration in an acquisition of assets is generally measured based on the acquisition date fair value of the equity interests issued.

Direct transaction costs are recognized as part of the cost of an acquisition of assets.

Intangible assets that are acquired in an asset acquisition for use in research and development activities that have an alternative future use are capitalized as in-process research and development, or IPR&D.

Acquired IPR&D that has no alternative future use is expensed immediately as a component of in-process research and development expense in the condensed consolidated statements of operations and comprehensive loss.

In addition to upfront consideration, acquisitions of assets may also include contingent consideration payments to be made for future milestone events or royalties on net sales of future products.

The Company assesses whether such contingent consideration is subject to liability classification and fair value measurement or meets the definition of a derivative.

Contingent consideration payments in an acquisition of assets not required to be accounted for as a liability at fair value are recognized when the contingency is resolved, and the consideration is paid or becomes payable.

Contingent consideration payments made prior to regulatory approval are expensed as incurred.

Net loss per share

Basic net loss per share of common stock is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted net loss per share of common stock is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net loss per share of common stock is computed by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.

The following potentially dilutive securities outstanding as of September 30, 2023 and 2022 have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

September 30,

Stock options (1)

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities.

Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period, including the effect of dilutive securities.

As the Company was in a net loss position for the three months ended March 31, 2024 and 2023, diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive securities are antidilutive.

The following potentially dilutive securities have been excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive (on an as-converted basis):

Three Months Ended March 31,

Stock options outstanding

Common stock warrants

(1) Represents common stock equivalents.

In periods in which the Company reports a net loss per share of common stock, diluted net loss per share of common stock is the same as basic net loss per share of common stock since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company reported a net loss per share of common stock for the three and nine months ended September 30, 2023 and 2022.

The Company accounts for leases in accordance with ASC 842, Leases .

At the inception of an arrangement, the Company determines whether an arrangement contains a lease based on facts and circumstances present in the arrangement.

An arrangement is or contains a lease if the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Typically, lessees are required to recognize leases with a term greater than one year on the condensed balance sheets as an operating or finance lease liability and right-of-use asset.

Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

The Company has elected the practical expedient to not recognize leases with a term of 12 months or less.

The Company does not have any financing leases as of September 30, 2023.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on their present value of lease payments over the remaining lease term.

Options to extend the lease term are included in the Company’s assessment of the lease term only if there is a reasonable assessment that the Company will renew.

Leases are discounted to its present value using either the interest rate implicit in the Company’s lease or its incremental borrowing rate, which

reflects the fixed rate in which the Company could borrow on a collateralized basis the amount of lease payments in the same currency, for a similar term, in a similar economic environment.

Recently adopted accounting standard

On January 1, 2023, the Company 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 the Company’s condensed financial statements.

Unvested restricted stock awards

Recent accounting standards not yet adopted

In December 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-09, Improvements to Income Tax Disclosures , which updates income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

This update also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments in this update are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company is still in the process of determining the effect this ASU will have on the condensed consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting—Improvements to Reportable Segment Disclosures.

ASU 2023-07 requires disclosure of incremental segment information on an interim and annual basis and provides new segment disclosure requirements for entities with a single reportable segment.

ASU 2023-07 is effective for all public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

The Company adopted annual requirements under ASU 2023-07 on January 1, 2024 and plans to adopt interim requirements under ASU 2023-07 on January 1, 2025.

The Company will begin including financial statement disclosures in accordance with ASU 2023-07 in its Annual Report on Form 10-K for the year ended December 31, 2024.

Fair value measurement

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.

When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

March 31, 2024

Amortized Cost

Unrealized Gain

Unrealized Loss

Cash equivalents:

Money market funds

treasury securities

Marketable securities:

treasury securities

Total financial assets

December 31, 2023

Amortized Cost

Unrealized Gain

Unrealized Loss

Cash equivalents:

Money market funds

treasury securities

Marketable securities:

treasury securities

Total financial assets

The Company’s marketable securities consist of U.S.

treasury debt securities with a contractual maturity date of 6 months .

Collaboration agreement with AbbVie

In January 2023, the Company entered into the Collaboration Agreement with AbbVie, pursuant to which the Company will use its 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.

Pursuant to the terms of the Collaboration Agreement, the Company granted to AbbVie an exclusive option to purchase all rights to each novel target-antibody pair, or a Validated Target Pair or VTP, that the Company generates that meets certain mutually agreed criteria, up to a maximum of 10 in total, for all human and non-human diagnostic, prophylactic and therapeutic uses throughout the world, including the development and commercialization of certain products, or Products, derived from the assigned VTP.

AbbVie paid the Company a nonrefundable upfront payment of $ 30.0 million in January 2023 and will pay certain additional platform access payments in the aggregate amount of up to $ 70.0 million based on the Company’s use of its 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 up to 10 VTPs for which it exercises an option.

If AbbVie progresses development and commercialization of a Product, AbbVie will pay the Company development and 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 Product, subject to specified deductions in certain circumstances.

On a Product-by-Product basis, AbbVie will pay the Company 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) the later of (i) the ten-year anniversary of the 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 and (b) the expiration of regulatory exclusivity for such Product in such country.

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 VTPs expire without AbbVie exercising any option, if AbbVie does not elect to make certain platform access payments at specified points during the research term, or upon the uncured material breach or any insolvency event of either party.

AbbVie may also terminate the Collaboration Agreement for convenience upon a specified period prior written notice, or upon the Company’s breach of representations and warranties with respect to debarment or compliance with anti-bribery and anti-corruption laws.

The Company assessed the Collaboration Agreement under ASC 808 and ASC 606 and concluded that it represents a contract with a customer.

The Company applied the relevant guidance of ASC 606 to evaluate the accounting under the Collaboration Agreement and identified one performance obligation under the arrangement:

a promise to provide research and development services to AbbVie, or R&D Services.

In January 2023 , the Company entered into a Collaboration and Option Agreement, or the Collaboration Agreement, with AbbVie Global Enterprises Ltd., or AbbVie, pursuant to which the Company is using its discovery platform 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.

Pursuant to the terms of the Collaboration Agreement, the Company granted AbbVie an exclusive option to purchase all rights to each novel target-antibody pair, or a Validated Target Pair or VTP, that the Company generates that meets certain mutually agreed criteria, up to a maximum of 10 in total, for all human and non-human diagnostic, prophylactic and therapeutic uses throughout the world, including the development and commercialization of certain products, or Products, derived from the assigned VTP.

AbbVie paid the Company a nonrefundable upfront payment of $ 30.0 million in January 2023 and will be required to pay certain additional platform access payments of up to $ 70.0 million in aggregate based on the Company’s use of its discovery platform in connection with activities under each stage of the research plan and delivery of VTPs to AbbVie.

If AbbVie exercises its option to purchase a VTP, then AbbVie will be required to pay an option exercise fee in the low single-digit millions for each of up to 10 VTPs for which it exercises an option.

For each Product, the Company is eligible to receive development and commercial based milestones of up to $ 120.0 million in the aggregate and sales milestones of up to $ 150.0 million in the aggregate for the achievement of specified levels of annual net sales.

The Company is also eligible to receive tiered royalties at percentage rates in the low single digits on annual net sales of any Products that are commercialized by AbbVie.

AbbVie’s obligation to pay royalties will terminate, on a Product-by-Product and country-by-country basis, upon the earlier of (a) the later of (i) 10 years following the first commercial sale for such Product in such country, or (ii) expiration of all valid claims of patent rights covering the Product in such country, and (b) the expiration of all applicable regulatory exclusivities for such Product in such country.

AbbVie may terminate the Collaboration Agreement at any time for convenience upon a specified period of prior written notice.

The Company determined that the Collaboration Agreement represents a contract with a customer and consists of one performance obligation to provide research and development services, or R&D services, to AbbVie.

The Company evaluated the options to continue the R&D services and options to purchase licenses to each VTP and concluded that these options did not represent material rights.

The Company determined the initial transaction price of the single performance obligation to be $ 30.0 million, as the variable consideration for additional R&D services, option exercise payments, and development milestone payments

are all subject to constraint at contract inception.

At each reporting period, the Company will reevaluate the variable consideration subject to constraint and, if necessary, will adjust its estimate of the overall transaction price.

For the sales-based royalties, the Company will recognize revenue when the related sales occur.

Collaboration revenue from the single performance obligation will be recognized over the estimated performance of the R&D services using the cost-to-cost input method which the Company believes best depicts the transfer of control to the customer.

Revenue from the Collaboration Agreement will be recognized over the estimated performance of the R&D services using the cost-to-cost input method which the Company believes best depicts the transfer of control to the customer.

Under the cost-to-cost input method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the performance obligation.

The Company recognized $ 3.6 million and $ 10.2 million of collaboration revenue for the three and nine months ended September 30, 2023, respectively.

The Company recognized $ 1.0 million and $ 2.4 million of collaboration revenue for the three months ended March 31, 2024 and 2023, respectively.

The following table summarizes the change in deferred revenue (in thousands):

Three Months Ended September 30, 2023

Nine Months Ended September 30, 2023

Balance at the beginning of the period

Deferral of revenue

Recognition of unearned revenue

Balance at the end of the period

As of September 30, 2023, the Company expects to recognize the deferred revenue associated with the non-refundable upfront fee over the estimated research and development period of approximately 1.25 years.

Government assistance programs

DoD expense reimbursement contract

In July 2020, the Company entered into the OTA Agreement with the U.S.

Department of Defense’s Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense, or JPEO-CBRND, in collaboration with the Defense Health Agency, to fund the Company’s efforts in developing an antibody cocktail therapeutic to treat COVID-19.

The amount of funding originally made available to the Company under the OTA Agreement 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.

In January 2023, the Company and the DoD modified the OTA Agreement to extend the termination date of the OTA Agreement to July 2023, at no additional cost to the government.

The Company’s obligations under the OTA agreement with the DoD were completed.

Under the OTA Agreement, the DoD is required to pay the Company, upon submission of invoices for approved budgeted supplies delivered and services rendered in carrying out the prototype project, within 30 calendar days of receipt of request for payment.

The Company received the maximum $ 17.6 million in expense reimbursement from the DoD under the OTA Agreement from inception through 2022.

The Company recorded contra-research and development expense related to the OTA Agreement of $ 0.0 million and $ 0.6 million for the three and nine months ended September 30, 2022 in the condensed statements of operations.

No contra-research and development expense related to the OTA Agreement was recorded during the three and nine months ended September 30, 2023.

Prepaid expenses and other assets

Prepaid expenses and other assets consisted of the following:

(in thousands)

September 30, 2023

December 31, 2022

Prepaid subscriptions and service contracts

Research and development advance payments

CARES Act employee retention credit receivable

Prepaid insurance

Accrued expenses and other liabilities

Accrued expenses and other liabilities consisted of the following:

(in thousands)

September 30, 2023

Three Months Ended March 31, 2024

Balance as of December 31, 2023

Recognition of revenue

Balance as of March 31, 2024

As of March 31, 2024, the Company expects to recognize the deferred revenue associated with the non-refundable upfront fee over the estimated research and development period of approximately 1.25 years.

Balance sheet components

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

March 31, 2024

December 31, 2023

1 unchanged sentence

Compensation and related benefits

Severance accruals

Professional fees

Short-term operating lease liability and other liabilities

Short-term operating lease liability

Total accrued expenses and other current liabilities

Commitments and contingencies

6 unchanged sentences

The Company assumes all administrative costs of the 401(k) Plan and makes matching contributions as defined in the 401(k) Plan document.

The Company made matching contributions of $ 0.1 million and $ 0.2 million to the 401(k) Plan for the three and nine months ended September 30, 2023.

The Company made matching contributions of $ 0.1 million and $ 0.2 million to the 401(k) Plan for the three and nine months ended September 30, 2022.

Legal proceedings

The Company is not a party to any material litigation and does not have material contingency reserves established for any litigation liabilities.

At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.

License agreements

The Company entered into various license agreements to further discover, develop and commercialize certain technologies and treatments.

The Company may need to pay developmental and regulatory milestone payments of up to approximately $ 2.6 million.

The Company made matching contributions of $ 0.1 million to the 401(k) Plan for each of the three months ended March 31, 2024 and 2023.

Asset acquisitions

Ayala Pharmaceuticals

On March 25, 2024, the Company and Ayala Pharmaceuticals, Inc., or Ayala, completed an Asset Purchase Agreement, or the Ayala Purchase Agreement, initially entered into in February 2024, pursuant to which the Company acquired Ayala’s AL101 and AL102 programs and assumed certain liabilities associated with the acquired assets.

The upfront consideration included (i) payment of approximately $ 20.0 million in cash, and (ii) the issuance of 2,175,489 unregistered shares of the Company’s common stock at an aggregate fair value of $ 50.6 million on the acquisition date.

The fair value of the shares issued to Ayala was based on the closing stock price of the Company’s common stock on March 25, 2024 of $ 24.00 per share less a discount of 3.0 % related to unregistered share restrictions.

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in two programs that were grouped as a single identifiable IPR&D asset.

The assets acquired in the transaction were measured based on the estimated fair value of the consideration paid of $ 71.3 million, which included direct transaction costs of $ 0.7 million.

The consideration paid and the relative fair values of the assets acquired and liabilities assumed were as follows (in thousands):

Common stock issued to Ayala

Upfront consideration paid to Ayala

Transaction costs

Consideration paid

Assets acquired:

In-process research and development

Total assets acquired

Liabilities assumed:

Accrued expenses

Total liabilities assumed

Net assets acquired

The cost attributable to the IPR&D was expensed in the Company’s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 since the acquired IPR&D had no alternative future use.

Under the Ayala Purchase Agreement, the Company will be required to pay Ayala up to $ 37.5 million in the aggregate upon the achievement of certain development, regulatory and commercial milestone events.

Any potential future milestone payment amounts will be accrued when the related contingency is resolved, and the milestone consideration becomes payable.

In December 2023, the Company entered into an agreement with Atreca, Inc., or Atreca, on the terms of a cash acquisition pursuant to which the Company would acquire certain antibody-related assets and materials for an upfront payment of $ 5.5 million and up to $ 7.0 million in clinical development milestones.

The closing of the transaction is subject to customary conditions, including the approval of Atreca’s stockholders.

As of March 31, 2024, the transaction had not closed.

On October 2, 2023, the Company completed its merger with Morphimmune, or the Merger, and acquired all of the outstanding equity interests of Morphimmune in exchange for 8,835,710 shares of the Company's common stock, based upon an exchange ratio of 0.3042 shares of the Company’s common stock for each outstanding share of Morphimmune capital stock.

Under the terms of the Agreement and Plan of Merger and Reorganization dated as of June 28, 2023, the Company assumed Morphimmune’s 2020 Equity Incentive Plan and all outstanding options to purchase shares of Morphimmune capital stock were converted into 2,472,563 options to purchase shares of the Company’s common stock with a weighted average exercise price of $ 1.29 per share.

All other terms and conditions associated with these options, including vesting and exercisability, are governed by the original terms and conditions of the Morphimmune 2020 Equity Incentive Plan.

The Company accounted for the acquisition of Morphimmune as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in two programs that were grouped as a single identifiable IPR&D asset.

The assets acquired in the transaction were measured based on the estimated fair value of the consideration paid of $ 88.0 million, which included direct transaction costs of $ 0.8 million.

The consideration paid consisted of $ 72.5 million of the Company’s common stock based on the closing stock price on October 2, 2023 of $ 8.20 per share and $ 14.7 million related to the value of Morphimmune’s share-based awards assumed by Immunome as of the same date.

The cost of the acquisition allocated to the acquired IPR&D of $ 80.8 million was expensed since the acquired IPR&D had no alternative future use.

Licensing arrangements

Bristol-Myers Squibb

In connection with the closing of the Ayala Purchase Agreement in March 2024, the Company assumed a license agreement, the BMS License Agreement, with Bristol-Myers Squibb Company, or BMS, pursuant to which the Company obtained a worldwide, non-transferable, royalty-bearing, exclusive, sublicensable, license under certain patent rights and know-how of BMS to research, discover, develop, make, have made, use, sell, offer to sell, export, import and commercialize AL101 and AL102, or the BMS Licensed Compounds, and products containing AL101 or AL102, or the BMS Licensed Products, for all uses including the prevention, treatment or control of any human or animal disease, disorder or condition.

Under the BMS License Agreement, the Company is obligated to use commercially reasonable efforts to develop at least one BMS Licensed Product.

The Company is also required to use commercially reasonable efforts to obtain regulatory approvals in certain major market countries for at least one BMS Licensed Product, as well as to affect the first commercial sale of and commercialize each BMS Licensed Product after obtaining such regulatory approval.

The Company is required to pay BMS up to approximately $ 142.0 million in the aggregate upon the achievement of certain clinical development or regulatory milestones for AL101 and AL102 across multiple indications.

In addition, the Company is required to pay BMS up to $ 50.0 million in the aggregate upon the achievement of certain commercial milestones for each BMS Licensed Product.

Any potential future milestone payment amounts will be accrued when the related contingency is resolved, and the milestone consideration becomes payable.

BMS is also eligible to receive tiered royalties ranging from a high single-digit to a low teen percentage on annual worldwide net sales of any BMS Licensed Products.

Royalty payments will be expensed in the period in which the underlying revenues are earned.

BMS has the right to terminate the BMS License Agreement in its entirety if the Company fails to fulfill its development and commercialization obligations within a defined period of time following written notice by BMS.

The Company has the right to terminate the BMS License Agreement for convenience upon prior written notice to BMS.

Upon termination of the BMS License Agreement by the Company for convenience or by BMS, the Company will grant an exclusive, non-transferable, sublicensable, worldwide license to BMS for certain patent rights that are necessary to develop, manufacture or commercialize the BMS Licensed Compounds or BMS Licensed Products.

In exchange for such license, BMS will be obligated to pay the Company a low single-digit percentage royalty on net sales of the BMS Licensed Compounds and/or BMS Licensed Products by it or its affiliates, licensees or sublicensees, provided that the termination occurred after a specified developmental milestone for such BMS Licensed Compounds and/or BMS Licensed Products.

Zentalis Pharmaceuticals

On January 5, 2024, the Company entered into a license agreement with Zentalis Pharmaceuticals, Inc., or the Zentalis License Agreement, pursuant to which the Company received an exclusive, worldwide, royalty-bearing, sublicensable license under certain intellectual property relating to Zentalis’ proprietary antibody-drug conjugate, or ADC, platform technology, ROR1 antibodies and ADCs targeting ROR1 to exploit products covered by or incorporating the licensed intellectual property rights.

Under the Zentalis License Agreement, the Company is required to use commercially reasonable efforts to develop an ADC targeting ROR1, two additional ADCs, and commercialize any product that has received regulatory approval.

As up front consideration for the license, the Company paid to Zentalis $ 15.0 million in cash and issued 2,298,586 unregistered shares of its common stock at an aggregate fair value of $ 23.4 million.

The fair value of the common stock issued to Zentalis was based on the closing stock price of the Company’s common stock on January 5, 2024 of $ 11.12 per share less a discount of 8.5 % related to unregistered share restrictions.

The Company accounted for the transaction as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable IPR&D asset.

The consideration paid to acquire the license and intellectual property rights, which included transaction costs of $ 0.2 million, was immediately recognized as IPR&D expense in the Company’s condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2024 since the acquired IPR&D had no alternative future use.

Under the Zentalis License Agreement, the Company is obligated to pay Zentalis an aggregate of up to $ 150.0 million in development and regulatory milestones for the first product containing an ADC targeting ROR1, or a ROR1 ADC Product, to achieve such milestones, and commercial milestones on ROR1 ADC Products.

The Company is also obligated to pay Zentalis mid-to-high single digit royalties on ROR1 ADC Products.

In addition, the Company is obligated to pay Zentalis up to $ 25.0 million in development and regulatory milestones for the first product from each of the first five additional development programs using the licensed platform technology to generate products, and mid-single digit royalties on products from each such program.

Any potential future milestone payment amounts will be accrued when the related contingency is resolved, and the milestone consideration becomes payable.

The Company’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 latest of (a) the 10-year anniversary of such first commercial sale for such product in such country, (b) the expiration of regulatory exclusivity for such product in such country, and (c) the expiration of the last-to-expire valid claim of a licensed patent covering such product in such country.

Royalty payments will be expensed in the period in which the underlying revenues are earned.

The Zentalis License Agreement will continue until the expiration of all royalty payment obligations.

The Zentalis License Agreement may be terminated early by (a) either party in its entirety upon (i) the other party’s uncured material breach, subject to a notice and cure period, (ii) any insolvency event of the other party or (iii) prolonged force majeure, (b) the Company, either in its entirety or in part, for convenience upon a specified period prior written notice, or (c) Zentalis (i) in its entirety if the Company challenges one of the licensed patents or (ii) fails to meet certain development activity benchmarks within specified time periods.

Purdue Research Foundation

Upon closing of the Merger, the Company assumed certain license agreements that Morphimmune had entered into prior to the Merger.

In January 2022, Morphimmune entered into a Master License Agreement, or the Purdue License Agreement, with Purdue Research Foundation, or PRF.

Under the Purdue License Agreement, PRF granted Morphimmune a royalty-bearing, transferable, worldwide, exclusive license, sublicensable through multiple tiers, under certain intellectual property owned by PRF to research, develop, manufacture, and commercialize the licensed products in all fields of use with limited exceptions.

Under the Purdue License Agreement, Morphimmune paid PRF a one-time upfront payment of $ 0.2 million upon execution and $ 0.1 million on each of the first and second anniversary of the effective date of the Purdue License Agreement.

During the period commencing on the date of first commercial sale of a licensed product and ending upon the date of expiration of the last valid claim of the licensed patents covering such licensed product in a country, referred to as the royalty term, the Company will pay PRF an earned unit royalty of a low single-digit percentage on gross receipts from sale of the licensed product, and beginning with the first sale of a licensed product, a tiered minimum annual royalty from the low to mid six-digit figure range less the unit royalties due for the annual period.

Upon the achievement of specified development and commercialization milestones, the Company will pay PRF the milestone payments as specified in the Purdue License Agreement, which may be up to $ 3.8 million in the aggregate.

The Company is also required to pay PRF an annual maintenance fee ranging from a low five-digit figure to a low six-digit figure prior to first sale of a licensed product and a low double-digit percentage of sublicense income received for sublicenses of licensed intellectual property, the percentage depending upon the timing of execution of the sublicense.

The Purdue License Agreement expires on a licensed product-by-licensed product and country-by-country basis, upon expiration of the royalty term for such licensed product for the applicable country.

The Company may terminate the Purdue License Agreement upon at least one month’s prior written notice to PRF.

PRF may terminate the Purdue License Agreement and the licenses granted thereunder if the Company fails to cure a payment default or other material breach of the Purdue License Agreement after written notice from PRF, or if Morphimmune becomes insolvent.

Other License Agreements

The Company has entered into various other license agreements to further discover, develop and commercialize certain technologies and treatments.

As of March 31, 2024, the Company may need to pay developmental and regulatory milestone payments of up to approximately $ 6.0 million.

In addition, the Company may need to pay royalty rates on net product sales, a portion of certain sublicense and collaboration payments, and certain commercial milestone payments of up to approximately $ 7.5 million, if any.

The Company recorded $ 0.1 million of development, regulatory, or commercial milestone payments during each of the three and nine months ended September 30, 2022, respectively, in research and development expenses in the condensed statements of operations.

No such costs were recorded during the three and nine months ended September 30, 2023, respectively.

Whitehead Letter Agreement

On November 17, 2022, the Company entered into a Letter Agreement, or the Letter Agreement, with the Whitehead Institute of Biomedical Research, or Whitehead, which became effective on January 4, 2023 upon the satisfaction of the conditions described therein.

The Letter Agreement supplements the Exclusive Patent License Agreement entered into between the Company and Whitehead on June 25, 2009 (as amended on December 17, 2009, March 21, 2013, August 21, 2017 and July 21, 2020, the License Agreement).

Pursuant to the Letter Agreement, Whitehead and the Company agreed that certain payments received by the Company from the Collaborator (as defined in the Letter Agreement) (i.e., a corporate partner, as defined in the License Agreement) would be excluded from the Company’s payment obligations to Whitehead.

The Company and Whitehead further agreed, among other things, that the Company will make certain payments to Whitehead (i) as Net Sales (as defined in the License Agreement) as long as the Company receives those payments from the Collaborator on a specified number of products purchased by the Collaborator and (ii) upon the achievement of certain milestones whether by the Company or the Collaborator.

The Company leases office and laboratory space for approximately 11,000 square feet of space in Exton, Pennsylvania.

The lease includes certain options to extend.

In August 2023, the Company extended the existing lease term until March 2025.

Supplemental condensed balance sheet information related to leases comprised of the following (in thousands):

September 30, 2023

The Company did not make any development, regulatory, or commercial milestone payments under these licensing agreements during the three months ended March 31, 2024 and 2023.

The Company currently leases approximately 11,000 square feet of office and laboratory space in Exton, Pennsylvania under a lease that expires on March 31, 2025, and approximately 14,000 square feet of office and laboratory space in Bothell, Washington, under a lease that expires on October 31, 2028.

Supplemental balance sheet information related to leases was as follows (in thousands):

March 31, 2024

December 31, 2023

Operating leases:

Operating lease right-of-use assets

Operating lease liability

Operating lease liability, net of current portion

Total operating lease liability

Operating lease liability and operating lease liability, net of current portion is included in accrued expenses and other current liabilities and other long-term liabilities, respectively, in the accompanying condensed balance sheets.

Operating lease expense recorded as research and development and general and administrative expenses in the condensed statements of operations was as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

General and administrative

Research and development

Total lease expense

Other operating lease information as of September 30, 2023 was as follows:

Operating lease liabilities, current portion

Operating lease liabilities, net of current portion

Total operating lease liabilities

Operating lease liabilities, current portion is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.

For each of the three months ended March 31, 2024 and 2023, the Company recorded operating lease expense of $ 0.1 million.

Under the terms of the lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability.

The Company did not incur significant variable lease costs for the three months ended March 31, 2024 and 2023.

Other information related to the Company’s operating leases was as follows:

March 31, 2024

December 31, 2023

Weighted-average remaining lease term (in years)

Weighted-average discount rate

Supplemental cash flow information related to the operating lease was as follows (in thousands):

Nine Months Ended September 30,

Cash paid for operating lease liability

As of September 30, 2023, minimum rental commitments under the operating lease were as follows (in thousands):

Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands):

Three Months Ended March 31,

Cash paid for operating lease liabilities

The Company’s future minimum lease payments were as follows as of March 31, 2024 (in thousands):

Years ending December 31,

2023 (represents remaining three months in 2023)

2024 (represents remaining nine months in 2024)

Total lease payments

Less imputed interest

Present value of lease liability

Present value of operating lease liabilities

The holders of common stock are entitled to one vote for each share of common stock.

Subject to the approval of the holders of a majority in interest of the Company’s stockholders entitled to vote thereon, the holders of common stock are entitled to receive dividends out of legally available funds.

In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to share ratably in the remaining assets of the Company available for distribution.

In January 2023, the Company sold 5,925 shares of common stock under the ATM Agreement resulting in net proceeds of approximately $ 34,000 .

On January 15, 2023, the Company issued 55,250 shares of common stock in the aggregate to certain non-employee board of directors pursuant to the 2020 Equity Incentive Plan in lieu of the non-employee director board and committee cash retainers owed for service on the board of directors in 2022.

The holders of common stock shall be entitled to receive dividends out of funds legally available if and when declared by the Company’s board of directors.

In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of common stock shall be entitled to share ratably in the remaining assets of the Company available for distribution.

The Company has reserved the following shares of common stock for issuance, on an as-converted basis, as follows:

March 31, 2024

December 31, 2023

Stock options issued and outstanding under the Plans

Common stock warrants outstanding

Remaining shares available for issuance under the Plans

Remaining shares available for issuance under the ESPP

Total reserved common stock

Follow-on public offering

In February 2024, the Company completed a follow-on public offering and issued 11,500,000 shares of its common stock at $ 20.00 per share for net proceeds of $ 215.4 million, after deducting underwriting discounts and commissions and offering expenses.

Warrants to acquire shares of common stock

At September 30, 2023, common stock warrants outstanding were as follows:

Warrants Outstanding

Exercise Price per Share

Expiration Date

April 28, 2024

On June 2, 2023, 803,112 Series A warrants with an exercise price of $ 9.00 expired.

No warrants were exercised during the three and nine months ended September 30, 2023 and 2022, respectively.

The Company had 157,314 and 500,000 issued and outstanding common stock warrants as of March 31, 2024 and December 31 2023, respectively, with an exercise price of $ 10.00 per share and an expiration date of April 28, 2024.

During the three months ended March 31, 2024, warrants to purchase 342,686 shares of common stock were exercised for proceeds of $ 3.4 million.

No warrants were exercised during the three months ended March 31, 2023.

Share-based compensation

On September 18, 2020, the Company adopted the 2020 Equity Incentive Plan, or the 2020 Plan, which supersedes all prior equity incentive plans.

Under the 2020 Plan, the number of shares of common stock reserved for issuance under the 2020 Plan will automatically increase on January 1 of each year, beginning on January 1, 2021 and continuing through and including January 1, 2030, by 4 % of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors.

On January 1, 2023, the number of shares available for future issuance under the 2020 Plan increased by 485,153 shares.

On September 29, 2023, the number of shares available for future issuance under the 2020 Plan increased by 2,955,280 shares.

As of September 30, 2023, there were 4,205,361 shares available for future issuance under the 2020 Plan.

The Company also adopted the 2020 Employee Stock Purchase Plan, or the ESPP, on September 18, 2020 which provides for the grant of purchase rights to purchase shares of the Company’s common stock to eligible employees, as defined by the ESPP.

The maximum number of shares of common stock that may be issued under the ESPP will not exceed 125,000 shares of common stock, plus the number of shares of common stock that are automatically added on January 1 of each calendar year for a period of up to ten years , commencing on the first January 1 following the year in which an IPO occurs and ending on, and including, January 1, 2030, in an amount equal to the lesser of (i) 1 % of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, and (ii) 1,000,000 shares of common stock.

On January 1, 2023, the number of shares available for future issuance under the ESPP increased by 121,288 shares.

As of September 30, 2023, there were 473,733 shares available under the ESPP.

No shares of common stock have been issued under the ESPP as of September 30, 2023.

The 2020 Plan and the ESPP are administered by the Board of Directors subject to the Board’s right to delegate to a committee.

The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors.

Stock options awarded under the 2020 Plan generally expire 10 years after the grant date unless the Board of Directors sets a shorter term.

Vesting periods for awards under the 2020 Plan are determined at the discretion of the Board of Directors.

Stock options granted to employees, officers, members of the Board of Directors and consultants of the Company typically vest over one to four years .

Certain options provide for accelerated vesting if there is a change in control, as defined in the 2020 Plan.

Share-based compensation expense recorded for stock options and restricted stock awards as research and development and general and administrative expenses in the condensed statements of operations is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

General and administrative

Unrecognized compensation cost related to unvested options and restricted stock awards was $ 7.4 million as of September 30, 2023 and will be recognized over an estimated weighted average period of 1.2 years.

2020 Equity Incentive Plan

In September 2020, the Company adopted the 2020 Equity Incentive Plan, or the 2020 Plan, which supersedes all prior equity incentive plans.

No further awards will be granted under the 2018 Equity Incentive Plan, or 2018 Plan.

Awards forfeited, cancelled, or repurchased from the above plans are returned to the pool of shares of common stock available for issuance under the 2020 Plan.

On January 1, 2024, the shares of common stock authorized for issuance under the 2020 Plan increased by 1,730,071 shares.

As of March 31, 2024, there were 4,398,174 shares available for issuance under the 2020 Plan.

On October 2, 2023, the Morphimmune 2020 Equity Incentive Plan, or the Morphimmune Plan, (or collectively with the 2020 Plan, the Plans), was assumed by the Company in conjunction with the Merger (Note 7).

There were 929,702 shares available for issuance under the Morphimmune Plan as of March 31, 2024.

2020 Employee Stock Purchase Plan

The Company adopted the 2020 Employee Stock Purchase Plan, or ESPP, in September 2020.

On January 1, 2024, the shares of common stock authorized for issuance under the ESPP increased by 432,518 shares.

As of March 31, 2024, there were 906,251 shares available for issuance under the ESPP.

No shares of common stock have been issued under the ESPP as of March 31, 2024.

Stock options

A summary of option activity under the Plans during the three months ended March 31, 2024 is as follows:

exercise price

(in thousands)

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Exercisable at March 31, 2024

Aggregate intrinsic value in the above table is calculated as the difference between the exercise price of the options and the Company’s fair value of its common stock as of period end.

The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2024 and 2023 was $ 14.62 and $ 4.18 per share, respectively.

The aggregate intrinsic value of options exercised during the three months ended March 31, 2024 was $ 2.5 million.

No options were exercised during the three months ended March 31, 2023.

The weighted average assumptions used in the Black-Scholes option-pricing model for stock options granted were:

Nine Months Ended September 30,

Three Months Ended March 31,

Expected volatility

2 unchanged sentences

Expected dividend yield

Fair value of common stock

A summary of option activity under the 2020 Plan and prior Plans during the nine months ended September 30, 2023 was as follows:

exercise price

Outstanding at January 1, 2023

Outstanding at September 30, 2023

Exercisable at September 30, 2023

The weighted-average grant date fair value per share of stock options granted during the nine months ended September 30, 2023 and 2022 was $ 3.67 and $ 2.65 , respectively.

The aggregate intrinsic value for options exercisable at September 30, 2023 was $ 6.7 million.

The aggregate intrinsic value of stock options outstanding at September 30, 2023 was $ 11.2 million.

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2023 was $ 0.1 million.

Restricted stock awards

During February 2023, the Company granted 25,000 shares of restricted stock awards to a consultant in exchange for services that vest evenly over twelve months with a vesting start date in January 2023.

The weighted average grant fair value was $ 5.62 per share.

In July 2023, the consulting agreement was terminated which ceased the continuation of vesting of the restricted stock awards.

Share-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended March 31,

Research and development

General and administrative

Total share-based compensation expense

Unrecognized share-based compensation related to stock options was $ 37.1 million as of March 31, 2024 and is expected to be recognized over a weighted average period of 1.9 years.

Subsequent events

The Merger with Morphimmune

On October 2, 2023 the Company closed the Merger transaction contemplated by the Merger Agreement.

As a result of the Merger, the Company acquired 100 % of the outstanding equity interests of Morphimmune through the issuance of 8,835,710 shares of the Company’s common stock to Morphimmune stockholders, based upon an exchange ratio of 0.3042 shares of the Company’s common stock for each outstanding share of Morphimmune capital stock.

Upon completion of the Merger, 8,128,096 options to purchase shares of Morphimmune capital stock were converted into 2,472,567 options to purchase shares of the Company’s common stock with a weighted average exercise price of

$ 1.29 per share.

All other terms and conditions associated with these options, including vesting and exercisability are governed by the original terms and conditions of Morphimmune’s legacy equity plan.

The Company will account for the acquisition of Morphimmune as an asset acquisition as substantially all of the fair value of the gross assets acquired of Morphimmune is concentrated within two programs that are considered a group of similar assets.

These programs are deemed to be similar IPR&D assets being acquired based on the similarity of:

(i) their current preclinical stage of development, (ii) solid tumor therapeutic indications, (iii) risks for development, (iv) regulatory pathway, and (v) economics of commercialization.

Under the asset acquisition method of accounting, the assets acquired and liabilities assumed are recognized and measured at fair value and no goodwill is recorded or recognized.

Acquired IPR&D that has no future alternative use is expensed at the time of acquisition.

Sale of Common Stock

On June 28, 2023, in connection with the Merger Agreement, the Company entered into subscription agreements with certain investors pursuant to which the Company would sell shares of its common stock, immediately following the completion of the Merger, in exchange for gross proceeds of $ 125.0 million.

Immediately following the completion of the Merger, the Company sold 21,690,871 shares of its common stock pursuant to the subscription agreements.

The Company recognized net proceeds of $ 125.0 million from this PIPE transaction, $61.0 million of which was received on or prior to September 30, 2023 and recorded as a deposit liability in the accompanying condensed balance sheets as of September 30, 2023.

The deposit liability was subsequently reclassified to stockholders’ equity upon completion of the sale of common stock in October 2023.

Termination of Chief Executive Officer

In accordance with the terms of the Merger Agreement, the Company’s CEO resigned as a board member, officer and employee of the Company.

Upon termination, 162,083 options immediately vested and the related unamortized stock-based compensation expense was immediately recognized.

In addition, the CEO was eligible to receive approximately $ 1.0 million in termination benefits comprised of salary, bonus and related benefits and were recognized at the time of termination.

Stock Options Granted for New Chief Executive Officer

On June 28, 2023 and contingent upon completion of the Merger, the Company entered into an employment agreement with Dr.

Clay Siegall, the President and CEO of Morphimmune, whereby Dr.

Siegall was granted 2,137,080 options to purchase shares of the Company’s common stock at an initial exercise price of $ 5.91 per share.

The options vest over time during Dr.

Siegall’s continued employment, which commenced on October 2, 2023, in connection with the closing of the Merger, to which 25 % of the options granted will vest after one year of employment with Immunome and the remaining 75 % of the options granted will vest monthly over the remaining 36 months following the one year anniversary, subject to acceleration in certain circumstances.

The estimated grant date fair value of Dr.

Siegall’s award was $ 9.6 million or $ 4.49 per share.

New Lease Agreement

In October 2023, the Company entered into a lease in Bothell, Washington.

The lease has a five-year term.

Board of Directors Stock Options Exercise Period Extension

In October 2023, the stock options held by directors who resigned in connection with the Merger were amended so that:

(a) the post-termination exercise period was extended to one year and (b) the vesting of all unvested shares was accelerated.

Open Market Sale Agreement, or the ATM Agreement

On November 8, 2023, the Company provided notice of termination of the ATM Agreement to Jefferies.

2024 ATM Agreement

On May 14, 2024, the Company entered into a sales agreement, or the 2024 ATM Agreement, with TD Securities (USA) LLC, or TD Cowen, as sales agent, pursuant to which the Company may offer and sell from time to time shares of its common stock having an aggregate offering price of up to $ 200.0 million, or the ATM Shares.

The sales of the ATM Shares, if any, will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market.

The Company has agreed to pay TD Cowen a commission of up to 3.0 % of the aggregate gross proceeds from any ATM Shares sold through the 2024 ATM Agreement.

The Company has not yet sold any ATM Shares under the 2024 ATM Agreement.

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 1. Financial Statements