What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-12 compared with 2024-05-14 · 128 added, 76 removed, 161 unchanged (56% of the section changed)

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These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

We are a biopharmaceutical company focused on the development of targeted oncology therapies.

We are a biotechnology company focused on the development of targeted oncology therapies.

We believe that the pursuit of novel or underexplored targets will be central to the next generation of transformative therapies and we are dedicated to developing targeted cancer therapies with first-in-class and best-in-class potential.

Our 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, we pair business development activity with significant investment in our internal discovery platforms.

We are advancing a program pipeline comprising one clinical and three preclinical assets.

Our goal is to establish a broad pipeline of preclinical and clinical assets and develop these assets into approved products for commercialization.

To support that goal, we pair business development activity with significant investment in our internal discovery programs.

We are advancing a pipeline comprising one clinical and two 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.

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.

The preclinical assets are IM-1021, a receptor tyrosine kinase-like orphan receptor 1, or ROR1, antibody-drug conjugate, or ADC, and IM-3050, a fibroblast activation protein, or FAP, targeted radioligand therapy.

On October 2, 2023, we completed our 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.

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AL102 is currently under evaluation in a Phase 3 trial for the treatment of desmoid tumors.

AL102 clinical activity was observed in two clinical trials that enrolled adult desmoid tumor patients.

A Phase 1 dose-escalation clinical trial was conducted by Bristol-Myers Squibb, or BMS, in patients with solid tumors.

AL102 clinical activity was observed in two prior clinical trials that enrolled adult desmoid tumor patients.

A Phase 1 dose-escalation clinical trial was conducted by Bristol-Myers Squibb, or BMS, in patients with solid tumors before the asset was licensed from BMS by Ayala.

In this trial, one patient with desmoid fibromatosis was enrolled.

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RINGSIDE Part B is a registrational Phase 3, global, double-blind, randomized, placebo-controlled clinical trial, conducted at 61 clinical sites in North America, Europe, Asia and Australia.

It will evaluate the efficacy, safety and tolerability of AL102 compared to placebo in patients with progressing desmoid tumors.

The study is evaluating the efficacy, safety and tolerability of AL102 compared to placebo in patients with progressing desmoid tumors.

One hundred fifty-six patients with histologically confirmed desmoid tumors with progressive disease (defined as tumor growth of at least 20% within the past 12 months as measured by RECIST v1.1) were enrolled.

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In this model, IM-1021 dosed weekly for three weeks at 2.5 mg/kg or 5.0 mg/kg demonstrated superior reductions in tumor volume compared with the same respective dose of a competitor, vedotin payload ROR1 ADC, with no meaningful weight loss observed.

Subject to obtaining an IND, our IM-1021 clinical strategy is designed to efficiently evaluate dose escalation in patients with solid tumors or lymphoma, followed by potential expansion of the solid tumor clinical program into targeted indications, potentially including non-small cell lung cancer, breast, prostate, pancreatic, and gastric cancer, and potential expansion of the lymphoma program into diffuse large B-cell lymphoma, mantle cell lymphoma, or other indications that are deemed to be appropriate.

non-small cell lung cancer, breast, prostate, pancreatic and gastric cancer, and potential expansion of the lymphoma program into diffuse large B-cell lymphoma, mantle cell lymphoma, or other indications that are deemed to be appropriate.

Concurrent with the dose escalation and expansion studies, we plan to conduct non-clinical studies evaluating IM-1021 in combination with other therapies and to evaluate and develop potential companion diagnostics that could help identify patients most likely to respond to IM-1021.

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We are developing IM-3050, a FAP-targeted Lu-177 RLT development candidate for the treatment of solid tumors.

FAP serves as a tumor-specific marker due to its expression in approximately 75% of solid tumors.

FAP is expressed in approximately 75% of solid tumors.

FAP is predominantly expressed by cancer-associated fibroblasts, the most common tumor stromal cell.

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We believe this RLT approach could overcome the limitations, such as poor internalization and low expression on tumor cells, that make FAP an unsuitable target for ADCs.

IM-3050, our lead FAP-targeted RLT, has four functional domains:

IM-3050 has four functional domains:

A small molecule FAP-specific ligand;

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an albumin-binding domain to improve tumor retention;

● A chelator to deliver the radionuclide

and a chelator to deliver the radionuclide.

We expect to submit an IND for the IM-3050 program to the FDA in the first quarter of 2025.

IM-4320 (Anti-IL-38 Immunotherapy)

We initiated our anti-IL-38 immunotherapy program on the basis of data generated by our proprietary memory B cell hybridoma screening technology.

IL-38 was identified as the target of an antibody isolated from a hybridoma library generated from the memory B cells of a patient with squamous head and neck cancer.

Our query of public and proprietary databases of cancer gene expression revealed over-expression of IL-38 in multiple solid tumors.

Furthermore, in some tumor types, we observed a correlation between high IL-38 expression and low levels of tumor-infiltrating immune effector cells, a hallmark of immune suppression, suggesting a role for IL-38 as an immune modulator.

Data obtained from preclinical testing indicated that blocking IL-38 function using inhibitory antibodies increased the immune response to the tumor and resulted in anti-tumor activity in select animal models, suggesting that anti-IL-38 antibodies could have therapeutic utility as single agents or in combination with other therapeutic modalities.

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

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

We intend to submit an IND for the IM-4320 program to the FDA subsequent to our anticipated IND submissions for IM-3050 and IM-1021.

Other Programs and Platforms

In addition to the already described current programs, we expect to continue to invest in our proprietary discovery platform to expand our pipeline.

The high output of antibody-target pairs resulting from our discovery platform may provide us with additional insights into the immune response against cancer and other diseases.

We intend to continue to invest in our platform, with the goal of developing first-in-class and best-in-class targeted cancer therapies, including immunotherapies, radioligand therapies and ADCs.

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

We may in-license or acquire complementary intellectual property as needed or required, and we may continue to build our know-how and trade secrets.

As an example, we may pursue both therapeutic and diagnostic applications of our antibodies through composition of matter and/or method of use patents.

While the focus area of our current programs is oncology, we may invest in intellectual property in other therapeutic areas as well.

We believe that our technology has broad utility and could enable the formation of attractive strategic partnerships.

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

In addition to the already described current programs, we expect to continue to invest in discovery efforts intended to expand our pipeline.

Additional ADC programs are a major focus of these efforts, but other modalities, including RLTs, merit consideration.

In the context of ADCs, we believe that quality antibodies against novel or underexplored targets, whether generated by our proprietary platform or acquired through business development, are the starting point for differentiated therapies.

By pairing these antibodies with linkers and payloads that are suitable for the biology of each target, we believe we can ultimately develop therapies that bring substantial benefit to patients.

We expect to add several such candidates to our pipeline in the future.

We may also choose to acquire additional clinical-stage programs.

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

We may continue to in-license or acquire complementary intellectual property as needed or required and we may continue to build our know-how and trade secrets.

As an example, we may design and evaluate proprietary ADC components with the potential for use across multiple programs.

We believe that establishing a broad toolbox of ADC-related technologies supports the development of first-in-class or best-in-class oncology therapies.

Components of our results of operations

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Intangible assets acquired in an asset acquisition for use in research and development activities which have no alternative future use are expensed as in-process research and development, or IPR&D, expense on the acquisition date.

IPR&D expenses for the three months ended March 31, 2024 relate to the acquisition of our license pursuant to the Zentalis Agreement and the acquisition of certain assets from Ayala.

IPR&D expenses for the six months ended June 30, 2024 primarily relate to the acquisition of our license pursuant to the Zentalis Agreement and the acquisition of certain assets from Ayala and Atreca.

Research and development expenses

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● expenses to conduct clinical trials including regulatory and quality assurance;

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

● the cost of process development, validation, and the manufacturing of drug supplies for use in our preclinical studies and clinical trials;

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

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Results of operations

Comparison of the three months ended March 31, 2024 and 2023

Comparison of the three months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Collaboration revenue

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(1) Amounts include non-cash share-based compensation expense as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Research and development

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Collaboration revenue

Collaboration revenue decreased by $1.4 million, from $2.4 million for the three months ended March 31, 2023 to $1.0 million for the three months ended March 31, 2024.

The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the three months ended March 31, 2024 compared to the same period in 2023.

Collaboration revenue decreased by $1.9 million, from $4.3 million for the three months ended June 30, 2023 to $2.4 million for the three months ended June 30, 2024.

The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the three months ended June 30, 2024 compared to the same period in 2023.

In-process research and development expenses

IPR&D expense for the three months ended March 31, 2024 was related to the write-off of IPR&D assets that were acquired from Zentalis and Ayala and determined to have no alternative future use .

There was no IPR&D expense for the three months ended March 31, 2023.

IPR&D expense for the three months ended June 30, 2024 primarily related to the write-off of IPR&D assets that were acquired from Atreca and determined to have no alternative future use .

There was no IPR&D expense for the three months ended June 30, 2023.

Research and development expenses

Research and development expenses increased by $11.5 million, from $3.9 million for the three months ended March 31, 2023 to $15.4 million for the three months ended March 31, 2024.

We record direct research and development expenses , consisting principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical trials, and costs related to manufacturing, to specific product development and clinical programs.

We do not allocate costs related to purchasing clinical trial materials, employee and contractor-related costs, and costs associated with our facility expenses, including depreciation or other indirect costs, to specific product candidates and clinical programs because these costs support multiple product programs.

Research and development expenses increased by $23.4 million, from $5.7 million for the three months ended June 30, 2023 to $29.1 million for the three months ended June 30, 2024.

We record direct research and development expenses , consisting principally of external costs, such as costs related to manufacturing, costs related to specific product development, and clinical trial costs including fees paid to investigators, consultants, central laboratories and CROs, to specific product development and clinical programs.

We do not allocate costs related to purchasing laboratory materials, employee-related costs and costs associated with our facility expenses, including depreciation or other indirect costs, to specific product candidates and clinical programs because these costs support multiple product programs.

The table below shows our research and development expenses incurred with respect to each active program.

Three Months Ended March 31,

Pre-clinical programs (2)

Three Months Ended June 30,

Preclinical programs (2)

Other research and development activities (3)

Indirect research and development (4)

The increase in 2024 compared to 2023 was due to clinical trial activities related to AL102, which was acquired from Ayala during the three months ended March 31, 2024.

The increase in 2024 compared to 2023 was due primarily to increased outsourced research and materials pertaining to IM-1021, IM-3050, and IM-4320.

The increase in 2024 compared to 2023 was due primarily to increased ADC discovery activities.

The increase in 2024 compared to 2023 was due primarily to an increase in personnel and personnel-related costs associated with the Merger and our discovery platform.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due to clinical trial activities related to AL102.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due primarily to increased outsourced research and manufacturing activities pertaining to IM-1021 and IM-3050.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due primarily to increased ADC discovery activities.

The increase for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was due primarily to an increase in personnel and personnel-related costs associated with supporting a larger development pipeline and performing increased discovery work.

General and administrative expenses

General and administrative expenses increased by $3.1 million, from $2.9 million for the three months ended March 31, 2023 to $6.0 million for the three months ended March 31, 2024.

The increase was primarily a result of a $1.6 million increase in personnel-related costs, which included increases of $0.6 million in salary and benefits costs due to increased headcount associated with the Merger and $1.0 million in share-based compensation.

In addition, professional fees increased $1.1 million related to accounting, legal and patent fees and other overhead related costs.

General and administrative expenses increased by $2.7 million, from $4.3 million for the three months ended June 30, 2023 to $7.0 million for the three months ended June 30, 2024.

The increase was primarily a result of a $2.6 million increase in personnel-related costs from an increase in headcount, including a $1.6 million increase in share-based compensation.

Interest income

Interest income increased by $2.6 million from $0.2 million for the three months ended March 31, 2023 to $2.8 million for the three months ended March 31, 2024.

Interest income increased by $3.7 million from $0.2 million for the three months ended June 30, 2023 to $3.9 million for the three months ended June 30, 2024.

The increase was primarily a result of increased interest rates and higher cash and cash equivalent and marketable security balances.

Comparison of the six months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the periods presented (in thousands):

Six Months Ended June 30,

Collaboration revenue

Operating expenses:

In-process research and development

Research and development (1)

General and administrative (1)

Total operating expenses

Loss from operations

Interest income

(1) Amounts include non-cash share-based compensation expense as follows (in thousands):

Six Months Ended June 30,

Research and development

General and administrative

Total share-based compensation expense

Collaboration revenue

Collaboration revenue decreased by $3.2 million, from $6.6 million for the six months ended June 30, 2023 to $3.4 million for the six months ended June 30, 2024.

The decrease was primarily due to a decrease in certain research and development activities allocated to AbbVie during the six months ended June 30, 2024 compared to the same period in 2023.

In-process research and development expenses

IPR&D expense for the six months ended June 30, 2024 primarily related to the write-off of IPR&D assets that were acquired from Zentalis, Ayala and Atreca and determined to have no alternative future use .

There was no IPR&D expense for the six months ended June 30, 2023.

Research and development expenses

Research and development expenses increased by $34.8 million, from $9.6 million for the six months ended June 30, 2023 to $44.5 million for the six months ended June 30, 2024.

The table below shows our research and development expenses incurred with respect to each active program.

Six Months Ended June 30,

Preclinical programs (2)

Other research and development activities (3)

Indirect research and development (4)

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to clinical trial activities related to AL102, which was acquired from Ayala in March 2024.

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to increased outsourced research and manufacturing activities pertaining to IM-1021 and IM-3050.

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to increased ADC discovery activities.

The increase for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to an increase in personnel and personnel-related costs associated with supporting a larger development pipeline and performing increased discovery work.

General and administrative expenses

General and administrative expenses increased by $5.7 million, from $7.2 million for the six months ended June 30, 2023 to $13.0 million for the six months ended June 30, 2024.

The increase was primarily a result of a $4.3 million increase in personnel-related costs from an increase in headcount, including a $2.6 million increase in share-based compensation.

In addition, fees related to accounting, legal and patent fees and other overhead related costs increased by $1.4 million.

Interest income

Interest income increased by $6.3 million from $0.4 million for the six months ended June 30, 2023 to $6.7 million for the six months ended June 30, 2024.

The increase was primarily a result of increased interest rates and higher cash and cash equivalent and marketable security balances.

Liquidity and capital resources

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To date, we have financed our operations primarily through sales of our equity securities, collaboration arrangements, strategic partnerships and transactions and to a lesser extent, through expense reimbursements received from a governmental contract that ended in 2022.

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

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

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

Our net losses were $129.5 million and $4.3 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $309.7 million and an accumulated deficit of $352.3 million.

Our net losses were $36.1 million and $5.6 million for the three months ended June 30, 2024 and 2023, respectively, and $165.6 million and $9.8 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $278.4 million and an accumulated deficit of $388.4 million.

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

In May 2024, we entered into a sales agreement, or the 2024 ATM Agreement, with TD Securities (USA) LLC, or TD Cowen, as sales agent, pursuant to which we may offer and sell from time to time shares of our 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.

In May 2024, we entered into an “at the market” sales agreement, or the 2024 ATM Agreement, with TD Securities (USA) LLC, or TD Cowen, as sales agent, pursuant to which we may offer and sell from time to time shares of our common stock having an aggregate offering price of up to $200.0 million, or the ATM Shares .

We have 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.

We have not yet sold any ATM Shares under the 2024 ATM Agreement.

The following table summarizes our sources and uses of cash for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31,

The following table summarizes our sources and uses of cash for the six months ended June 30, 2024 and 2023 (in thousands):

Six Months Ended June 30,

Cash (used in) provided by operating activities

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Operating activities

Net cash used in operating activities for the three months ended March 31, 2024 was $11.2 million, consisting primarily of our net loss of $129.5 million, partially offset by noncash charges of $113.8 million and a net change in operating assets and liabilities of $4.5 million.

Net cash used in operating activities for the six months ended June 30, 2024 was $34.6 million, consisting primarily of our net loss of $165.6 million, partially offset by noncash charges of $123.7 million and a net change in operating assets and liabilities of $7.3 million.

The noncash charges primarily consisted of $118.3 million of in-process research and development assets acquired without alternative future use and $5.4 million of share-based compensation.

The change in operating assets and liabilities primarily consisted of a decrease in prepaid expense and other current assets of $2.5 million, an increase in accounts payable of $2.4 million, and an increase in accrued expenses and other current liabilities of $0.7 million, partially offset by a decrease in deferred revenue of $1.0 million.

Net cash provided by operating activities for the three months ended March 31, 2023 was $24.2 million, consisting primarily of our net loss of $4.3 million, offset by noncash charges of $1.4 million and a net change in operating assets and liabilities of $27.1 million.

The noncash charges primarily consisted of $1.2 million of share-based compensation.

The change in operating assets and liabilities primarily consisted of an increase in deferred revenue of $27.6 million, an increase in accounts payable of $0.7 million, and a decrease in prepaid expenses and other current assets of $0.2 million, partially offset by a decrease in accrued expenses and other liabilities and other long-term liabilities of $1.5 million.

The change in operating assets and liabilities primarily consisted of an increase in accrued expenses and other current liabilities of $7.6 million, an increase in accounts payable of $2.4 million and a decrease in prepaid expenses and other assets of $0.9 million, partially offset by a decrease in deferred revenue of $3.4 million.

Net cash provided by operating activities for the six months ended June 30, 2023 was $18.5 million, consisting primarily of our net loss of $9.8 million, partially offset by noncash charges of $2.6 million and a net change in operating assets and liabilities of $25.8 million.

The noncash charges primarily consisted of $2.3 million of share-based compensation expense.

The change in operating assets and liabilities primarily consisted of an increase in deferred revenue of $23.4 million, an increase in accounts payable of $1.3 million and a decrease in prepaid expenses and other assets of $1.2 million.

Investing activities

Net cash used in investing activities for the three months ended March 31, 2024 was $37.2 million, consisting primarily of $35.1 million in IPR&D assets acquired from Zentalis and Ayala and $2.2 million of purchases of property and equipment.

Net cash used in investing activities for the three months ended March 31, 2023 was $0.1 million, consisting primarily of purchases of property and equipment.

Net cash used in investing activities for the six months ended June 30, 2024 was $118.9 million, consisting primarily of $112.7 million of purchases of marketable securities, $41.7 million of purchases of IPR&D assets and $4.5 million of purchases of property and equipment, partially offset by $40.0 million from maturities of marketable securities.

Net cash used in investing activities for the six months ended June 30, 2023 was $0.4 million, consisting of purchases of property and equipment.

Financing activities

Net cash provided by financing activities for the three months ended March 31, 2024 was $219.4 million, consisting of net proceeds of $215.8 million from the 2024 Financing and $3.6 million from the exercise of options and common stock warrants.

Net cash provided by financing activities for the three months ended March 31, 2023 was $34,000, consisting of net proceeds from the sales of common stock under our prior ATM sales agreement that we terminated in November 2023.

Net cash provided by financing activities for the six months ended June 30, 2024 was $220.1 million, consisting of gross proceeds of $230.0 million from the 2024 Financing and $4.8 million from the exercise of options and common stock warrants, partially offset by offering costs of $14.6 million from our 2024 Financing and 2024 ATM Agreement.

Net cash provided by financing activities for the six months ended June 30, 2023 was $34,000, consisting of net proceeds from the sales of common stock under our prior ATM sales agreement that we terminated in November 2023.

Funding requirements

We expect our expenses to increase substantially in connection with our ongoing and future activities, particularly as we advance and expand our clinical development of AL102, seek regulatory approval for AL102, continue the preclinical and potential clinical development of IM-1021, IM-3050, IM-4320, and any other future product candidates, and continue to pursue our business development strategy.

We expect our expenses to increase substantially in connection with our ongoing and future activities, particularly as we advance and expand our clinical development of AL102, seek regulatory approval for AL102, continue the preclinical and potential clinical development of IM-1021 and IM-3050 and any other future product candidates, and continue to pursue our business development strategy.

We expect that our primary uses of capital will be for clinical development services, non-clinical research, strategic transactions, manufacturing, legal and other regulatory compliance expenses, compensation and related expenses, risk management and general overhead costs.

We expect that our existing cash, cash equivalents and marketable securities as of March 31, 2024 will enable us to fund our 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.

We expect that our existing cash, cash equivalents and marketable securities as of June 30, 2024 will enable us to fund our 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.

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

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

t he success of our existing and any future license agreements, collaborations and other strategic transactions and the achievement of milestones or occurrence of other developments that trigger payments to or from us under any such agreements and transactions;

● the success of our existing and any future license agreements, collaborations and other strategic transactions and the achievement of milestones or occurrence of other developments that trigger payments to or from us under any such agreements and transactions;

● the costs of operating as a public company.

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We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis.

Our expected material cash requirements do not include potential contingent payments that we may be required to pay upon the achievement of development, regulatory or commercial milestones under the terms of the Ayala Purchase Agreement, nor do they include potential contingent payments upon the achievement of development, regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we have entered into or may enter into with various entities pursuant to which we have in-licensed certain intellectual property.

Our expected material cash requirements do not include potential contingent payments that we may be required to pay upon the achievement of development, regulatory or commercial milestones pursuant to asset acquisitions and license agreements to which we are a party, nor do they include potential contingent payments upon the achievement of development, regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we have entered into or may enter into with various entities pursuant to which we have in-licensed certain intellectual property.

For further details on the potential contingent payments related to asset acquisitions and license agreements, see Notes 7 and 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Critical accounting policies and estimates

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Form 10-K for the fiscal year ended December 31, 2023.

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods.

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

Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are described in Note 2 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q, we believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

Research and development expenses and accruals

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, and amounts incurred under license agreements, consulting agreements and other contracted services.

Research and development costs are expensed as incurred.

As part of preparing our financial statements, we are required to estimate and accrue expenses.

We estimate preclinical, clinical trial and other research and development expenses based on the services performed pursuant to contracts with research institutions, contract manufacturing organizations and third-party service providers that conduct and manage preclinical studies and clinical trials and perform research services on our behalf.

We record these costs of research and development activities based upon the estimated services provided but not yet invoiced and include these costs in accrued expenses and other current liabilities in our consolidated balance sheets and in research and development expense in our consolidated statements of operations.

We make significant judgments and estimates in determining the accrued balance in each reporting period.

As actual costs become known, we adjust our accrued estimates.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period.

Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external third-party service providers.

Amounts ultimately incurred in relation to amounts accrued for these services at a reporting date may be substantially higher or lower than our estimates.

We execute all our clinical trials with support from CROs and other vendors and we accrue costs for clinical trial activities performed by these third parties based upon the estimated amount of work completed on each trial.

The significant factors used in estimating accruals include the number of patients enrolled, the activities to be performed for each patient, the number of active clinical sites, and the duration for which the patients will be enrolled in the trial.

We monitor patient enrollment levels and related activities to the extent possible through internal reviews, correspondence with CROs and review of contractual terms.

We base our estimates on the best information available at the time.

However, additional information may become available to us, which may allow us to make a more accurate estimate in future periods.

If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

Other than research and development expenses and accruals as disclosed above, there have been no material changes in our critical accounting policies and estimates from those disclosed in our Form 10-K for the fiscal year ended December 31, 2023.

For a discussion of our critical accounting policies and estimates, refer to “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical accounting policies and significant judgments ” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2023.

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We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering or such earlier time that we are no longer an emerging growth company.

We would cease to be an emerging growth company earlier if we have more than $1.235 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1.0 billion of non-convertible debt securities over a three-year period.

We would cease to be an emerging growth company earlier if we have more than $1.235 billion in annual revenue during our most recently completed fiscal year, we have more than $700.0 million in market value of our stock held by non-affiliates as of the last business day of our most recently completed second fiscal quarter, or we issue more than $1.0 billion of non-convertible debt securities over a three-year period.

For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis