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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-13 · 112 added, 183 removed, 108 unchanged (73% of the section changed)

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In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

Furthermore, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

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

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.

We are a clinical-stage targeted oncology company committed to developing first-in-class and best-in-class targeted therapies designed to improve outcomes for cancer patients.

We are advancing an innovative portfolio of therapeutics, drawing on leadership that previously played key roles in the design, development, and commercialization of cutting-edge targeted cancer therapies, including antibody-drug conjugate therapies, or ADCs.

We believe that the pursuit of novel or underexplored targets will be central to the next generation of transformative therapies.

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, 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.

We are advancing a pipeline that includes three clinical assets and three preclinical assets.

Varegacestat, formerly AL102, is an investigational gamma secretase inhibitor, or GSI, currently under evaluation in a Phase 3 clinical trial for the treatment of desmoid tumors.

IM-1021, a receptor tyrosine kinase-like orphan receptor 1, or ROR1, antibody-drug conjugate, received investigational new drug, or IND, clearance in December 2024, and the Phase 1 trial is ongoing with the first patient dosed in February 2025.

IM-3050, a fibroblast activation protein, or FAP, targeted radioligand therapy, or RLT, received IND clearance in April 2025 and we expect to initiate a Phase 1 trial in the second half of 2025.

Our preclinical assets include three solid tumor ADC drug candidates:

IM-1617, IM-1340, and IM-1335, all of which are undergoing IND-enabling activities.

In addition, we have multiple ADCs currently undergoing lead optimization in advance of future development decisions.

At present, our internal discovery efforts center on designing ADCs against novel or underexplored targets.

We believe that pursuing differentiated targets provides a path to significant clinical benefit and meaningful market opportunities.

This strategy is supported by HC74, the differentiated, novel topoisomerase 1 inhibitor, or TOP1i, payload we purchased from Zentalis Pharmaceuticals, Inc., or Zentalis, in October 2024.

We have efforts underway to develop additional linkers and payloads and believe that a broad toolbox of linkers and payloads supports our mission to design and develop a diverse pipeline of ADCs.

To expand and advance our innovative portfolio of therapeutics, we draw on leadership that previously played key roles in the design, development, and commercialization of cutting-edge targeted cancer therapies, including the first ADCs commercialized for Hodgkin and T-cell lymphoma, urothelial cancer and cervical cancer.

Our current programs

AL-102 (Gamma Secretase Inhibitor)

Our clinical asset is AL102, an investigational GSI that we acquired from Ayala Pharmaceuticals, Inc., or Ayala, on March 25, 2024 pursuant to an Asset Purchase Agreement, or the Ayala Purchase Agreement.

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

This patient demonstrated tumor shrinkage of 16.5% while on study.

Based on these data and responses demonstrated with other GSIs, Ayala designed a seamless Phase 2/3 study called RINGSIDE to specifically evaluate the activity of AL102 in patients with progressing desmoid tumors who required therapy.

RINGSIDE Part A enrolled 42 patients at three different dosing regimens of AL102:

2 mg once a day for two days every week, 4 mg once a day for two days every week or 1.2 mg once a day daily.

Overall, the ORR in evaluable patients as measured by RECIST v1.1 by an independent radiologist was 61% for all doses tested.

The 1.2 mg daily dosing cohort had an ORR of 75% in the evaluable population.

AL102 was well tolerated overall with a safety profile consistent with that reported with other GSIs.

These data were reported at ESMO in 2023.

Based upon the clinical activity observed in RINGSIDE Part A at the dose of 1.2 mg given once daily, and following consultation with the U.S.

Food and Drug Administration, or FDA, the Phase 3 randomized registration trial, RINGSIDE Part B (NCT04871282) was initiated by Ayala in November 2022.

Enrollment was completed in February 2024.

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.

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.

Patients were either treatment-naïve with desmoid tumors not amenable to surgery or had refractory or recurrent disease after at least one line of therapy.

Patients in the study were randomized to receive either AL102 at a dose of 1.2 mg given once daily or placebo and evaluated for tumor progression using RECIST v1.1.

Patients who progress while on study are eligible to enter an open-label extension whereby they may receive AL102 at a dose of 1.2 mg once daily until disease progression or unacceptable toxicity.

The primary endpoint of RINGSIDE Part B is progression free survival with secondary endpoints of ORR, duration of response and specific patient-reported outcomes.

We expect to publish topline data for RINGSIDE Part B in the second half of 2025.

In parallel, we are evaluating and performing the additional manufacturing and pharmacology work required to support a new drug application, or NDA, submission.

IM-1021 (ROR1 ADC)

We are developing IM-1021, a preclinical stage ADC targeting ROR1 that we exclusively licensed from Zentalis Pharmaceuticals, Inc., or Zentalis, in January 2024, and acquired from Zentalis in October 2024 in connection with the Zentalis Asset Purchase.

In preclinical studies, IM-1021 showed sustained tumor regression in a mouse model of triple-negative breast cancer.

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, which may include any or all of the following:

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.

Our strategy is to pursue pivotal clinical studies in indications that have shown compelling clinical outcomes in earlier-stage trials, present significant commercial opportunities, have the potential for enhanced outcomes using a companion diagnostic and offer potential for accelerated approval.

We expect to submit an IND for the IM-1021 program to the FDA in the first quarter of 2025.

Varegacestat (formerly AL102)

Our lead clinical asset is varegacestat, an oral, once daily GSI that is being evaluated for the treatment of desmoid tumors.

In the Phase 2 RINGSIDE study Part A, varegacestat demonstrated objective response rates, or ORR, of 75% of evaluable patients and 64% in the intent-to-treat population;

median reduction in tumor volume of 88%;

and an 85% reduction in T2 imaging, which is suggestive of a reduction in cellularity.

The Phase 2 data also show a safety profile consistent with the GSI class.

Enrollment in a Phase 3 registrational trial was completed in February 2024, and we expect to report topline data from this trial in the second half of 2025.

We acquired varegacestat from Ayala Pharmaceuticals, Inc., or Ayala, in March 2024.

IM-1021 (Solid Tumor and B-Cell Lymphoma ADC)

IM-1021 is a ROR1 ADC that incorporates HC74, our proprietary TOP1i payload.

ROR1 is expressed in both hematologic malignancies and solid tumors with limited normal tissue expression, and previous ADCs targeting ROR1 have demonstrated clinical activity.

In preclinical studies, IM-1021 showed sustained tumor regression in preclinical models, including a mouse model of triple-negative breast cancer, or TNBC, and a mouse model of mantle cell lymphoma, or MCL.

We believe that IM-1021 may provide improved therapeutic index as compared to other ROR1-targeted ADCs in development.

IM-1021 received IND clearance in December 2024, and the Phase 1 clinical trial is ongoing with a starting dose of 2 mg/kg of adjusted ideal body weight.

We expect dose escalation to include patients both with solid tumors and with B-cell lymphomas.

IM-3050 (FAP Radioligand Therapy)

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

IM-3050 is a FAP-targeted lutetium-177, Lu-177 or 177Lu, RLT product candidate for the treatment of solid tumors.

FAP is a cell surface protease that serves as a tumor-specific marker due to its broad expression on cancer associated fibroblasts, the most common tumor stromal cell.

FAP is expressed in 75% of solid tumors.

IM-3050 is designed to deliver radioactive 177Lu directly to FAP- expressing cells, where the “bystander” effect of the radiation may damage or kill nearby tumor cells.

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 has four functional domains:

A small molecule FAP-specific ligand;

a linker tuned to drive tumor-specific uptake;

an albumin-binding domain to improve tumor retention;

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.

In vivo data show single dose antitumor activity and tolerability.

We received IND clearance for this program in April 2025 and expect to initiate a Phase 1 clinical trial in the second half of 2025 .

IM-1617 (Solid Tumor ADC)

IM-1617 is a potential first-in-class ADC that targets an undisclosed receptor that is preferentially expressed in a broad array of solid tumors, including colorectal cancer, or CRC, non-small cell lung cancer, or NSCLC, and breast and ovarian cancers.

The target is a receptor tyrosine kinase that promotes tumor cell survival and mediates immune cell exclusion, providing potential for a secondary mechanism of action.

IND-enabling work for IM-1617 was initiated in the fourth quarter of 2024.

IM-1340 (Solid Tumor ADC)

IM-1340 is a potential first-in-class ADC for the treatment of multiple solid tumors.

The target of IM-1340 is underexplored and non-obvious in cancer and, to our knowledge, there are no ADCs or other therapeutic modalities in development against it.

It has a unique expression profile that spans neuroendocrine tumors, or NETs, and other carcinomas, including lung and prostate tumors, with limited expression in normal tissue.

IND-enabling work for IM-1340 was initiated in the fourth quarter of 2024.

IM-1335 (Solid Tumor ADC)

IM-1335 is being developed for the treatment of solid tumor indications.

It shares a target with a competitor’s now-discontinued investigational ADC that showed clinical activity prior to discontinuation.

Our goal in designing IM-1335 was to optimize the safety and efficacy through a deep understanding of target biology and ADC optimization.

We identified limitations that we expect contributed to the failure of the prior ADC against this target, and we believe that IM-1335 overcomes these limitations.

IND-enabling work for IM-1335 was initiated in the fourth quarter of 2024.

Other Programs and Platforms

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Additional ADC programs are the primary focus of these efforts.

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 potential first-in-class or best-in-class oncology therapies.

We believe that our team’s ADC expertise positions us to develop the next generation of transformative ADCs.

This expertise comprises executive leadership with a proven record of success, an ADC-focused discovery team with deep experience in ADC design, and a seasoned development team whose members spearheaded the development of multiple FDA-approved ADCs.

We pair our portfolio of antibodies to potential first-in-class ADC targets with rigorous target selection based on a deep understanding of target biology.

That target-driven approach is complemented by HC74, our differentiated, proprietary TOP1i payload and our optimized, proprietary linkers.

Components of our results of operations

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

To date, we have generated our revenue through a Collaboration and Option Agreement, or the Collaboration Agreement, with AbbVie.

To date, we have generated our revenue through a Collaboration and Option Agreement, or the Collaboration Agreement, with AbbVie Global Enterprises Ltd., or AbbVie.

Our collaboration revenue to date consists of payments from AbbVie that we recognize over the expected performance period under this agreement.

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

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

In-process research and development expense

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

In-process research and development expenses

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 expense for the nine months ended September 30, 2024 primarily relate to the acquisition of our license pursuant to the Zentalis License Agreement and the acquisition of certain assets from Ayala and Atreca.

Research and development expenses

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● personnel-related expenses, including salaries, bonuses, benefits and share-based compensation for employees engaged in research and development functions;

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

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

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

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Results of operations

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

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

Three Months Ended September 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):

Three Months Ended September 30,

Research and development

General and administrative

Total share-based compensation expense

Collaboration revenue

Collaboration revenue decreased by $0.7 million, from $3.6 million for the three months ended September 30, 2023 to $2.9 million for the three months ended September 30, 2024.

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

In-process research and development expense

IPR&D expense for the three months ended September 30, 2024 related to $4.0 million for the write-off of acquired IPR&D assets that were determined to have no alternative future use and $2.7 million for the issuance of unregistered shares of our common stock in connection with the BMS License Agreement Amendment.

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

Research and development expenses

Research and development expenses increased by $33.4 million, from $3.8 million for the three months ended September 30, 2023 to $37.2 million for the three months ended September 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 September 30,

Preclinical programs (2)

Other research and development activities (3)

Indirect research and development (4)

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

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

The increase for the three months ended September 30, 2024 compared to the three months ended September 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 $5.2 million, from $4.4 million for the three months ended September 30, 2023 to $9.5 million for the three months ended September 30, 2024.

The increase was primarily a result of a $4.1 million increase in personnel-related costs from an increase in headcount, including a $2.5 million increase in share-based compensation.

Interest income

Interest income increased by $3.1 million from $0.3 million for the three months ended September 30, 2023 to $3.4 million for the three months ended September 30, 2024.

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

Comparison of the nine months ended September 30, 2024 and 2023

Comparison of the three months ended March 31, 2025 and 2024

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

Nine Months Ended September 30,

Three Months Ended March 31,

Collaboration revenue

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

Nine Months Ended September 30,

Three Months Ended March 31,

Research and development

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Collaboration revenue

Collaboration revenue decreased by $3.9 million, from $10.2 million for the nine months ended September 30, 2023 to $6.3 million for the nine months ended September 30, 2024.

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

Collaboration revenue increased by $1.9 million, from $1.0 million for the three months ended March 31, 2024 to $2.9 million for the three months ended March 31, 2025.

The increase was primarily due to an increase in certain research and development activities allocated to AbbVie during the three months ended March 31, 2025 compared to the same period in 2024.

In-process research and development expense

IPR&D expense for the nine months ended September 30, 2024 was primarily related to the write-off of acquired IPR&D assets that were determined to have no alternative future use .

There was no IPR&D expense for the nine months ended September 30, 2023.

There was no IPR&D expense for the three months ended March 31, 2025.

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 .

Research and development expenses

Research and development expenses increased by $68.2 million, from $13.5 million for the nine months ended September 30, 2023 to $81.7 million for the nine months ended September 30, 2024.

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

Nine Months Ended September 30,

Preclinical programs (2)

Other research and development activities (3)

Research and development expenses increased by $21.5 million, from $15.4 million for the three months ended March 31, 2024 to $36.9 million for the three months ended March 31, 2025.

The table below shows our research and development expenses incurred with respect to each active program (in thousands):

Three Months Ended March 31,

Varegacestat (1)

Other product candidates (4)

Indirect research and development (5)

The increase for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due to manufacturing activities and clinical trial activities related to AL102, which was acquired from Ayala in March 2024.

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

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

The increase for the nine months ended September 30, 2024 compared to the nine months ended September 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.

(1) The increase for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due primarily to manufacturing and clinical trial activities related to varegacestat, which we acquired from Ayala in March 2024.

(2) The increase for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due primarily to increased clinical trial activities as we initiated our Phase 1 trial in February 2025.

(3) The decrease for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due primarily to the timing of outsourced research, manufacturing and IND-enabling activities.

We received IND clearance for this program in April 2025.

(4) The increase for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due primarily to increased ADC discovery activities.

(5) The increase for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due primarily to an increase in personnel and personnel-related costs in support of varegacestat, IM-1021, IM-3050 and other development and discovery programs.

General and administrative expenses

General and administrative expenses increased by $10.9 million, from $11.6 million for the nine months ended September 30, 2023 to $22.5 million for the nine months ended September 30, 2024.

General and administrative expenses increased by $4.7 million, from $6.0 million for the three months ended March 31, 2024 to $10.7 million for the three months ended March 31, 2025.

The increase was primarily a result of a $3.3 million increase in personnel-related costs from an increase in headcount, including a $1.5 million increase in share-based compensation.

In addition, fees related to accounting, legal and patent fees and other overhead related costs increased by $2.5 million.

Interest income

Interest income increased by $9.4 million from $0.7 million for the nine months ended September 30, 2023 to $10.1 million for the nine months ended September 30, 2024.

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

Interest income increased by $0.2 million from $2.8 million for the three months ended March 31, 2024 to $3.0 million for the three months ended March 31, 2025.

The increase was primarily a result of higher marketable security balances, partially offset by lower interest rates during the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Liquidity and capital resources

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

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 financed our operations primarily through sales of our equity securities.

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 $47.1 million and $4.3 million for the three months ended September 30, 2024 and 2023, respectively, and $212.7 million and $14.2 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, we had cash, cash equivalents and marketable securities of $240.1 million and an accumulated deficit of $435.5 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.

Our net losses were $41.6 million and $129.5 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had cash, cash equivalents and marketable securities of $317.3 million and an accumulated deficit of $557.4 million.

In January 2025, we issued 22,258,064 shares of our common stock at $7.75 per share for net proceeds of $161.7 million, after deducting underwriting discounts and commissions and offering expenses payable by us, or the 2025 Financing.

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 nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended September 30,

Cash (used in) provided by operating activities

Cash used in investing activities

As of March 31, 2025, we had sold an aggregate of 2,030,431 shares of common stock under the 2024 ATM Agreement for gross proceeds of $20.0 million and net proceeds of approximately $19.6 million, with approximately $180.0 million remaining available for future offerings.

No shares of common stock were sold under the 2024 ATM Agreement during the three months ended March 31, 2025.

The following table summarizes our sources and uses of cash for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,

Cash used in operating activities

Cash provided by (used in) investing activities

Cash provided by financing activities

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Operating activities

Net cash used in operating activities for the nine months ended September 30, 2024 was $68.7 million, consisting primarily of our net loss of $212.7 million, partially offset by noncash charges of $134.4 million and a net change in operating assets and liabilities of $9.6 million.

The noncash charges primarily consisted of $125.0 million of in-process research and development assets acquired without alternative future use and $10.3 million of share-based compensation.

The change in operating assets and liabilities primarily consisted of an increase in accrued expenses and other current liabilities of $13.5 million, an increase in accounts payable of $0.3 million and a decrease in prepaid expenses and other assets of $2.3 million, partially offset by a decrease in deferred revenue of $6.3 million.

Net cash provided by operating activities for the nine months ended September 30, 2023 was $9.9 million, consisting primarily of our net loss of $14.2 million, partially offset by noncash charges of $4.1 million and a net change in operating assets and liabilities of $19.9 million.

The noncash charges primarily consisted of $3.3 million of share-based compensation expense.

The change in operating assets and liabilities primarily consisted of an increase in deferred revenue of $19.8 million and a decrease in prepaid expenses and other assets of $1.6 million, partially offset by a decrease in accrued expenses and other current liabilities of $1.5 million.

Net cash used in operating activities for the three months ended March 31, 2025 was $53.1 million, consisting primarily of our net loss of $41.6 million and a net change in operating assets and liabilities of $17.0 million, partially offset by noncash charges of $5.6 million.

The noncash charges primarily consisted of $5.7 million of share-based compensation.

The change in operating assets and liabilities primarily consisted of a decrease in accrued expenses and other current liabilities of $8.5 million, a decrease in accounts payable of $3.8 million, a decrease in deferred revenue of $2.9 million and an increase in prepaid expenses and other assets of $1.7 million.

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.

The noncash charges primarily consisted of $112.0 million of IPR&D assets acquired without alternative future use and $2.2 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.

Investing activities

Net cash used in investing activities for the nine months ended September 30, 2024 was $94.8 million, consisting primarily of $112.7 million of purchases of marketable securities, $46.1 million of purchases of IPR&D assets and $6.0 million of purchases of property and equipment, partially offset by $70.0 million from maturities of marketable securities.

Net cash used in investing activities for the nine months ended September 30, 2023 was $0.5 million, consisting of purchases of property and equipment.

Net cash provided by investing activities for the three months ended March 31, 2025 was $5.1 million, consisting of $15.0 million from maturities of marketable securities, partially offset by $6.2 million of upfront and milestone payments related to IPR&D assets and $3.7 million of purchases of property and equipment.

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

Financing activities

Net cash provided by financing activities for the nine months ended September 30, 2024 was $220.4 million, consisting of gross proceeds of $230.0 million from the 2024 Financing and $5.3 million from the exercise of options and common stock warrants, partially offset by offering costs of $14.8 million from our 2024 Financing and 2024 ATM Agreement.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $60.9 million, consisting primarily of $61.0 million in gross proceeds from prepayments received in relation to the PIPE transaction associated with the closing of the Merger in October 2023.

The Company received these funds prior to the closing of the Merger and recorded this transaction as a deposit liability in the accompanying condensed balance sheets as of September 30, 2023.

Financing activities also provided $34,000 net proceeds from the sales of common stock under our prior ATM sales agreement that we terminated in November 2023, offset by $0.1 million in payments of deferred offering costs associated with the PIPE transaction.

Net cash provided by financing activities for the three months ended March 31, 2025 was $162.2 million, consisting of gross proceeds of $172.5 million from the 2025 Financing and $0.2 million from the exercise of options, partially offset by offering costs of $10.5 million from the 2025 Financing.

Net cash provided by financing activities for the three months ended March 31, 2024 was $219.4 million, consisting of gross proceeds of $230.0 million from our issuance of 11,500,000 shares of our common stock at $20.00 per share in a public offering, or the 2024 Financing, and $3.6 million from the exercise of options and common stock warrants, partially offset by offering costs of $14.2 million from the 2024 Financing.

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 and IM-3050 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 varegacestat, seek regulatory approval for varegacestat, advance the clinical development of IM-1021 and IM-3050, continue the development of our other current product candidates and any 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 September 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 expect that our existing cash, cash equivalents and marketable securities as of March 31, 2025 will be sufficient 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.

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

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

Our future funding requirements will depend on many factors including:

● the scope, progress, results and costs of discovery, preclinical development, manufacturing and clinical trials for programs and product candidates that we currently own and those that we may discover or acquire rights to in the future;

● the extent to which we acquire or in-license products, intellectual property and other technologies and the terms on which we acquire or in-license those assets;

● the scope, progress, results and costs of discovery, preclinical development, manufacturing and clinical trials for programs and development candidates that we currently own and those that we may acquire rights to in the future;

● the costs of continuing to operate and advance our discovery and ADC platforms;

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

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

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

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

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

● 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;

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Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, including pursuant to the 2024 ATM Agreement, debt financings, collaborations, strategic alliances and licensing arrangements.

As a result of the war between Russia and Ukraine, conflict in the Middle East, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic and political factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability.

As a result of the war between Russia and Ukraine, conflicts in the Middle East, trade wars, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic and political factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability.

There can be no assurance that deterioration in credit and financial markets and confidence in economic conditions will not occur.

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If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market programs and development candidates that we would otherwise prefer to develop and market ourselves.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market programs and product candidates that we would otherwise prefer to develop and market ourselves.

If we cannot obtain the necessary funding to support these activities on favorable terms, or at all, we will need to delay, scale back or eliminate some or all of our research and development programs, including our clinical and preclinical development of our product candidates.

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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.

For further details on the potential contingent payments related to asset acquisitions and license agreements, see Note 7 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

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 condensed consolidated financial statements included in Part I, Item 1 of 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, and preclinical and clinical development expenses, including process development, validation, and the manufacture of drug supplies, costs to conduct clinical trials, 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.

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, 2024.

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 estimates ” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2024.

Recent accounting pronouncements

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As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

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

We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering (i.e., December 31, 2025) 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 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.

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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