What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-09 compared with 2021-08-10 · 211 added, 136 removed, 606 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except share and par value data)

September 30,

Current assets:

6 unchanged sentences

Property and equipment, net

Operating lease right-of-use assets

Other long-term assets

Liabilities, Convertible Preferred Stock and Stockholders’

4 unchanged sentences

Current portion of deferred revenue

Unvested stock liability

Unvested stock liabilities

Current portion of operating lease liabilities

Total current liabilities

Deferred revenue, net of current portion

Operating lease liabilities, net of current portion

Total liabilities

3 unchanged sentences

0 and 6,838,829 at

June 30, 2021 and December 31, 2020, respectively;

September 30, 2021 and December 31, 2020, respectively;

issued and outstanding

shares –

0 and 6,838,829 at June 30, 2021 and December 31, 2020, respectively;

0 and 6,838,829 at September 30, 2021 and December 31, 2020, respectively;

liquidation preference –

$ 0 and $ 21,709 at June 30, 2021

$ 0 and $ 21,709 at September 30, 2021

and December 31, 2020, respectively

4 unchanged sentences

10,000,000 and 0 at

June 30, 2021 and December 31, 2020, respectively;

September 30, 2021 and December 31, 2020, respectively;

no shares issued

and outstanding at June 30, 2021 and December 31, 2020

and outstanding at September 30, 2021 and December 31, 2020

Common stock, $ 0.001 par value;

1 unchanged sentence

200,000,000 and 9,000,000 at

June 30, 2021 and December 31, 2020, respectively;

September 30, 2021 and December 31, 2020, respectively;

issued shares –

and 1,257,736 at June 30, 2021 and December 31, 2021, respectively;

and 1,257,736 at September 30, 2021 and December 31, 2020, respectively;

shares –

41,094,559 and 1,046,599 at June 30, 2021 and December 31, 2020,

41,171,963 and 1,046,599 at September 30, 2021 and December 31, 2020,

Additional paid-in capital

10 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Collaboration revenue

10 unchanged sentences

related parties

Increase in fair value of convertible promissory

notes –

Change in fair value of convertible promissory notes –

related parties

10 unchanged sentences

Equity (Deficit)

For the Six Months Ended June 30, 2021 and 2020

For the Nine Months Ended September 30, 2021 and 2020

(in thousands, except share data)

14 unchanged sentences

Unrealized gain (loss) on investment securities

Balance at June 30, 2021

Balance at September 30, 2021

Convertible Preferred Stock

9 unchanged sentences

Stock-based compensation

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying notes.

2 unchanged sentences

Equity (Deficit)

For the Three Months Ended June 30, 2021 and 2020

For the Three Months Ended September 30, 2021 and 2020

(in thousands, except share data)

2 unchanged sentences

Stockholders’

Balance at March 31, 2021

Issuance of Series B convertible preferred stock, net of $ 175

of issuance costs

Conversion of convertible preferred stock to common stock

in connection with initial public offering

Initial public offering, net of $ 18,733 of issuance costs

Balance at June 30, 2021

Vesting of restricted shares

1 unchanged sentence

Unrealized gain (loss) on investment securities

Balance at June 30, 2021

Balance at September 30, 2021

Convertible Preferred Stock

1 unchanged sentence

Stockholders’

Balance at March 31, 2020

Issuance of Series Seed 2 convertible preferred stock, net of

$ 39 of issuance costs

Conversion of convertible promissory notes into Series Seed

2 convertible preferred stock

Balance at June 30, 2020

Vesting of restricted shares

Stock-based compensation

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying notes.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

11 unchanged sentences

and $ 0 , respectively)

Accounts payable

Other long-term assets

Accounts payable (includes related party amounts of $ 0

and $ 50 , respectively)

Accrued expenses (includes related party amounts of $( 544 ) and $ 195 ,

1 unchanged sentence

Deferred revenue

Operating lease right-of-use assets and liabilities, net

Net cash used in operating activities

2 unchanged sentences

Purchases of short-term investments

Maturities of short-term investments

Net cash used in investing activities

16 unchanged sentences

convertible preferred stock

Unpaid fixed asset additions

Vesting of restricted common stock

1 unchanged sentence

Unrealized gain (loss) on short-term investments

Operating lease liabilities arising from right-of-use assets

See accompanying notes.

4 unchanged sentences

(the “Company”) was incorporated in the State of Delaware in June 2017 and is based in San Diego, California.

The Company is a preclinical stage biopharmaceutical company developing next-generation therapeutics based on the Company’s proprietary Tumor Activated T Cell Engager (“TRACTr”) platform technology to better treat patients suffering from cancer.

The Company is a preclinical stage biopharmaceutical company developing a broad pipeline of novel immunotherapies by applying its proprietary technology to its Tumor Activated T Cell Engager ("TRACTr") and Tumor Activated Immunomodulator ("TRACIr") platforms to better treat patients suffering from cancer.

Forward Stock Split

3 unchanged sentences

Liquidity and Capital Resources

From its inception through June 30, 2021, the Company has devoted substantially all its efforts to organizing and staffing, business planning, raising capital and developing its TRACTr therapeutics platform and preclinical assets.

The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $ 23.2 million as of June 30, 2021.

From its inception through September 30, 2021, the Company has devoted substantially all its efforts to organizing and staffing, business planning, raising capital and developing its TRACTr and TRACIr therapeutic platforms and preclinical assets.

The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $ 34.0 million as of September 30, 2021.

The Company has a limited operating history, has not generated any product revenue, and the sales and income potential of its business is unproven.

7 unchanged sentences

Unaudited Interim Financial Information

The unaudited condensed financial statements as of June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial statements.

The unaudited condensed financial statements as of September 30, 2021 , and for the three and nine months ended September 30, 2021 and 2020, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), and with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial statements.

These unaudited condensed financial statements have been prepared on the same basis as the Company’s audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company’s financial position as of the interim date and results of operations for the interim periods presented.

14 unchanged sentences

As a result of applying the fair value option, direct costs and fees related to the convertible promissory notes were recognized in earnings as incurred and not deferred.

For the three and six months ended June 30, 2020, the Company recognized $ 1.2 million and $ 1.7 million, respectively, of increase in fair value of convertible promissory notes –

For the three and nine months ended September 30, 2020, the Company recognized $ 0 and $ 1.7 million, respectively, of increase in fair value of convertible promissory notes –

related party.

8 unchanged sentences

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, classified within Level 1 of the designations discussed above, accounts receivable, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value due to the short-term nature of those instruments.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value due to the short-term nature of those instruments.

Financial assets measured at fair value on a recurring basis consist of short-term investments.

The fair value of short-term investments is based upon market prices quoted on the last day of the fiscal period or other observable market inputs.

The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, bids and/or offers.

The fair value of short-term investments classified within Level 1 is based on quoted prices in active markets as provided by the Company’s investment managers.

The fair value of short-term investments classified within Level 2 is based on standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers.

The Company validates the quoted market prices provided by its investment managers by comparing the investment managers’

assessment of the fair values of the Company’s investment portfolio balance against the fair values of the Company’s investment portfolio balance obtained from an independent source.

The Company has no financial liabilities recorded at fair value on a recurring basis.

9 unchanged sentences

Observable Inputs

As of June 30, 2021:

As of September 30, 2021:

Short-term investments:

Treasury securities

Corporate debt securities

Commercial paper

Total assets measured at fair value

Total assets measured at fair value on a recurring basis

Janux Therapeutics, Inc.

4 unchanged sentences

Short-Term Investments

Short-term investments consist of commercial paper.

Short-term investments consist of U.S.

treasury securities, corporate debt securities and commercial paper.

The Company has classified these investments as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies, and therefore has classified all short-term investments with maturity dates beyond three months at the date of purchase as current assets in the accompanying balance sheets.

As of June 30, 2021, the remaining contractual maturities of all short-term investments were less than 12 months.

Short-term investments are carried at fair value with the unrealized gains and losses included in accumulated other comprehensive income (loss) as a component of stockholders’

3 unchanged sentences

Realized gains and losses are calculated using the specific identification method and recorded as interest income or expense.

The Company has determined there were no material declines in fair values of its investments due to credit-related factors as of June 30, 2021.

The Company has determined there were no material declines in fair values of its investments due to credit-related factors as of September 30, 2021.

The following table summarizes short-term investments (in thousands):

As of June 30, 2021

As of September 30, 2021

Treasury securities

Corporate debt securities

Commercial paper

The amortized cost and estimated fair value in the table above excludes $ 3,000 of accrued interest receivable as of June 30, 2021 included in prepaid expenses and other current assets in the accompanying balance sheets.

As of June 30, 2021, aggregated gross unrealized losses of available-for-sale investments were not material and no allowance for credit losses has been recorded.

Additionally, no realized gains or losses on sales of short-term investments have been recorded through June 30, 2021.

The amortized cost and estimated fair value in the table above exclud es $ 28,000 o f accrued interest receivable as of September 30, 2021 included in prepaid expenses and other current assets in the accompanying balance sheets.

Contractual maturities of available-for-sale debt securities are as follows (in thousands):

As of September 30, 2021

Due in 1 Year or Less

Due Between 1 and 2 Years

Treasury securities

Corporate debt securities

Commercial paper

As of September 30, 2021, aggregated gross unrealized losses of available-for-sale investments were not material and no allowance for credit losses has been recorded.

Additionally, no realized gains or losses on sales of short-term investments have been recorded through September 30, 2021.

The Company had no short-term investments as of or during the year ended December 31, 2020.

6 unchanged sentences

financial condition and generally does not require collateral.

As of December 31, 2020 and June 30, 2021, all of the Company’s accounts receivable relate to a single customer.

For the three and six months ended June 30, 2021, all of the Company’s revenue related to a single customer.

As of December 31, 2020 and September 30, 2021, all of the

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Company’s accounts receivable, if any, relate to a single customer.

For the three and nine months ended September 30, 2021, all of the Company’s revenue related to a single customer.

The Company determines if a contract contains a lease at the inception of the contract and evaluates each lease agreement to determine whether the lease is an operating or finance lease .

For leases where the Company is the lessee, right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease.

Liabilities from operating leases are included in current portion of operating lease liabilities, and operating lease liabilities, net of current portion on the accompanying balance sheets.

The Company does not have any financing leases.

Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet.

The Company does not have material short-term lease costs.

Lease liabilities are measured at the present value of the lease payments not yet paid discounted using the discount rate for the lease established at the lease commencement date.

To determine the present value, the implicit rate is used when readily determinable.

For those leases where the implicit rate is not provided, the Company determines an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

ROU assets are measured as the present value of the lease payments and also include any prepaid lease payments made and any other indirect costs incurred, and exclude any lease incentives received.

Lease terms may include the impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company has elected the practical expedient to account for the lease and non-lease components, such as common area maintenance charges, as a single lease component for the Company's facilities leases.

Revenue Recognition

3 unchanged sentences

The Company considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

A customer is a party that has entered into a contract with the Company, where the purpose of the contract is to obtain a product or a service that is an output of the Company’s ordinary activities in exchange for consideration.

11 unchanged sentences

(i) the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts, and (ii) the mostly likely amount method, which identifies the single most likely amount in a range of possible consideration amounts.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

If a contract has multiple performance obligations, the Company allocates the transaction price to each distinct performance obligation in an amount that reflects the consideration the Company is entitled to receive in exchange for satisfying each distinct performance obligation.

14 unchanged sentences

The Company estimates the fair value of equity awards using the Black-Scholes option pricing model and recognizes forfeitures as they occur.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Comprehensive Loss

5 unchanged sentences

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

The Company has excluded weighted-average unvested shares of 589,054 shares, 255,373 shares, 447,465 shares and 282,172 shares from the weighted-average number of common shares outstanding for the three months ended June 30, 2021 and 2020 and six months ended June 30, 2021 and 2020, respectively.

The Company has excluded weighted-average unvested shares of 477,408 shares, 202,655 shares, 457,556 shares and 255,473 shares from the weighted-average number of common shares outstanding for the three months ended September 30, 2021 and 2020 and nine months ended September 30, 2021 and 2020, respectively.

Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods.

Dilutive common stock equivalents are comprised of convertible preferred stock, unvested common stock subject to repurchase and options outstanding under the Company’s stock option plan.

For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be anti-dilutive.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares):

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

September 30,

Convertible preferred stock outstanding

12 unchanged sentences

Property and equipment, net consist of the following (in thousands):

September 30,

Laboratory equipment

Computer equipment and software

Construction in progress

Total property and equipment

1 unchanged sentence

Property and equipment, net

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Accrued liabilities consist of the following (in thousands):

Accrued equity issuance costs

September 30,

Accrued compensation (including related party amounts of $ 0 and $ 286 , respectively)

Accrued research and development (including related party amounts of $ 0

and $ 14 , respectively)

Accrued compensation (including related party amounts of $ 0 and $ 286 , respectively)

Other accrued liabilities (including related party amounts of $ 0 and $ 244 , respectively)

Accrued professional fees

Commitments and Contingencies

3 unchanged sentences

Specifically, the WuXi Biologics Licensed Technology is used to manufacture a component of the Company’s PSMA-TRACTr and EGFR-TRACTr product candidates.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

In consideration for the license, the Company paid WuXi Biologics a non-refundable, one-time license fee of $ 0.2 million upon Wuxi Biologics’

9 unchanged sentences

The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Operating Leases

In August 2021, the Company entered into a lease agreement (the "Lease") located in San Diego, California for the Company’s general office use .

The Company determined this facilities lease was an operating lease at the inception of the lease contract.

According to accounting standards, the Lease commenced on September 1, 2021 and has a term of 14 months from the commencement date.

There are no options to extend the term or early termination provisions.

Future minimum noncancelable operating lease payments as of September 30, 2021 are as follows (in thousands):

2021 (remaining)

Total minimum lease payments

Imputed interest

Total operating lease liabilities

Current portion of operating lease liabilities

Operating lease liabilities, net of current portion

The weighted average remaining lease term for the Company’s operating lease is 1.1 years as of September 31, 2021.

Operating lease expense and cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2021 was not material.

No operating lease expense was recorded in 2020 as the Company had no operating leases that had commenced during that period.

Related Party Transactions

4 unchanged sentences

Either party may terminate the support services agreement by giving 30 days’

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

prior notice.

1 unchanged sentence

prior notice.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

On January 1, 2021, the Company entered into a second Support Services Agreement with COI, which superseded the August 2017 Support Services Agreement.

6 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

General and administrative

At June 30, 2021, the Company had prepaid expenses and other current assets of $ 36,000 with COI.

At September 30, 2021, the Company had prepaid expenses and other current assets of $ 14,000 with COI.

At December 31, 2020, the Company had accounts payable and accrued expenses due to COI or its affiliates of $ 0.5 million.

For the six months ended June 30, 2021, the Company paid COI $ 10,000 related to the purchase of property and equipment.

For the nine months ended September 30, 2021, the Company paid COI $ 14,000 related to the purchase of property and equipment.

Convertible Preferred Stock and Stockholders’

15 unchanged sentences

2021 Equity Incentive Plan

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

In June 2021, the Company’s board of directors and stockholders adopted the 2021 Equity Incentive Plan (the “2021 Plan,”

and together with the 2017 Plan the “Plans”).

The 2021 Plan became effective upon the date of the underwriting agreement related to the Company’s IPO.

The 2021 Plan became effective upon the date of the underwriting agreement related to the

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Company’s IPO.

Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock awards, performance cash awards and other forms of stock awards to employees, directors and consultants.

9 unchanged sentences

Balance at December 31, 2020

Balance at June 30, 2021

Vested and expected to vest at June 30, 2021

Exercisable at June 30, 2021

The weighted average grant date fair value per share of option grants for the six months ended June 30, 2021 and 2020 was $ 6.45 , and $ 0.09 , respectively.

The total intrinsic value of stock options exercised for the six months ended June 30, 2021 and 2020 was $ 1.0 million and $ 0 , respectively.

As of June 30, 2021, total unrecognized stock-based compensation cost was $ 29.4 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.6 years.

Forfeited or cancelled

Balance at September 30, 2021

Vested and expected to vest at September 30, 2021

Exercisable at September 30, 2021

The weighted average grant date fair value per share of option grants for the nine months ended September 30, 2021 and 2020 wa s $ 7.83 , and $ 0.43 , resp ectively.

The total intrinsic value of stock options exercised for the nine months ended September 30, 2021 and 2020 was $ 1.0 million and $ 0 , respectivel y.

As of September 30, 2021, total unrecognized stock-based compensation cost was $ 36.5 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.3 years.

The assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants under its Plans were as follows:

Six Months Ended

Nine Months Ended

September 30,

Risk-free interest rate

0.8 % –

0.7 % –

Expected volatility

28 unchanged sentences

In June 2021, employees began to enroll in the ESPP and the Company’s first offering period commenced.

Stock-based compensation expense related to the ESPP for the three and six months ended June 30, 2021 was immaterial.

Stock-based compensation expense related to the ESPP for the three and nine months ended September 30, 2021 was $ 0.1 million.

Stock-Based Compensation Expense

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

General and administrative

Unvested Stock Liability

A summary of the Company’s unvested shares and unvested stock liability is as follows (in thousands, except share data):

Stock Liability

Unvested Stock Liabilities

A summary of the Company’s unvested shares and unvested stock liabilities is as follows (in thousands, except share data):

Stock Liabilities

Balance at December 31, 2020

1 unchanged sentence

Vested shares

Balance at June 30, 2021

Balance at September 30, 2021

Janux Therapeutics, Inc.

2 unchanged sentences

Common stock reserved for future issuance consists of the following:

September 30,

Conversion of preferred stock

4 unchanged sentences

In December 2020, the Company entered into a research collaboration and exclusive license agreement with Merck to develop TRACTr product candidates that are distinct from those in its internally developed pipeline (“Merck Agreement”).

The Company recognized $ 0.5 million and $ 0.9 million of revenue under the Merck Agreement for the three and six months ended June 30, 2021.

The Company recogniz ed $ 1.2 million and $ 2.0 million of r evenue under the Merck Agreement for the three and nine months ended September 30, 2021.

No revenue was recognized under the Merck Agreement during 2020.

As of June 30, 2021, aggregate deferred revenue related to the Merck Agreement was $ 7.9 million, of which $ 5.1 million was classified as current.

The Company had $ 0.4 million and $ 8.0 million of accounts receivable outstanding as of June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, aggregate deferred revenue related to the Merck Agreement w as $ 7.1 million, of which $ 5.3 million was classified as current.

The Compan y had $ 0 and $ 8.0 million of accounts receivable outstanding as of September 30, 2021 and December 31, 2020, respectively.

The remaining performance obligations under the Merck Agreement relate to the Company’s conduct of research services and the Company’s participation in a joint research committee.

The Company estimates the remaining term of the research services, over which revenue will be recognized, to be 1.8 years as of June 30, 2021.

The Company estimates the remaining term of the research services, over which revenue will be recogni zed, to be 1.5 years a s of September 30, 2021.

Effective April 23, 2021, the Company adopted a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code available to eligible employees.

2 unchanged sentences

compensation.

Employer contributions paid through June 30, 2021 were immaterial.

Employer contributions paid through September 30, 2021 were immaterial.

Subsequent Events

On October 1, 2021, the Company entered into a noncancelable lease agreement to lease office and laboratory space in San Diego, California.

The targeted lease commencement date is July 2022 and will have a lease term of 126 months.

The Company has one option to extend the lease term for a period of 5 years .

Pursuant to the lease and during the term thereof, the Company has a one-time right of first offer to lease additional space in the building to the extent such space becomes available.

Aggregate base rent payable during the lease term is approximately $ 38.0 million, inclusive of a six month abatement period and annual increases in rental payments of 3 %.

The Company will be required to pay its proportional share of utilities, operating expenses and certain taxes, assessments and fees of the premises under the terms of the lease.

The lease provides that the landlord shall provide an allowance of up to $ 10.6 million to fund the costs of the design, permitting and construction of permanently affixed improvements to the premises.

As required under the terms of the lease, in October 2021 the Company entered into a letter of credit in the amount of $ 0.8 million, to be classified as restricted cash, which is subject to draw down by the landlord upon certain events of breach or default by the Company.

The letter of credit amount is subject to a 50 % reduction subject to certain conditions on or following the date that is 54 months following the lease commencement date.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

7 unchanged sentences

Furthermore, past operating results are not necessarily indicative of results that may occur in future periods.

We are an innovative biopharmaceutical company developing next-generation therapeutics based on our proprietary Tumor Activated T Cell Engager (TRACTr) platform technology to better treat patients suffering from cancer.

We are an innovative biopharmaceutical company developing a broad pipeline of novel immunotherapies by applying our proprietary technology to our Tumor Activated T Cell Engager (TRACTr) and Tumor Activated Immunomodulator (TRACIr) platforms to better treat patients suffering from cancer.

Our initial focus is on developing a novel class of T Cell engagers (TCEs), and our lead product candidates are designed to target clinically validated drug targets.

2 unchanged sentences

We are developing a broad pipeline with lead programs targeting prostate-specific membrane antigen (PSMA), epidermal growth factor receptor (EGFR), and trophoblast cell surface antigen 2 (TROP2), with all of our programs currently in the preclinical or discovery stage.

We expect to submit at least two Investigational New Drug application (IND) submissions by the end of 2022.

We are also applying our proprietary technology to develop a Tumor Activated Immunomodulator (TRACIr) costimulatory bispecific product candidate against programmed death-ligand 1 (PD-L1) and CD28 designed to further enhance the anti-tumor activity of T cells, which we believe has the potential to be used as a single-agent or in combination with our current TRACTr pipeline.

We expect to submit Investigational New Drug applications (IND) for our PSMA-TRACTr in the first half of 2022, for our EGFR-TRACTr in the second half of 2022 and for our TROP2-TRACTr in 2023.

We are also applying our proprietary technology to develop a TRACIr costimulatory bispecific product candidate against programmed death-ligand 1 (PD-L1) and Cluster of Differentiation 28 (CD28) designed to further enhance the anti-tumor activity of T cells, which we believe has the potential to be used as a single-agent or in combination with our current TRACTr pipeline.

Based on data we have generated in non-human primates (NHPs), we believe our TRACTr and TRACIr product candidates have the potential for (i) significantly reduced risk of toxic CRS responses, (ii) reduced risk of on-target, healthy tissue toxicities, and (iii) improved half-life with once-weekly dosing in humans.

We expect to select a PD-L1xCD28 TRACIr development candidate in 2022.

We were incorporated in June 2017.

3 unchanged sentences

We have incurred operating losses since our inception and have not yet generated any product revenue.

Our net losses were $8.5 million and $3.9 million, respectively, for the six months ended June 30, 2021 and 2020.

As of June 30, 2021, we had an accumulated deficit of $23.2 million.

Our net losses were $19.3 million and $5.1 million, respectively, for the nine months ended September 30, 2021 and 2020.

As of September 30, 2021, we had an accumulated deficit of $34.0 million.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on a variety of factors including the timing and scope of our preclinical studies and our expenditures on other research and development activities and the timing of any revenue recognition under our collaboration agreement with Merck.

7 unchanged sentences

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and most of our office employees working remotely.

To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and remote work.

We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

21 unchanged sentences

Research and Development

To date, our research and development expenses have related primarily to development of our TRACTr platform technology, programs, and discovery efforts, preclinical studies and other preclinical activities related to lead discovery and optimization of development candidates under our TRACTr platform technology and costimulatory bispecific development program.

To date, our research and development expenses have related primarily to development of our TRACTr and TRACIr platforms, discovery efforts, preclinical studies and other preclinical activities related to lead discovery and optimization of development candidates under our TRACTr and TRACIr platforms.

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

6 unchanged sentences

Certain research and development expenses as listed above include amounts paid to COI.

We anticipate that our research and development expenses will substantially increase for the foreseeable future as we continue the development of our TRACTr and costimulatory bispecific platforms and the discovery and development of product candidates within our TRACTr and costimulatory bispecific programs.

We anticipate that our research and development expenses will substantially increase for the foreseeable future as we continue the development of our TRACTr and TRACIr platforms and the discovery and development of product candidates under our TRACTr and TRACIr platforms.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of future clinical trials and preclinical studies of product candidates due to the inherently unpredictable nature of preclinical and clinical development.

18 unchanged sentences

Interest expense consists of coupon interest of 8% per annum on our convertible promissory notes that converted in June 2020.

Increase in Fair Value of Convertible Promissory Notes –

Change in Fair Value of Convertible Promissory Notes –

Related Parties

3 unchanged sentences

Results of Operations

Comparison of the Three Months Ended June 30, 2021 and 2020

Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2021 and 2020

Three Months Ended September 30,

(in thousands)

5 unchanged sentences

Loss from operations

Other expense:

Other income (expense):

Interest income

Interest expense –

related parties

Increase in fair value of convertible promissory notes –

related parties

Total other income (expense)

1 unchanged sentence

We began recognizing revenue from our December 2020 collaboration with Merck in 2021 when we began to provide the research services required under the agreement.

We did not generate any collaboration revenue for the three months ended June 30, 2020.

We did not generate any collaboration revenue for the three months ended September 30, 2020.

Research and Development Expense

Research and development expenses were $4.7 million and $0.7 million for the three months ended June 30, 2021 and 2020, respectively.

The increase of $4.0 million was due to a net increase related to the development of our TRACTr platform technology and programs of $2.4 million, personnel and facilities costs of $0.8 million, stock-based compensation expense of $0.6 million, and license fees of $0.2 million.

Research and development expenses were $8.4 million and $0.8 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $7.6 million was primarily due to increases related to the development of our platform technologies and programs of $5.0 million, stock-based compensation expense of $1.1 million, and other research and development expenses of $1.5 million, as operations grew in support of program advances.

General and Administrative Expense

General and administrative expenses were $2.0 million and $0.4 million for the three months ended June 30, 2021 and 2020, respectively.

The increase of $1.6 million was due primarily to increases of $0.7 million of stock-based compensation, $0.5 million in personnel and facilities related expenses, $0.2 million in consulting and outside services, and $0.2 million in other general and administrative costs.

Other Expense

Other income of $46,000 for the three months ended June 30, 2021 consisted of interest income on our cash and cash equivalents and short-term investments.

Other expense of $1.4 million for the three months ended June 30, 2020 consisted of a $1.2 million increase in the fair value of our convertible promissory notes and $0.1 million of interest expense on our convertible promissory notes.

Comparison of the Six Months Ended June 30, 2021 and 2020

Six Months Ended June 30,

General and administrative expenses were $3.6 million and $0.4 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $3.2 million was primarily due to increases in stock-based compensation of $1.4 million, personnel and facilities costs of $0.7 million, and other general and administrative expenses of $1.1 million, as we now operate as a public company.

Other Income (Expense)

Other expenses of $0.1 million for the three months ended September 30, 2021 consisted of interest income on our cash and cash equivalents and short-term investments.

Comparison of the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30,

(in thousands)

5 unchanged sentences

Loss from operations

Other expense:

Other income (expense):

Interest income

1 unchanged sentence

related parties

Increase in fair value of convertible promissory notes –

Change in fair value of convertible promissory notes –

related parties

2 unchanged sentences

We began recognizing revenue from our December 2020 collaboration with Merck in 2021 when we began to provide the research services required under the agreement.

We did not generate any collaboration revenue for the six months ended June 30, 2020.

We did not generate any collaboration revenue for the nine months ended September 30, 2020.

Research and Development Expense

Research and development expenses were $6.7 million and $1.2 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $5.5 million was due to a net increase related to the development of our TRACTr platform technology and programs of $3.4 million, personnel and facilities costs of $1.1 million, stock-based compensation expense of $0.6 million, license fees of $0.2 million, and other research and development costs of $0.2 million.

Research and development expenses were $15.1 million and $2.1 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $13.0 million was primarily due to increases related to the development of our platform technologies and programs of $8.3 million, personnel and facilities costs of $2.4 million, stock-based compensation expense of $1.8 million, and other research and development expenses of $0.5 million, as operations grew in support of program advances.

General and Administrative Expense

General and administrative expenses were $2.7 million and $0.7 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $2.0 million was due primarily to increases of $0.8 million of stock-based compensation, $0.6 million in personnel and facilities related expenses, $0.3 million in professional services related primarily to corporate legal fees and audit and tax fees, $0.2 million in consulting and outside services, and $0.1 million in other general and administrative costs.

Other Expense

Other income of $46,000 for the six months ended June 30, 2021 consisted of interest income on our cash and cash equivalents and short-term investments.

Other expense of $1.9 million for the six months ended June 30, 2020 consisted of a $1.7 million increase in the fair value of our convertible promissory notes and $0.2 million of interest expense on our convertible promissory notes.

General and administrative expenses were $6.4 million and $1.1 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $5.3 million was primarily due to increases in stock-based compensation of $2.2 million, personnel and facilities costs of $1.3 million, and other general and administrative expenses of $1.8 million, as we now operate as a public company.

Other Income (Expense)

Other income of $0.2 million for the nine months ended September 30, 2021 consisted of interest income on our cash and cash equivalents and short-term investments.

Other expense of $1.9 million for the nine months ended September 30, 2020 consisted of a $1.7 million increase in the fair value of our convertible promissory notes and $0.2 million of interest expense on our convertible promissory notes.

Liquidity and Capital Resources

3 unchanged sentences

Proceeds from our IPO, net of underwriting discounts and commissions and other offering costs, were $204.1 million.

As of June 30, 2021, we had not yet paid $0.9 million of the IPO offering costs.

All outstanding shares of our convertible preferred stock converted into common stock in connection with our IPO.

As of June 30, 2021, we had cash and cash equivalents and short-term investments of $394.2 million.

As of September 30, 2021, we had cash and cash equivalents and short-term investments of $387.5 million.

The following summarizes our cash flows for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

5 unchanged sentences

Operating Activities

Net cash used in operating activities was $0.6 million for the six months ended June 30, 2021 and net cash used in operating activities was $1.7 million for the six months ended June 30, 2020.

The net cash used in operating activities for the six months ended June 30, 2021 was primarily due to our net loss of $8.5 million, adjusted for $1.4 million of noncash charges and a change in operating assets and liabilities of $6.5 million.

The net cash used in operating activities for the six months ended June 30, 2020 was primarily due to our net loss of $3.9 million, adjusted for a $1.7 million noncash charge related to an increase in the fair value of convertible promissory notes, $0.2 million of noncash interest and a $0.3 million change in operating assets and liabilities.

Net cash used in operating activities was $6.5 million for the nine months ended September 30, 2021 and net cash used in operating activities was $2.7 million for the nine months ended September 30, 2020.

The net cash used in operating activities for the nine months ended September 30, 2021 was primarily due to our net loss of $19.3 million, adjusted for $4.0 million of stock-based compensation expense and a change in operating assets and liabilities of $8.8 million.

The net cash used in operating activities for the nine months ended September 30, 2020 was primarily due to our net loss of $5.1 million, adjusted for a $1.7 million noncash charge related to an increase in the fair value of convertible promissory notes, $0.2 million of noncash interest and a $0.5 million change in operating assets and liabilities.

Investing Activities

Net cash used in investing activities was $142.7 million for the six months ended June 30, 2021 due our purchase of short-term investments of $142.5 million and our purchase of property and equipment of $0.2 million.

We had no cash flows from investing activities for the six months ended June 30, 2020.

Net cash used in investing activities was $348.3 million for the nine months ended September 30, 2021 due to our purchase of short-term investments, net of maturities of $348.0 million and our purchase of property and equipment of $0.3 million.

We had no cash flows from investing activities for the nine months ended September 30, 2020.

Financing Activities

Net cash provided by financing activities of $387.2 million for the six months ended June 30, 2021 primarily consisted of $205.0 million of net proceeds from our initial public offering, $180.5 million of net proceeds from our preferred stock sales and $1.7 million of proceeds from stock option exercises.

Net cash provided by financing activities of $7.0 million for the six months ended June 30, 2020 primarily consisted of $2.5 million of net proceeds from the issuance of convertible promissory notes and $4.5 million of net proceeds from the issuance of convertible preferred stock.

Net cash provided by financing activities of $386.4 million for the nine months ended September 30, 2021 primarily consisted of $204.2 million of net proceeds from our initial public offering, $180.5 million of net proceeds from our preferred stock sales and $1.7 million of proceeds from stock option exercises.

Net cash provided by financing activities of $7.0 million for the nine months ended September 30, 2020 primarily consisted of $2.5 million of net proceeds from the issuance of convertible promissory notes and $4.5 million of net proceeds from the issuance of convertible preferred stock.

Funding Requirements

4 unchanged sentences

Our future capital requirements will depend on many factors, including:

the initiation, trial design, progress, timing, costs and results of drug discovery, preclinical studies and clinical trials of our product candidates, and in particular the IND-enabling studies and planned future clinical trials for PSMA-TRACTr, EGFR-TRACTr, TROP2-TRACTr and costimulatory bispecific;

the number and characteristics of clinical programs that we pursue;

16 unchanged sentences

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

Contractual Obligations

In August 2021, we entered into a noncancelable agreement to lease office space in San Diego, California ( Ocean Air Drive Lease ) with aggregate payments of approximately $0.3 million over the lease term.

According to accounting standards, the Ocean Air Drive Lease commenced in September 2021 and has a term of 14 months.

In October 2021, we entered into a noncancelable agreement to lease office and laboratory space in San Diego, California (Torrey Plaza Lease) with aggregate payments of approximately $38.0 million over the 126-month term of the lease.

The Torrey Plaza Lease is expected to commence in July 2022.

As required under the terms of the lease, in October 2021 the Company entered into a letter of credit in the amount of $0.8 million, to be classified as restricted cash, which is subject to draw down by the landlord upon certain events of breach or default by the Company.

The letter of credit amount is subject to a 50% reduction subject to certain conditions on or following the date that is 54 months following the lease commencement date.

The lease provides that the landlord shall provide an allowance of up to $10.6 million to fund the costs of the design, permitting and construction of permanently affixed improvements to the premises.

We enter into contracts in the normal course of business with various third parties for preclinical research studies and testing, manufacturing and other services and products for operating purposes.

These contracts provide for termination upon notice.

Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.

Critical Accounting Policies and Estimates

2 unchanged sentences

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accruals for research and development expenses, stock-based compensation and fair value measurements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, accruals for research and development expenses, stock-based

compensation and fair value measurements.

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

7 unchanged sentences

contained in the Prospectus.

There have not been any material changes to the critical accounting policies discussed therein during the three months ended June 30, 2021.

There have not been any material changes to the critical accounting policies discussed therein during the three months ended September 30, 2021.

Off-Balance Sheet Arrangements

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements