What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-07 · 213 added, 515 removed, 360 unchanged (67% of the section changed)

3 unchanged sentences

(in thousands, except share and par value data)

September 30,

Current assets:

Cash and cash equivalents

Accounts receivable

Short-term investments

5 unchanged sentences

Other long-term assets

Liabilities and Stockholders’

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

Accrued liabilities

Accrued expenses

Current portion of deferred revenue

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

1 unchanged sentence

Commitments and contingencies (Note 3)

Stockholders’

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

authorized shares –

10,000,000 at

September 30, 2023 and December 31, 2022, respectively;

authorized shares – 10,000,000 at

March 31, 2024 and December 31, 2023, respectively;

no shares issued

and outstanding at September 30, 2023 and December 31, 2022

and outstanding at March 31, 2024 and December 31, 2023

Common stock, $ 0.001 par value;

authorized shares –

200,000,000 at

September 30, 2023 and December 31, 2022, respectively;

issued shares –

and 41,684,666 at September 30, 2023 and December 31, 2022, respectively;

shares –

46,151,427 and 41,616,260 at September 30, 2023 and December 31, 2022,

authorized shares – 200,000,000 at

March 31, 2024 and December 31, 2023, respectively;

issued shares – 51,846,342

and 46,262,759 at March 31, 2024 and December 31, 2023, respectively;

shares – 51,840,571 and 46,252,440 at March 31, 2024 and December 31, 2023,

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes.

3 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Collaboration revenue

15 unchanged sentences

Janux Therapeutics, Inc.

Unaudited Condensed Statements of Stockholders’

For the Nine Months Ended September 30, 2023 and 2022

Unaudited Condensed Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2024 and 2023

(in thousands, except share data)

Comprehensive

Stockholders’

Balance at December 31, 2022

Issuance of common stock and pre-funded common stock warrants, net of issuance costs

Exercise of pre-funded common stock warrants

Exercise of common stock options

Shares issued under employee stock purchase plan

Vesting of restricted shares

Stock-based compensation

Unrealized gain on available-for-sale securities, net

Balance at September 30, 2023

Comprehensive

Stockholders’

Income (Loss)

Balance at December 31, 2023

Issuance of common stock and pre-funded common stock warrants, net of $ 20,896 of issuance costs

Exercise of common stock options

Shares issued under employee stock purchase plan

Vesting of restricted shares

1 unchanged sentence

Unrealized loss on available-for-sale securities, net

Balance at September 30, 2022

See accompanying notes.

Janux Therapeutics, Inc.

Unaudited Condensed Statements of Stockholders’

For the Three Months Ended September 30, 2023 and 2022

(in thousands, except share data)

Balance at March 31, 2024

Comprehensive

Stockholders’

Balance at June 30, 2023

Issuance of common stock and pre-funded common stock warrants, net of issuance costs

Exercise of pre-funded common stock warrants

Stockholders’

Balance at December 31, 2022

Exercise of common stock options

1 unchanged sentence

Stock-based compensation

Unrealized loss on available-for-sale securities, net

Balance at September 30, 2023

Comprehensive

Stockholders’

Balance at June 30, 2022

Vesting of restricted shares

Stock-based compensation

Unrealized loss on available-for-sale securities, net

Balance at September 30, 2022

Unrealized gain on available-for-sale securities, net

Balance at March 31, 2023

See accompanying notes.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

15 unchanged sentences

Maturities of short-term investments

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from exercise of common stock options and employee stock purchase plan

Proceeds from exercise of common stock options

Proceeds from the issuance of common stock and pre-funded common stock warrants, net of issuance costs

1 unchanged sentence

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

Cash, cash equivalents and restricted cash –

beginning of year

Cash, cash equivalents and restricted cash –

end of period

Cash, cash equivalents and restricted cash – beginning of year

Cash, cash equivalents and restricted cash – end of period

Supplemental disclosure of noncash investing and financing activities

Unpaid property and equipment

Unpaid equity issuance costs

Vesting of restricted common stock

Unrealized gain (loss) on available-for-sale securities, net

Operating lease liabilities arising from right-of-use assets

See accompanying notes.

3 unchanged sentences

Janux Therapeutics, Inc.

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

The Company is a clinical-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.

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

Liquidity and Capital Resources

From its inception through September 30, 2023, 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 assets.

The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $ 157.0 million as of September 30, 2023.

From its inception through March 31, 2024, 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 assets.

The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $ 183.5 million as of March 31, 2024.

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

To date the Company has funded its operations primarily with the net proceeds from the issuance of convertible promissory notes, the issuance of convertible preferred stock, the issuance of common stock in its initial public offering (“IPO”), the issuance of common stock and pre-funded common stock warrants in an underwritten offering, the exercise of common stock options, and amounts received under a collaboration agreement.

To date the Company has funded its operations primarily with the net proceeds from the issuance of convertible promissory notes, the issuance of convertible preferred stock, the issuance of common stock in its initial public offering (“IPO”), the issuance of common stock and pre-funded common stock warrants in underwritten offerings, the exercise of common stock options, and amounts received under a collaboration agreement.

The Company expects to incur substantial operating losses for the next several years and will need to obtain additional financing in order to continue its research and development activities, initiate and complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval.

1 unchanged sentence

If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs.

Any of these actions could materially harm the Company’s business, results of operations and future prospects.

There can be no assurance that such financing will be available or will be at terms acceptable to the Company, especially in light of COVID-19 and other public health crises, current financial conditions within the banking industry, including the effects of recent failures of financial institutions and liquidity levels, as well as recent or anticipated changes in interest rates and the inflationary macro environment.

1 unchanged sentence

Unaudited Interim Financial Information

The unaudited condensed financial statements as of September 30, 2023, and for the three and nine months ended September 30, 2023 and 2022, 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.

The unaudited condensed financial statements as of March 31, 2024, and for the three months ended March 31, 2024 and 2023, 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.

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

The condensed balance sheet data as of December 31, 2022 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP.

These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2022.

The condensed balance sheet data as of December 31, 2023 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP.

These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023.

Use of Estimates

The Company’s financial statements are prepared in accordance with GAAP.

The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes.

The most significant estimates in the Company’s financial statements relate to estimates to complete the performance obligations and the estimated transaction price for collaboration revenue, accruals for research and development expenses, stock-based compensation and fair value measurements.

These estimates and assumptions are based on current facts, historical experience and various other factors 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 and the recording of revenues and expenses that are not readily apparent from other sources.

2 unchanged sentences

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Fair Value Measurements

6 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, restricted cash, 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 fair value of assets classified within Level 1 is based on quoted prices in active markets as provided by the Company’s investment managers.

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

The fair value of assets 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 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.

None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis.

No transfers between levels have occurred during the periods presented.

The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis (in thousands):

Fair Value Measurements at

5 unchanged sentences

Observable Inputs

As of September 30, 2023:

As of March 31, 2024:

Cash equivalents:

3 unchanged sentences

Treasury securities

agency discount notes

Asset-backed securities

7 unchanged sentences

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Fair Value Measurements at

11 unchanged sentences

Treasury securities

agency discount notes

Asset-backed securities

Corporate debt securities

7 unchanged sentences

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

Cash and cash equivalents include cash in readily available checking accounts, commercial paper and money market funds.

Cash and cash equivalents include cash in readily available checking accounts and money market funds.

Restricted Cash

Restricted cash consists of a money market account securing a standby letter of credit issued in connection with the Company’s Torrey Plaza operating lease (as defined and described in Note 3).

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the accompanying balance sheets that sum to the amounts shown in the statements of cash flows (in thousands):

September 30,

Cash and cash equivalents

4 unchanged sentences

Treasury securities, U.S.

agency bonds, U.S.

agency discount notes, asset-backed securities, corporate debt securities and commercial paper, all of which are highly rated by Moody’s, S&P, and Fitch.

agency bonds, asset-backed securities, corporate debt securities and commercial paper, all of which are highly rated by Moody’s, S&P, and Fitch.

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 investment securities as current assets.

Those investments with maturity dates of three months or less at the date of purchase are presented as cash equivalents in the accompanying balance sheets.

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’

equity until realized.

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’ equity until realized.

Any premium or discount arising at purchase is amortized or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument.

The Company records an allowance for

The Company records an allowance for credit losses when unrealized

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

credit losses when unrealized losses are due to credit-related factors.

Notes to Unaudited Condensed Financial Statements–(Continued)

losses are due to credit-related factors.

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

The following tables summarize short-term investments (in thousands):

As of September 30, 2023

As of March 31, 2024

Treasury securities

agency discount notes

Asset-backed securities

3 unchanged sentences

Treasury securities

agency discount notes

Asset-backed securities

Corporate debt securities

Commercial paper

The amortized cost and estimated fair value in the tables above excl ude $ 1.7 million and $ 0.7 million o f accrued interest receivable as of September 30, 2023 and December 31, 2022, respectively.

The amortized cost and estimated fair value in the tables above excl ude $ 3.9 million and $ 2.2 million of accrued interest receivable as of March 31, 2024 and December 31, 2023, respectively.

Accrued interest receivable is 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, 2023

As of March 31, 2024

Due in 1 Year or Less

1 unchanged sentence

Treasury securities

agency discount notes

Asset-backed securities

5 unchanged sentences

Treasury securities

agency discount notes

Asset-backed securities

Corporate debt securities

Commercial paper

As of March 31, 2024 , 32 out of 49 of our a vailable-for-sale debt securities were in an aggregate gross unrealized loss position.

The Company relies on both qualitative and quantitative factors to determine whether the unrealized loss for each available-for-sale

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

As of September 30, 2023 , 46 out of 49 of our a vailable-for-sale debt securities were in an aggregate gross unrealized loss position.

The Company relies on both qualitative and quantitative factors to determine whether the unrealized loss for each available-for-sale debt security at any balance sheet date is due to a credit loss.

Qualitative factors may include a credit downgrade, severity of the decline in fair value below amortized cost and other adverse conditions related specifically to the security, as well as the intent to sell the security, or whether the Company will “more likely than not”

be required to sell the security before recovery of its amortized cost basis.

Notes to Unaudited Condensed Financial Statements–(Continued)

debt security at any balance sheet date is due to a credit loss.

The Company considers the decline in market value for the securities to be primarily attributable to current economic conditions and interest rate adjustments, rather than credit-related factors and does not intend to sell any securities prior to maturity.

No allowance for credit losses has been recorded as of September 30, 2023 or December 31, 2022.

The following table summarizes our available-for-sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded at December 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

As of December 31, 2022

No allowance for credit losses has been recorded as of March 31, 2024 or December 31, 2023.

The following tables summarize our available-for-sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

As of March 31, 2024

Less Than 12 Months

1 unchanged sentence

Treasury securities

Asset-backed securities

Corporate debt securities

Commercial paper

There were no available-for-sale debt securities in a continuous unrealized loss position for 12 months or longer at September 30, 2023.

As of December 31, 2023

Less Than 12 Months

12 Months or Longer

Treasury securities

Asset-backed securities

Concentrations of Credit Risk

1 unchanged sentence

The Company invests its cash reserves in money market funds or available-for-sale debt securities in accordance with its investment policy.

The Company’s investment policy includes guidelines on acceptable investment securities, limits interest-bearing security investments to certain types of debt and money market instruments issued by the U.S.

government and institutions with investment grade credit ratings and places restrictions on maturities and concentration by asset class and issuer in order to maintain appropriate diversification.

In accordance with the Company’s policies, the Company monitors exposure with its counterparties.

The Company also maintains deposits in federally insured financial institutions in excess of federally insured limits.

1 unchanged sentence

The Company is also subject to credit risk from its accounts receivable.

The Company generally does not perform evaluations of customers’

financial condition and generally does not require collateral.

As of September 30, 2023, and December 31, 2022, all of the Company’s accounts receivable, if any, relate to a single customer.

For the three and nine months ended September 30, 2023 and 2022, all of the Company’s revenue related to a single customer.

The Company generally does not perform evaluations of customers’ financial condition and generally does not require collateral.

As of March 31, 2024, and December 31, 2023, all of the Company’s accounts receivable, if any, relate to a single customer.

For the three months ended March 31, 2024 and 2023, 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.

Liabilities from operating leases are included in current portion of operating lease liabilities, and

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

operating lease liabilities, net of current portion on the accompanying balance sheets.

The Company does not have any financing leases.

3 unchanged sentences

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

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

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

The IBR is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

2 unchanged sentences

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

The Company’s operating leases are subject to additional variable charges, including common area maintenance, property taxes, property insurance and other variable costs.

Given the variable nature of such costs, they are recognized as expense as incurred.

6 unchanged sentences

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

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.

To be considered a contract, (i) the contract must be approved (in writing, orally, or in accordance with other customary business practices), (ii) each party’s rights regarding the product or the service to be transferred can be identified, (iii) the payment terms for the product or the service to be transferred can be identified, (iv) the contract must have commercial substance (that is, the risk, timing or amount of future cash flows is expected to change as a result of the contract), and (v) it is probable that the Company will collect substantially all of the consideration to which it is entitled to receive in exchange for the transfer of the product or the service.

A performance obligation is defined as a promise to transfer a product or a service to a customer.

The Company identifies each promise to transfer a product or a service (or a bundle of products or services, or a series of products and services that are substantially the same and have the same pattern of transfer) that is distinct.

A product or a service is distinct if both (i) the customer can benefit from the product or the service either on its own or together with other resources that are readily available to the customer and (ii) the Company’s promise to transfer the product or the service to the customer is separately identifiable from other promises in the contract.

Each distinct promise to transfer a product or a service is a unit of accounting for revenue recognition.

6 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.

With respect to variable consideration relating to development and regulatory milestone payments, if it is probable that a significant revenue reversal would not occur, the associated payment value is included in the transaction price.

For development and

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

regulatory milestones that are uncertain in nature and highly dependent on factors outside of our control, the aggregate consideration is determined to be fully constrained and is not included in the transaction price until the underlying events occur or the associated approvals are received.

At the end of each reporting period, the Company re-evaluates the probability of achievement of each milestone and any related constraint, and if necessary, adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect the reported amount of revenues in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

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.

1 unchanged sentence

In those instances where the Company first receives consideration in advance of satisfying its performance obligation, the Company classifies such consideration as deferred revenue until (or as) the Company satisfies such performance obligation.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

instances where the Company first satisfies its performance obligation prior to its receipt of consideration, the consideration is recorded as accounts receivable.

In those instances where the Company first satisfies its performance obligation prior to its receipt of consideration, the consideration is recorded as accounts receivable.

The Company expenses incremental costs of obtaining and fulfilling a contract as and when incurred if the expected amortization period of the asset that would be recognized is one year or less, or if the amount of the asset is immaterial.

4 unchanged sentences

The Company records accruals for estimated costs incurred for ongoing research and development activities.

When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs.

When evaluating the adequacy of the accrued expenses, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs.

Significant judgments and estimates may be made in determining the prepaid or accrued balances at the end of any reporting period.

Actual results could differ from the Company’s estimates.

Stock-Based Compensation

4 unchanged sentences

The only component of other comprehensive loss is unrealized gain (loss) on available-for-sale securities.

Comprehensive losses have been reflected in the statements of operations and comprehensive loss and as a separate component in the statements of stockholders’

Comprehensive losses have been reflected in the statements of operations and comprehensive loss and as a separate component in the statements of stockholders’ equity.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, including pre-funded common stock warrants that were issued in an underwritten offering in July 2023 (Note 5), without consideration for potentially dilutive securities.

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, including pre-funded common stock warrants that were issued in underwritten offerings (Note 4), without consideration for potentially dilutive securities.

The pre-funded common stock warrants are included in the calculation of basic and diluted net loss per share as the exercise price of $ 0.001 per share is non-substantive and the shares are issuable for little or no consideration.

The Company has excluded weighted-average unvested shares of 20,274 shares, 136,505 shares, 32,132 shares and 213,301 shares from the weighted-average number of shares of common stock outstanding for the three months ended September 30, 2023 and 2022 and nine months ended September 30, 2023 and 2022, respectively.

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

The Company has excluded weighted-average unvested shares of 7,994 shares and 49,457 shares from the weighted-average number of common stock outstanding for the three months ended March 31, 2024 and 2023, respectively.

Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

equivalents outstanding for the period determined using the treasury-stock and if-converted methods.

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):

September 30,

Common stock options

2 unchanged sentences

Total potentially dilutive shares

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The Company adopted ASU No.

2020-06 on January 1, 2024 and the adoption of the standard had no material impact on its financial statements and related disclosures.

Accounting Pronouncements Pending Adoption

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.

The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker.

The standard is effective for the Company beginning in fiscal year 2024 and interim periods within fiscal year 2025, with early adoption permitted.

The Company does not expect to early adopt the new standard.

The Company is currently evaluating the impact of ASU 2023-07 on its financial statements and related disclosures and will adopt the new standard using a retrospective approach.

In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.

The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid.

The standard is effective for the Company for annual periods beginning after December 15, 2024 , with early adoption permitted.

The Company does not expect to early adopt the new standard.

The new standard is expected to be applied prospectively, but retrospective application is permitted.

The Company is currently evaluating the impact of ASU 2023-09 on its financial statements and related disclosures.

Balance Sheet Details

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

September 30,

Laboratory equipment

5 unchanged sentences

Property and equipment, net

Accrued liabilities consist of the following (in thousands):

September 30,

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Accrued expenses consist of the following (in thousands):

Accrued compensation

Accrued research and development

Other accrued liabilities

Accrued liabilities

Other accrued expenses

Accrued expenses

Prepaid expenses and other current assets consist of the following (in thousands):

Interest receivable

Prepaid research and development

Other prepaid expenses

Prepaid expenses and other current assets

Commitments and Contingencies

License Agreement with WuXi Biologics (Hong Kong) Limited

patent rights, know-how and biological materials (“WuXi Biologics Licensed Technology”), to use the WuXi Biologics Licensed Technology to make, use, sell, offer for sale and import certain therapeutic products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (“WuXi Biologics Licensed Product”).

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

achievement of a certain technical milestone.

In April 2021, the Company entered into a cell line license agreement (“Cell Line License Agreement”) with WuXi Biologics (Hong Kong) Limited (“WuXi Biologics”), pursuant to which the Company received a non-exclusive, worldwide, sublicensable license under certain of WuXi Biologics’ patent rights, know-how and biological materials (“WuXi Biologics Licensed Technology”), to use the WuXi Biologics Licensed Technology to make, use, sell, offer for sale and import certain therapeutic products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (“WuXi Biologics Licensed Product”).

In consideration for the license, the Company paid WuXi Biologics a non-refundable, one-time license fee of $ 0.2 million upon WuXi Biologics’ achievement of a certain technical milestone.

This one-time license fee was recognized as research and development expense when incurred since the WuXi Biologics Licensed Technology had no alternative future use.

If the Company does not engage WuXi Biologics or its affiliates to manufacture the WuXi Biologics Licensed Products for its commercial supplies, the Company is required to make royalty payments to WuXi Biologics in an amount equal to a low single-digit percentage of specified portions of net sales of WuXi Biologics Licensed Products manufactured by a third-party manufacturer.

The Company has the right (but not the obligation) to buy out its remaining royalty obligations with respect to each WuXi Biologics Licensed Product by paying WuXi Biologics a one-time payment in an amount ranging from low single digit million dollars to a maximum of $ 15.0 million depending on the development and commercialization stage of the WuXi Biologics Licensed Product (the “Buyout Option”), and upon such payment, the Company's license with respect to such WuXi Biologics Licensed Product will become fully paid-up, irrevocable, and perpetual.

The royalty obligations will remain in effect during the term of the Cell Line License Agreement so long as the Company has not exercised the Buyout Option.

The Cell Line License Agreement will continue indefinitely unless terminated (i) by the Company upon three months’

prior written notice and the Company’s payment of all amounts due to WuXi Biologics through the effective date of termination, (ii) by either party for the other party’s material breach that remains uncured for 30 days after written notice, and (iii) by WuXi Biologics if the Company fails to make a payment and such failure continues for 30 days after receiving notice of such failure.

The Cell Line License Agreement will continue indefinitely unless terminated (i) by the Company upon three months’ prior written notice and the Company’s payment of all amounts due to WuXi Biologics through the effective date of termination, (ii) by either party for the other party’s material breach that remains uncured for 30 days after written notice, and (iii) by WuXi Biologics if the Company fails to make a payment and such failure continues for 30 days after receiving notice of such failure.

Operating Leases

In October 2021, the Company entered into a lease agreement (the “Torrey Plaza Lease”) to lease office and laboratory space in San Diego, California.

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

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

According to accounting standards, the Torrey Plaza Lease commenced on April 1, 2022 and has a term of 130 months from the commencement date.

The Torrey Plaza Lease provides an option to extend the term of the lease for a period of 5 years beyond the initial term, which the Company is not reasonably certain to exercise and therefore was not considered in determining the ROU assets and lease liabilities balance.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

As required under the terms of the Torrey Plaza Lease, in October 2021 the Company entered into a standby letter of credit, which is secured by a money market account in the amount of $ 0.8 million.

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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 contractual lease commencement date.

Future minimum noncancelable operating lease payments as of September 30, 2023 are as follows (in thousands):

Future minimum noncancelable operating lease payments as of March 31, 2024 are as follows (in thousands):

2024 (remaining)

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Operating lease liabilities, net of current portion

The Torrey Plaza lease had a remaining lease term o f 9.3 ye ars and a discount rate of 8 % as of September 30, 2023.

Operating lease expense included in the measurement of lease liabilities for the three and nine months ended September 30, 2023 was $ 0.9 million and $ 2.6 million, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2023 was $ 0.8 million and $ 1.9 million, respectively.

Operati ng lease expense included in the measurement of lease liabilities for the three and nine months ended September 30, 2022 was $ 0.9 million and $ 1.9 million, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 30, 2022 was immaterial.

The Torrey Plaza lease has a remaining lease term of 8.8 years and a discount rate of 8 % as of March 31, 2024.

Operating lease expense included in the measurement of lease liabilities for the three months ended March 31, 2024 and 2023 was $ 0.9 million and $ 0.9 million, respectively.

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2024 and 2023 was $ 0.8 million and $ 0.3 million, respectively.

Contingencies

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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.

As of September 30, 2023, the Company is not currently party to any material le gal proceedings.

Related Party Transactions

In January 2021, the Company entered into a Support Services Agreement (the “2021 Support Services Agreement”) with Avalon BioVentures, Inc.

("Avalon") that outlines the terms of services provided by Avalon to the Company, as well as the fees charged for such services.

Avalon is a shared service company that provides certain back-office and administrative and research and development support services, including facilities support, to the portfolio companies of Avalon Ventures, an entity that beneficially owns greater than 5 % of our outstanding capital stock.

The 2021 Support Services Agreement was most recently renewed in January 2023 and will continue to renew for additional one-year renewal periods until terminated by the parties.

Either party may terminate the 2021 Support Services Agreement with 30 days written notice.

Operating expense recognized by the Company under the 2021 Support Services Agreement for the three and nine months ended September 30, 2023 was immaterial.

Operating expense recognized by the Company under the 2021 Support Services Agreement for the three and nine months ended September 30, 2022 was as follows (in thousands):

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Three Months Ended

September 30, 2022

Nine Months Ended

September 30, 2022

Research and development

General and administrative

Stockholders’

As of March 31, 2024, the Company is not currently party to any material le gal proceedings.

Stockholders’ Equity

Shelf Registration Statement

In August 2022, the Company filed a shelf registration statement (File No.

333-266720), which was declared effective in September 2022.

The shelf registration statement provides the Company with the ability to offer up to $ 400.0 million of certain securities, including shares of its common stock, from time to time.

The specific terms of any offering under the shelf registration statement are established at the time of such offering.

In August 2022, the Company entered into an Open Market Sale Agreement SM (“Sale Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of common stock, from time to time, through an “at the market offering”

program having an aggregate offering price of up to $ 100.0 million through which Jefferies would act as sales agent.

In May 2023 , the Company terminated the Sale Agreement.

In May 2023, the Company entered into an ATM Equity Offering SM Sales Agreement (“New Sale Agreement”) with BofA Securities, Inc.

(“BofA”) to sell shares of common stock, from time to time, through an “at the market offering”

program having an aggregate offering price of up to $ 150.0 million through which BofA would act as sales agent.

There was no activity from the New Sale Agreement during the nine months ended September 30, 2023.

As of September 30, 2023 , $ 150.0 million of common stock remained available for sale under the New Sale Agreement.

In July 2023, the Company closed an underwritten offering of 4,153,717 shares of its common stock and pre-funded warrants to purchase 583,483 shares of common stock.

In May 2023, the Company entered into an ATM Equity Offering SM Sales Agreement (“Sale Agreement”) with BofA Securities, Inc.

(“BofA”) to sell shares of common stock, from time to time, through an “at the market offering” program having an aggregate offering price of up to $ 150.0 million through which BofA would act as sales agent.

There was no activity from the Sale Agreement during the three months ended March 31, 2024.

As of March 31, 2024 , $ 150.0 million of common stock remained available for sale under the Sale Agreement.

In February 2024, the Company delivered written notice to BofA that it was suspending and terminating the prospectus related to the shares of its common stock issuable pursuant to the terms of the Sale Agreement.

As a result, the Company will not make any sales of its securities pursuant to the Sale Agreement, unless and until a new prospectus, prospectus supplement, or a new registration statement relating to the shares of its common stock is filed.

Other than the termination of the prospectus, the Sale Agreement remains in full force and effect.

In July 2023, the Company closed an underwritten offering of 4,153,717 shares of its common stock and pre-funded warrants to purchase 583,483 shares of common stock at an exercise price of $ 0.001 per share.

The shares of common stock were sold at a price of $ 12.46 per share and the pre-funded common stock warrants were sold at a price of $ 12.459 per pre-funded common stock warrant, resulting in gross proceeds of $ 59.0 million.

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The pre-funded common stock warrants will not expire until exercised in full and are exercisable in cash or by means of a cashless exercise.

In March 2024, the Company closed an underwritten offering of 5,397,301 shares of its common stock and pre-funded warrants to purchase 1,935,483 shares of common stock at an exercise price of $ 0.001 per share .

The shares of common stock were sold at a price of $ 46.50 per share and the pre-funded common stock warrants were sold at a price of $ 46.499 per pre-funded common stock warrant, resulting in gross proceeds of $ 341.0 million.

Fees related to the offering included underwriting discounts, commissions, and

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

offering expenses in the aggregate amount of $ 20.9 million, resulting in net proceeds of $ 320.1 million.

The pre-funded common stock warrants will not expire until exercised in full and are exercisable in cash or by means of a cashless exercise.

The Company has assessed the pre-funded common stock warrants for appropriate equity or liability classification.

The pre-funded common stock warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria.

In addition, such pre-funded common stock warrants do not provide any guarantee of value or return and do not provide the warrant holders with the option to settle any unexercised warrants for cash outside of the Company’s control.

The pre-funded common stock warrants also include a separate provision whereby the exercisability of the warrants may be limited if, upon exercise, the warrant holder or any of its affiliates would beneficially own more than 19.9 % of the Company’s outstanding common stock.

The pre-funded common stock warrants also include a separate provision whereby the exercisability of the warrants may be limited if, upon exercise, the warrant holder or any of its affiliates would beneficially own more than a certain percentage of the Company’s outstanding common stock.

The Company valued the pre-funded common stock warrants at issuance, concluding that their sale price approximated their fair value.

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In August 2017, the Company adopted the Janux Therapeutics, Inc.

2017 Equity Incentive Plan (the “2017 Plan”), which provided for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock awards to its employees, members of its board of directors and consultants.

The maximum term of options granted under the 2017 Plan is ten years and, in general, the options issued under the 2017 Plan vest over a four-year period from the vesting commencement date.

The 2017 Plan allows for the early exercise of stock options, which may be subject to repurchase by the Company at the original exercise price.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Upon the effectiveness of the 2021 Plan defined and described below, no further grants will be made under the 2017 Plan.

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2021 Equity Incentive Plan

In June 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan,”

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

In June 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan,” and together with the 2017 Plan the “Plans”).

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.

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The 2021 Plan does not permit early exercises.

A total of 2,775,890 new shares of common stock were initially reserved for issuance under the 2021 Plan.

The number of shares reserved that were remaining under the 2017 Plan as of the effective date of the 2021 Plan, or 1,424,110 shares, were added to the shares initially reserved under the 2021 Plan upon its effectiveness and any future cancellations under the 2017 Plan will become available for future issuance under the 2021 Plan.

In addition, the number of shares of common stock available for issuance under the 2021 Plan automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to 5% of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company’s board of directors.

As of September 30, 2023 , there were 8,991,993 shar es authorized for issuance under the 2021 Plan, inclusive of shares added from 2017 Plan cancellations.

A summary of the Company’s stock option activity under its Plans is as follows (in thousands, except share, per share data and years):

Any future cancellations under the 2017 Plan will become available for future issuance under the 2021 Plan.

In addition, the number of shares of common stock available for issuance under the 2021 Plan automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to 5 % of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company’s board of directors.

As of March 31, 2024 , there were 11,387,354 shar es authorized for issuance under the 2021 Plan, inclusive of shares added from 2017 Plan cancellations.

A summary of the Company’s stock option activity under its Plans is as follows (in thousands, except share, per share data and years):

Exercise Price

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Forfeited or cancelled

Balance at September 30, 2023

Vested and expected to vest at September 30, 2023

Exercisable at September 30, 2023

The weighted-average grant date fair value per share of option grants for the nine months ended September 30, 2023 and 2022 wa s $ 10.09 and $ 12.52 , respectively.

The total intrinsic value of stock options exercised for the nine months ended September 30, 2023 and 2022 was $ 1.9 million and $ 0.1 million, respectively.

As of September 30, 2023 , total unrecognized stock-based compensation cost associated with option grants was $ 40.0 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.3 years.

Balance at March 31, 2024

Vested and expected to vest at March 31, 2024

Exercisable at March 31, 2024

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

The weighted-average grant date fair value of option grants for the three months ended March 31, 2024 and 2023 was $ 8.11 and $ 10.21 , respectively.

The total intrinsic value of stock options exercised for the three months ended March 31, 2024 and 2023 was $ 5.6 million and $ 1.5 million, respectively.

As of March 31, 2024 , total unrecognized stock-based compensation cost associated with option grants was $ 45.3 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.6 years.

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

Nine Months Ended

September 30,

Three Months Ended March 31,

Risk-free interest rate

3.5 % –

1.5 % –

3.8 % – 4.2 %

3.5 % – 4.2 %

Expected volatility

83 % –

81 % –

Expected term (in years)

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Treasury notes with maturities similar to the expected term of the awards.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Expected volatility .

Given the Company’s limited historical stock price volatility data, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available, including the Company’s historical volatility, weighted by years of available trading data within the expected term.

The peer group was developed based on companies in the biotechnology industry.

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The expected term represents the period of time that options are expected to be outstanding.

Because the Company does not have historical exercise behavior, it determines the expected life assumption using the simplified method, for employees, which is an average of the contractual term of the option and its vesting period.

Because the Company does not have sufficient historical exercise behavior to provide a reasonable basis upon which to estimate the expected term, it determines the expected life assumption using the simplified method, for employees, which is an average of the contractual term of the option and its vesting period.

The expected term for nonemployee options is generally the contractual term.

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2021 Employee Stock Purchase Plan

In June 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective on June 10, 2021.

The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to 15 % of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP.

The price of common stock purchased under the ESPP is equal to 85 % of the lower of the fair market value of the common stock at the commencement date of each offering period or the relevant date of purchase.

A total o f 466,000 shares of common stock were approved to be initially reserved for issuance under the ESPP.

In addition, the number of shares of common stock available for issuance under the ESPP automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to the lesser of (i) 1 % of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase and (ii) 932,000 shares;

provided that before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

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

For the three and nine months ended September 30, 2023, stock-based compensation expense related to t he ESPP was $ 0.2 million and $ 0.7 million, re spectively.

Stock-based compensation expense related to the ESPP for the three and nine months ended September 30, 2022 was $ 0.2 million and $ 0.4 million, re spectively.

As of September 30, 2023 , total unrecognized stock-based compensation expense related to the ESPP was $ 0.5 million, which is expected to be recognized over a remaining weighted-average period of approximately 1.3 years.

provided that before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

Stock-based compensation expense related to the ESPP was immaterial for the three months ended March 31, 2024 and 2023.

As of March 31, 2024 , total unrecognized stock-based compensation expense related to the ESPP was $ 0.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 1.4 years.

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Stock-Based Compensation Expense

Stock-based compensation expense has been reported in the statements of operations and comprehensive loss as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Research and development

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Unvested Stock Liabilities

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

Weighted-Average Grant Date Fair Value

Stock Liabilities

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Vested shares

Balance at September 30, 2023

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

Balance at March 31, 2024

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance consists of the following:

September 30,

Common stock options outstanding

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Shares available for issuance under the ESPP

Pre-funded common stock warrants

Pre-funded common stock warrants outstanding

Research Collaboration and Exclusive License Agreement

In December 2020, the Company entered into a research collaboration and exclusive license agreement (the “Merck Agreement”), pursuant to which the Company granted Merck Sharp & Dohme Corp.

(“Merck”) an exclusive, worldwide, royalty-bearing, sublicensable license to certain of its patent rights and know-how for up to two collaboration targets (“First Collaboration Target”

and “Second Collaboration Target”, together the “Collaboration Targets”) related to next generation T cell engager immunotherapies for the treatment of cancer.

In December 2020, the Company entered into a research collaboration and exclusive license agreement (the “Merck Agreement”), pursuant to which the Company granted Merck Sharp & Dohme Corp.

(“Merck”) an exclusive, worldwide, royalty-bearing, sublicensable license to certain of its patent rights and know-how for up to two collaboration targets (“First Collaboration Target” and “Second Collaboration Target”, together the “Collaboration Targets”) related to next generation T cell engager immunotherapies for the treatment of cancer.

In each case, once the Collaboration Targets are designated by Merck, they have the right to research, develop, make, have made, use, import, offer to sell, and sell compounds and any licensed products related thereto.

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The Merck Agreement provides that Merck is obligated to pay to the Company tiered royalty payments on a product-by-product and country-by-country basis, ranging from low single-digit to low teens percentage royalty rates on specified portions of annual net sales for licensed products under either of the Collaboration Targets that are commercialized.

Such royalties are subject to reduction, on a product-by-product and country-by-country basis, for licensed products not covered by patent claims, or that require Merck to obtain a license to obtain a license to third-party intellectual property in order to commercialize the licensed products, or that are subject to compulsory licensing.

Such royalties are subject to reduction, on a product-by-product and country-by-country basis, for licensed products not covered by patent claims, or that

Janux Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements–(Continued)

require Merck to obtain a license to obtain a license to third-party intellectual property in order to commercialize the licensed products, or that are subject to compulsory licensing.

The Merck Agreement will terminate at the end of the calendar year in which the expiration of all royalty obligations occurs for all licensed products under the agreement.

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Both parties have the right to terminate the agreement for an uncured material breach, certain illegal or unethical activities, and insolvency of the other party.

Upon expiration of the agreement but not early termination thereof, and provided all payments due under the agreement have been made, Merck’s exclusive licenses under the agreement will become fully paid-up and perpetual.

The Company recognized $ 2.5 million, $ 1.8 million, $ 5.6 million, and $ 5.8 million of revenue under the Merck Agreement for the three months ended September 30, 2023 and 2022 and nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023 , aggregate deferred revenue related to the Merck Agreement was $ 3.6 million, all of which was classified as current.

The Company did no t have an accounts receivable balance outstanding as of September 30, 2023 and December 31, 2022.

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 for the Second Collaboration Target.

The performance obligations related to the First Collaboration Target were completed as of September 30, 2023 .

As it relates to the Second Collaboration Target, the Company estimates the remaining term of the research services, over which revenue will be recognized, to be 0.9 years as of September 30, 2023 .

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

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report) and the audited financial statements and related notes thereto as of and for the year ended December 31, 2022 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC), on March 10, 2023.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.

As a result of many factors, including those factors set forth in the “Risk Factors”

section of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

You should carefully read the “Risk Factors”

section of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

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

We are an innovative clinical-stage biopharmaceutical company developing tumor-activated immunotherapies for cancer.

Our proprietary technology has enabled the development of two distinct bispecific platforms:

Tumor Activated T Cell Engagers (TRACTr) and Tumor Activated Immunomodulators (TRACIr).

The TRACTr platform produces T cell engagers (TCEs) with a tumor antigen-binding domain and a CD3 T cell binding domain, while the TRACIr platform produces bispecifics with a tumor antigen-binding domain and a costimulatory CD28 binding domain.

The goal of both platforms is to provide cancer patients with safe and effective therapeutics that direct and guide their immune system to eradicate tumors while minimizing safety concerns.

Our initial focus is on developing a novel class of TRACTr therapeutics designed to target clinically validated TCE drug targets, but overcome liabilities associated with prior generations TCEs.

While TCE therapeutics have displayed potent anti-tumor activity in hematological cancers, developing TCEs to treat solid tumors has faced challenges due to the limitations of prior TCE technologies, namely (i) on-target healthy tissue immune activation that contributes to cytokine release syndrome (CRS) and healthy tissue toxicity and (ii) poor pharmacokinetics (PK) leading to short half-life.

Our first clinical candidate, JANX007, is a prostate-specific membrane antigen or PSMA-TRACTr and is being investigated in a Phase 1 clinical trial in adult subjects with metastatic castration-resistant prostate cancer (mCRPC).

In July 2023 we announced interim clinical data for JANX007 which displayed meaningful PSA drops in-line with what has been achieved by un-masked T cell engagers, and we believe displayed a differentiated profile with regards to CRS, healthy tissue toxicities and PK, consistent with the TRACTr mechanism-of-action.

Our second clinical candidate, JANX008, is an epidermal growth factor receptor or EGFR-TRACTr and is being studied in a Phase 1 clinical trial for the treatment of multiple solid cancers including colorectal cancer, squamous cell carcinoma of the head and neck, non-small cell lung cancer, and renal cell carcinoma.

The first patient for this trial was dosed in April 2023.

We anticipate providing an update on our clinical programs in 2024.

Our TRACTr pipeline also includes a trophoblast cell surface antigen 2 or TROP2-TRACTr, which is a clinically validated anti-tumor target that is overexpressed in various cancer types, such as breast, lung, urothelial, endometrial, ovarian, prostate, pancreatic, gastric, colon, head and neck, and glioma.

We have completed TROP2-TRACTr development candidate identification.

Our TRACIr pipeline includes JANX009, which is a programmed death-ligand 1 or PD-L1-TRACIr designed for the treatment of solid tumors.

We have completed Investigational New Drug application (IND) enabling studies and manufacturing for this product candidate.

In addition to named programs, we are generating a number of unnamed TRACTr and TRACIr programs for potential future development.

We are currently assessing priorities in our preclinical pipeline.

We were incorporated in June 2017.

To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, business development, raising capital, developing and optimizing our technology platform, identifying potential product candidates, undertaking research and development for our lead programs, establishing and enhancing our intellectual property portfolio and providing general and administrative support for these operations.

All of our product candidates and research programs other than JANX007 and JANX008 are in preclinical development, and none have been approved for commercial sale.

We have never generated any revenue from product sales and have incurred net losses each year since we commenced operations.

We have funded our operations primarily with the net proceeds from the issuance of convertible promissory notes, the issuance of convertible preferred stock, the exercise of common stock options, proceeds from our initial public offering (IPO), the issuance of common stock and pre-funded common stock warrants in public and/or underwritten offerings and amounts received under a collaboration agreement with Merck Sharp & Dohme Corp.

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

Our net losses were $46.5 million and $47.0 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, we had an accumulated deficit of $157.0 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 clinical and preclinical studies and our expenditures on other research and development activities and the

timing of any revenue recognition under our collaboration agreement with Merck.

We expect our expenses and operating losses will increase substantially and that we will continue to incur significant losses for the foreseeable future as we conduct our ongoing and planned research and development activities and conduct preclinical studies and clinical trials, hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates, which will not be for many years, if ever.

Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially grants, collaborations, licenses or other similar arrangements.

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all.

Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates or to our platform technologies that we would otherwise prefer to develop and market ourselves.

Based on our current operating plan, we believe that our existing cash and cash equivalents and short-term investments, will be sufficient to meet our anticipated operating expenses and capital expenditure requirements through at least the next 12 months, following the date of this Quarterly Report and through 2027.

Our Research Collaboration with Merck

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

Merck has the right to select up to two collaboration targets (each a Collaboration Target) related to next generation T cell engager immunotherapies for the treatment of cancer.

Merck selected the first Collaboration Target upon execution of the agreement and selected the second Collaboration Target in May 2022.

Merck received an exclusive worldwide license for each selected target and intellectual property from the collaboration.

In return, we are eligible to receive up to $500.5 million per target in upfront and milestone payments, plus royalties on sales of the products derived from the collaboration.

Merck provides research funding under the collaboration.

Risks and Uncertainties

Global economic and business activities continue to face widespread macroeconomic uncertainties, including those associated with COVID-19 and other public health crises, bank failures, inflation and monetary supply shifts, recession risks and potential disruptions from the Russia-Ukraine conflict, the war in the Middle East and related sanctions.

For example, in 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of certain financial institutions.

If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.

Inflation generally affects us by increasing our salaries and fees paid to third-party contract service providers.

We have considered potential impacts arising from the risks and uncertainties as described above and have not experienced any material disruption to our operations to date.

Support Services Agreement with Avalon BioVentures, Inc.

(formerly COI Pharmaceuticals, Inc.)

In January 2021, we entered into a Support Services Agreement (the 2021 Support Services Agreement) with Avalon BioVentures, Inc.

(Avalon) that outlines the terms of services provided by Avalon to the Company, as well as the fees charged for such services.

The amounts paid to Avalon include support service fees or mark-ups of up to 5%.

The 2021 Support Services Agreement was most recently renewed in January 2023 and will continue to renew for additional one-year renewal periods until terminated by the parties.

Either party may terminate the 2021 Support Services Agreement with 30 days written notice.

Financial Operations Overview

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

We recognized $5.6 million and $5.8 million of revenue under the Merck Agreement for the nine months ended September 30, 2023 and 2022, respectively.

Research and Development

To date, our research and development expenses have related primarily to direct and indirect expenses in connection with the development of our TRACTr and TRACIr platforms, discovery efforts and preclinical and clinical development of our product candidates.

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.

Our direct research and development expenses include:

external research and development expenses incurred under agreements with CROs and consultants to conduct our preclinical and clinical studies;

license fees;

laboratory equipment, materials and supplies.

Our indirect research and development expenses include:

salaries and employee-related costs, including recruiting fees and stock-based compensation for those individuals involved in research and development efforts;

maintenance of facilities and equipment, software license fees, depreciation;

allocated facilities and equipment-related expenses, which include rent, utilities, insurance, and office supplies.

Certain research and development expenses as listed above include amounts paid to Avalon pursuant to the 2021 Support Services Agreement.

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 clinical trials and preclinical studies of product candidates due to the inherently unpredictable nature of preclinical and clinical development.

Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations.

We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential.

We will need to raise substantial additional capital in the future.

In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

General and Administrative

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions.

Other significant general and administrative expenses include facility-related costs, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities;

legal fees relating to intellectual property and corporate matters;

professional fees for accounting, tax and consulting services;

insurance costs;

and other operating costs.

Our general and administrative expenses include amounts paid to Avalon pursuant to the 2021 Support Services Agreement for certain back-office and administrative support services, including facilities support.

We anticipate that our general and administrative expenses will increase for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any of our product candidates receive marketing approval, commercialization activities.

We also anticipate increased expenses associated with operating as a public company, including expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs.

Other income consists of interest income on our cash and cash equivalents and short-term investments.

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022

Three Months Ended September 30,

(in thousands)

Collaboration revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Collaboration Revenue

Collaboration revenues were $2.5 million and $1.8 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $0.7 million was due to an increase in full-time equivalent hours incurred in the performance of research services required under the Merck Agreement.

Research and Development Expense

The following table summarizes our direct and indirect research and development expenses for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

(in thousands)

Direct costs:

Preclinical stage programs and other direct unallocated costs

Total direct costs

Indirect costs

Total research and development expenses

IND applications for JANX007 and JANX008 were cleared by the U.S.

Food and Drug Administration (FDA) in May 2022 and January 2023, respectively.

As a result, we have separated direct costs for the development of JANX007 and JANX008 from preclinical stage programs and other direct unallocated costs for the three months ended September 30, 2023 and 2022.

We will further separate direct costs related to our other programs as future IND applications are cleared by the FDA.

These changes in presentation had no effect on net loss, total research and development expenses, stockholders’

equity, or cash flows as previously reported.

Research and development expenses were $11.9 million and $13.7 million for the three months ended September 30, 2023 and 2022, respectively.

The decrease of $1.8 million was primarily due to decreases in preclinical stage programs and other direct unallocated costs of $2.0 million and direct costs related to the development of JANX008 of $0.4 million, offset by increases in direct costs related to the development of JANX007 of $0.4 million and indirect costs of $0.3 million.

The increase in indirect costs was primarily due to increases in facilities and other costs of $0.4 million and personnel costs of $0.3 million, offset by a decrease in stock-based compensation expense of $0.5 million.

General and Administrative Expense

General and administrative expenses were $6.4 million and $6.1 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $0.3 million was primarily due to increases in stock-based compensation of $0.4 million, personnel and facilities related costs of $0.3 million, offset by a decrease in consulting and professional fees of $0.4 million.

Other income was $4.2 million and $1.3 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $2.9 million was due to the impact of increases in interest rates on our debt securities, resulting in increased interest income.

Comparison of the Nine Months Ended September 30, 2023 and 2022

Nine Months Ended September 30,

(in thousands)

Collaboration revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Collaboration Revenue

Collaboration revenues were $5.6 million and $5.8 million for the nine months ended September 30, 2023 and 2022, respectively.

The decrease of $0.2 million was due to a decrease in full-time equivalent hours incurred in the performance of research services required under the Merck Agreement.

Research and Development Expense

The following table summarizes our direct and indirect research and development expenses for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

(in thousands)

Direct costs:

Preclinical stage programs and other direct unallocated costs

Total direct costs

Indirect costs

Total research and development expenses

IND applications for JANX007 and JANX008 were cleared by the FDA in May 2022 and January 2023, respectively.

As a result, we have separated direct costs for the development of JANX007 and JANX008 from preclinical stage programs and other direct unallocated costs for the nine months ended September 30, 2023 and 2022.

We will further separate direct costs related to our other programs as future IND applications are cleared by the FDA.

These changes in presentation had no effect on net loss, total research and development expenses, stockholders’

equity, or cash flows as previously reported.

Research and development expenses were $42.7 million and $38.0 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $4.7 million was primarily due to increases in indirect costs $5.0 million, direct costs related to the development of JANX007 of $1.8 million and preclinical stage programs and other direct unallocated costs of $0.5 million, offset by decreases in direct costs related to the development of JANX008 of $2.6 million.

The increase in indirect costs was primarily due to personnel costs of $2.3 million, facilities and other costs of $2.0 million and stock-based compensation expense of $0.7 million.

General and Administrative Expense

General and administrative expenses were $19.8 million and $16.6 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $3.2 million was primarily due to increases in stock-based compensation of $1.8 million and personnel and facilities related costs of $1.4 million.

Other income was $10.3 million and $1.8 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $8.5 million was due to the impact of increases in interest rates on our debt securities, resulting in increased interest income.

Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses and negative cash flows for the foreseeable future.

As of September 30, 2023, we had cash, cash equivalents, restricted cash and short-term investments of $350.5 million.

Inclusive in this amount is $0.8 million of restricted cash that is not available for current use.

In August 2022, we filed a shelf registration statement (File No.

333-266720), which was declared effective in September 2022.

The shelf registration statement provides us with the ability to offer up to $400.0 million of certain securities, including shares of our common stock, from time to time.

The specific terms of any offering under the shelf registration statement are established at the time of such offering.

In August 2022, we entered into an Open Market Sale Agreement SM (Sale Agreement) with Jefferies LLC (Jefferies) to sell shares of our common stock, from time to time, through an “at the market offering”

program having an aggregate offering price of up to $100.0 million through which Jefferies would act as sales agent.

In May 2023, we terminated the Sale Agreement.

In May 2023, we entered into an ATM Equity Offering SM Sales Agreement (New Sale Agreement) with BofA Securities, Inc.

(BofA) to sell shares of our common stock, from time to time, through an “at the market offering”

program having an aggregate offering price of up to $150.0 million through which BofA would act as sales agent.

As of September 30, 2023, $150.0 million of common stock remained available for sale under the New Sale Agreement.

In July 2023, we closed an underwritten offering of 4,153,717 shares of our common stock and pre-funded warrants to purchase 583,483 shares of common stock.

The shares of common stock were sold at a price of $12.46 per share and the pre-funded common stock warrants were sold at a price of $12.459 per pre-funded common stock warrant, resulting in gross proceeds of $59.0 million.

Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $2.5 million, resulting in net proceeds of $56.5 million.

The following summarizes our cash flows for the periods indicated:

Nine Months Ended September 30,

(in thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

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

Operating Activities

Net cash used in operating activities of $40.7 million for the nine months ended September 30, 2023 was primarily due to our net loss of $46.5 million and a change in operating assets and liabilities and other non-cash charges of $9.7 million, adjusted for $15.5 million of stock-based compensation expense.

Net cash used in operating activities of $31.0 million for the nine months ended September 30, 2022 was primarily due to our net loss of $47.0 million, adjusted for $13.0 million of stock-based compensation expense and a change in operating assets and liabilities and other non-cash charges of $3.0 million.

Investing Activities

Net cash used in investing activities of $52.3 million for the nine months ended September 30, 2023 was primarily due to $51.0 million of net purchases of short-term investments and by our purchase of property and equipment, primarily consisting of laboratory equipment of $1.3 million.

Net cash provided by investing activities of $59.9 million for the nine months ended September 30, 2022 was primarily due to $64.3 million of net maturities of short-term investments offset by our purchase of property and equipment, primarily consisting of laboratory equipment of $4.4 million.

Financing Activities

Net cash provided by financing activities of $58.7 million for the nine months ended September 30, 2023 was primarily due to proceeds from the issuance of common stock and pre-funded common stock warrants, net of issuance costs, of $56.5 million, and exercises of common stock options and from shares issued under the employee stock purchase plan (ESPP) of $2.2 million.

Net cash provided by financing activities of $0.3 million for the nine months ended September 30, 2022 was primarily due to proceeds from shares issued under our ESPP.

Funding Requirements

However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.

Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

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 clinical trials for JANX007 and JANX008;

the number and characteristics of clinical programs that we pursue;

the outcome, timing and costs of seeking FDA, European Commission and any other comparable regulatory approvals for any future drug candidates;

the costs of manufacturing our product candidates;

the costs associated with hiring additional personnel and consultants as our preclinical, manufacturing and clinical activities increase;

the receipt of marketing approval and revenue received from any commercial sales of any of our product candidates, if approved;

the cost of commercialization activities for any of our product candidates, if approved, including marketing, sales and distribution costs;

the ability to establish and maintain strategic collaboration, licensing or other arrangements and the financial terms of such agreements;

the extent to which we in-license or acquire other products and technologies;

the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

our implementation of additional internal systems and infrastructure, including operational, financial and management information systems;

our costs associated with expanding our facilities or building out our laboratory space;

the effects of the disruptions to and volatility in the credit and financial markets in the United States and worldwide from COVID-19 or other epidemics;

the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potentially grants, collaborations, licenses or other similar arrangements.

To the extent that we raise additional capital through the sale of equity or

convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.

Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock.

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 and Commitments

In April 2021, we entered into a cell line license agreement (Cell Line License Agreement) with WuXi Biologics (Hong Kong) Limited (WuXi Biologics).

According to the terms of the Cell Line License Agreement, if we do not engage WuXi Biologics or its affiliates to manufacture the therapeutic products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (WuXi Biologics Licensed Products) for our commercial supplies, we are required to make royalty payments to WuXi Biologics in an amount equal to a low single-digit percentage of specified portions of net sales of WuXi Biologics Licensed Products manufactured by a third-party manufacturer.

We have the right (but not the obligation) to buy out our remaining royalty obligations with respect to each WuXi Biologics Licensed Product by paying WuXi Biologics a one-time payment in an amount ranging from low single digit million dollars to a maximum of $15.0 million (Buyout Option).

The royalty obligations will remain in effect during the term of the Cell Line License Agreement so long as we have not exercised the Buyout Option.

See the section within Item 1 of Part I, “Notes to Condensed Financial Statements —

Note 3 —

Commitments and Contingencies”

of this Quarterly Report for additional information.

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 commenced in July 2022.

See the section within Item 1 of Part I, “Notes to Condensed Financial Statements —

Note 3 —

Commitments and Contingencies”

of this Quarterly Report for additional information.

We enter into contracts in the normal course of business with various third parties for preclinical and clinical 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

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

generally accepted accounting principles (GAAP).

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 estimates to complete the performance obligations and the estimated transaction price for collaboration revenues, accruals for research and development expenses and estimates used in valuing our equity awards for stock-based compensation expense.

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.

Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles.

For a description of our critical accounting policies, see Item 1 of Part I, “Notes to Condensed Financial Statements —

Note 1 —

Organization and Summary of Significant Accounting Policies”

of this Quarterly Report and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations —

Critical Accounting Policies and Estimates”

contained in our Annual Report on Form 10-K, filed with the SEC on March 10, 2023.

There have not been any material changes to the critical accounting policies discussed therein during the three months ended September 30, 2023.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable to a smaller reporting company.

The Company recognized $ 1.3 million and $ 2.0 million of revenue under the Merck Agreement for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 , aggregate deferred revenue related to the Merck Agreement was $ 1.0 million, all of which was classified as current.

The Company had $ 0.5 million and $ 0 of accounts receivable outstanding as of March 31, 2024 and December 31, 2023, respectively.

The performance obligations related to the First Collaboration Target were completed as of March 31, 2024 .

As it relates to the Second Collaboration Target, the Company estimates the remaining term of the research services, over which revenue will be recognized, to be 0.4 years as of March 31, 2024 .

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