What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-10 · 257 added, 306 removed, 374 unchanged (60% of the section changed)

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2022 and 2021

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2023 and 2022

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2023 and 2022

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022

Notes to Condensed Consolidated Financial Statements

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(In thousands, except share and per share data)

September 30,

Current assets:

Cash and cash equivalents

Marketable debt securities

Marketable securities

Prepaid expenses and other current assets

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5,000,000 shares authorized

as of September 30, 2022 and December 31, 2021;

as of March 31, 2023 and December 31, 2022;

no shares issued and

outstanding as of September 30, 2022 and December 31, 2021

outstanding as of March 31, 2023 and December 31, 2022

Common stock, $ 0.001 par value per share;

115,000,000 shares

authorized as of September 30, 2022 and December 31, 2021;

43,269,200 shares and 17,710,450 shares issued and outstanding as of

September 30, 2022 and December 31, 2021, respectively

authorized as of March 31, 2023 and December 31, 2022;

43,269,200 shares issued and outstanding as of

March 31, 2023 and December 31, 2022

Additional paid-in capital

7 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses:

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Comprehensive loss:

Other comprehensive loss:

Unrealized gain (loss) on marketable debt securities

Total other comprehensive income (loss)

Other comprehensive gain:

Unrealized gain on marketable securities

Total other comprehensive gain

Total comprehensive loss

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Stock-based compensation expense

Unrealized gain on marketable securities

Balances as of March 31, 2023

Stock-based compensation expense

Unrealized gain on marketable debt securities

Balances as of June 30, 2022

Stock-based compensation expense

Issuance of Common Stock, net

Unrealized gain on marketable debt securities

Balances as of September 30, 2022

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

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’

(In thousands, except share data)

Comprehensive

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Balances as of March 31, 2022

Stock-based compensation expense

Balances as of June 30, 2021

Stock-based compensation expense

Issuance of Common Stock, net

Unrealized gain on marketable debt securities

Balances as of September 30, 2021

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

1 unchanged sentence

Stock-based compensation expense

Loss on disposal of fixed asset

Non-cash lease expense

Depreciation expense

Amortization of premium on marketable debt securities

Amortization of premium on marketable securities

Changes in operating assets and liabilities:

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Accrued expenses

Right-of-use assets

Operating lease liabilities

Net cash used in operating activities:

Cash flows from investing activities:

Purchase of property and equipment

Purchase of marketable debt securities

Maturities and sales of marketable debt securities

Net cash (used in)/provided by investing activities

Net cash provided by investing activities

Cash flows from financing activities:

Proceeds from issuance of equity securities, net of issuance costs

Net cash provided by financing activities

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Supplemental disclosure of non-cash investing and financing activities:

Property and equipment included in accounts payable and accrued expenses

Issuance costs included in accounts payable and accrued expenses

Purchases of property and equipment included in accounts payable and accrued expenses

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

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or “Larimar”), is a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using its novel cell penetrating peptide technology platform.

Larimar's lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver human frataxin ("FXN"), an essential protein, to the mitochondria of patients with Friedreich’s ataxia.

Friedreich’s ataxia is a rare, progressive and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality.

In May 2021, Larimar reported positive topline data from its Phase 1 Friedreich’s ataxia, ("FA") program after completing dosing of the single ascending dose ("SAD") trial in December 2020 and of the multiple ascending dose ("MAD") trial in March 2021.

Also in May 2021, the United States Food and Drug Administration ("FDA") placed a clinical hold on the Company's CTI-1601 clinical program after the Company notified the agency of mortalities at the highest dose levels of the 26-week non-human primate toxicology study that was designed to support extended dosing of patients with CTI-1601.

FA is a rare, progressive and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality.

In May 2021, Larimar reported positive top-line data from its Phase 1 FA program after completing dosing of the single ascending dose ("SAD") trial in December 2020 and of the multiple ascending dose ("MAD") trial in March 2021.

Also in May 2021, the U.S.

Food and Drug Administration ("FDA") placed a clinical hold on the Company's CTI-1601 clinical program after the Company notified the agency of mortalities at the highest dose levels of a 26-week non-human primate toxicology study that was designed to support extended dosing of patients with CTI-1601.

At the time the hold was placed, Larimar had no interventional clinical trials with patients enrolling or enrolled.

In February 2022, in response to the Company's complete response to the clinical hold discussed above, the FDA stated that it was maintaining the clinical hold and that additional data are needed to resolve the clinical hold.

Larimar subsequently submitted a request for an FDA Type C meeting, which was granted and was held in July 2022.

Following the Type C meeting, the Company submitted a complete response to the FDA.

In September 2022, the FDA cleared the initiation of the 25 mg cohort of a Phase 2, four-week, placebo-controlled, dose exploration trial of CTI-1601 in Friedreich’s ataxia (FA) patients.

In a written communication to Larimar, the FDA indicated it was lifting its full clinical hold on the CTI-1601 program and imposing a partial hold.

With this decision, the FDA cleared CTI-1601 for a return to the clinic and the initiation of a 25 mg dose cohort of a phase 2 dose exploration study.

The conduct of additional cohorts and/or other clinical trials of CTI-1601 in this study are subject to approval by the FDA.

Larimar does not know when, or if, the partial clinical hold will be lifted.

In February 2022, in response to the complete response the Company submitted, the FDA stated that it was maintaining the clinical hold and that additional data were needed to resolve the clinical hold.

The Company subsequently submitted a request to the FDA for a Type C meeting, which was granted and was held in July 2022.

The Company submitted a complete response to the FDA incorporating additional information requested by the FDA at the meeting as well as information on a proposed dose exploration study in August 2022.

In September 2022, following the Type C meeting and the submission of the Company's complete response, the FDA allowed the 25 mg cohort of a Phase 2, four-week, placebo-controlled, dose exploration trial of CTI-1601 in FA patients to proceed.

In connection with this decision, the FDA lifted its full clinical hold on the CTI-1601 clinical development program and imposed a partial clinical hold.

The dose exploration trial is designed to further characterize CTI-1601’s safety, PD and PK profiles to provide information about the long-term dose and dose regimen.

In May, 2023, Larimar reported preliminary top-line data from the 25 mg cohort of its Phase 2 four-week, placebo controlled dose exploration trial of CTI-1601 in FA patients and announced that it had submitted this data to the FDA.

Larimar has a meeting scheduled with the Agency later this quarter to discuss the information needed to gain clearance to initiate a 50 mg cohort in the Phase 2 trial.

Larimar expects to provide an update on the next steps for the CTI-1601 program in the third quarter of 2023, after it has received feedback from the upcoming FDA meeting.

The Company is subject to risks and uncertainties common to pre-commercial companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with governmental regulations, failure to secure regulatory approval for its drug candidates or any other product candidates and the ability to secure additional capital to fund its operations.

Drug candidates currently under development will require extensive non-clinical and clinical testing and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities.

Even if our drug development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

In late 2019, an outbreak of a novel strain of the Coronavirus 2019 Disease (COVID-19) was identified and infections have been found in a number of countries around the world, including the United States.

In 2020, the pandemic resulted in a four-month temporary stoppage of the Company’s CTI-1601Phase 1 clinical trials in patients with Friedreich’s ataxia.

Both of the Company's SAD and MAD clinical trials were completed in 2021.

In the future, the COVID-19 pandemic and responsive measures thereto may result in negative impacts on the Company, including possible delays in our clinical and regulatory activities.

We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to materially adversely affect our business, financial condition, results of operations, and prospects.

Product candidates currently under development will require extensive non-clinical and clinical testing and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities.

Even if the Company's drug development efforts are successful, it is uncertain when, if ever, it will realize significant revenue from product sales.

Basis of Presentation

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All intercompany balances and transactions have been eliminated.

The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP.

Going Concern Assessment

The accompanying condensed consolidated financial statements have been prepared in conformity with Generally Accepted Accounting Principles ("GAAP").

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

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

and 2022, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

However, the Company believes that the disclosures are adequate to make the information presented not misleading.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2023.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of March 31, 2023, condensed consolidated results of operations for the three months ended March 31, 2023 and condensed consolidated statement of cash flows for the three months ended March 31, 2023 have been made.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023 .

Liquidity and Capital Resources

The Company’s condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Since its inception, the Company has incurred significant recurring operating losses and negative cash flows from operations.

The Company has incurred net losses of $ 25.9 million and $ 41.5 million for the nine months ended September 30, 2022 and 2021, respectively.

In addition, as of September 30, 2022, the Company had an accumulated deficit of $ 142.2 million .

The Company has incurred net losses of $ 6.5 million and $ 8.9 million for the three months ended March 31, 2023 and 2022, respectively.

In addition, as of March 31, 2023, the Company had an accumulated deficit of $ 158.1 million .

The Company expects to continue to generate operating losses for the foreseeable future.

As of September 30, 2022, the Company had approximately $ 124.7 million of cash, cash equivalents and marketable debt securities available for use to fund its operations and capital requirements.

The Company has funded its operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, restricted cash, cash equivalents and marketable debt securities upon the merger with Zafgen, Inc.

and prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

As of March 31, 2023, the Company had approximately $ 111.5 million of cash and cash equivalents available for use to fund its operations and capital requirements.

The Company has funded its operations to date primarily with proceeds from sales of common stock and proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, marketable securities and restricted cash upon the merger with Zafgen, Inc.

("Zafgen") and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

In accordance with Accounting Standards Update (“ASU”) No.

2014-15, " Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern ", the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

As of the issuance date of these condensed consolidated financial statements, the Company expects its cash, cash equivalents and marketable debt securities will be sufficient to fund its forecasted operating expenses and capital expenditure requirements, for at least twelve months from the issuance of these financial statements.

If the timing of our clinical assumptions were delayed or if there were other forecasted assumption changes that negatively impact our operating plan, the Company could reduce expenditures in order to further extend cash resources.

As of the issuance date of these condensed consolidated financial statements, the Company expects its cash and cash equivalents will be sufficient to fund its forecasted operating expenses and capital expenditure requirements, for at least twelve months from the issuance of these condensed consolidated financial statements.

If the timing of the Company's clinical assumptions are delayed or if there are other forecasted assumption changes that negatively impact its operating plan, the Company could reduce expenditures in order to further extend cash resources.

The Company has not yet commercialized any products and does not expect to generate revenue from the commercial sale of any products for several years, if at all.

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The Company could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and it may be required to relinquish rights to some of its technologies or product candidates or otherwise agree to terms unfavorable to it, any of which may have a material adverse effect on the Company's business, operating results and prospects.

In addition, geopolitical unrest, the impact of the COVID-19 pandemic and/or the potential impact of other health crises on the global financial markets may reduce the Company's ability to access capital, which could negatively affect its liquidity and ability to continue as a going concern.

In addition, geopolitical tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, bank instability and the ability of the U.S.

government to manage federal debt limits as well as the potential impact of other health crises on the global financial markets may reduce the Company's ability to access capital, which could negatively affect its liquidity and ability to continue as a going concern.

If the Company is unable to obtain sufficient funding when needed and/or on acceptable terms, the Company may be required to significantly curtail, delay or discontinue one or more of its research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion or pre commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

However, the Company believes that the disclosures are adequate to make the information presented not misleading.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2022.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of September 30, 2022, condensed consolidated results of operations for the three and nine months ended September 30, 2022 and condensed consolidated statement of cash flows for the nine months ended September 30, 2022 have been made.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022 .

Use of Estimates

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Prior to May 28, 2020, the Company had been a private company and lacked company-specific historical and implied volatility information for its common stock.

Therefore, the Company estimates its expected common stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until it has adequate historical data regarding the volatility of its own traded stock price.

Prior to January 1, 2023, the Company estimated its expected common stock price volatility solely based on the historical volatility of publicly traded peer companies.

Beginning on January 1, 2023, based on the availability of sufficient historical trading data of the Company's own common stock on the Nasdaq Global Market was now available to calculate accurately its volatility, the Company began blending its volatility starting from June 2020 (following its merger with Zafgen in 2020) to the date of each stock-based award, and weighing the volatility of its peer group for the amount of time from May 31, 2020 backwards so that the blended volatility equals the expected term of the related stock-based award.

The expected term of the Company’s stock options has been determined utilizing the “simplified”

method for awards that qualify as “plain-vanilla”

method for awards th at qualify as “plain-vanilla”

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield considers the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

The expected dividend yield considers the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Net Loss Per Share

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Basic shares outstanding includes the weighted average effect of the Company’s prefunded warrants issued in June 2020, the exercise of which requires little or no consideration for the delivery of shares of common stock.

Basic and diluted weighted average shares of common stock outstanding for the three and nine months ended September 30, 2022 and 2021 includes the weighted average effect of 628,403 prefunded warrants for the purchase of shares of common stock, for which the remaining unfunded exercise price is $ 0.01 per share.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares, including potentially dilutive common shares assuming the dilutive effect of outstanding stock options and unvested restricted common shares, as determined using the treasury stock method.

Basic and diluted weighted average shares of common stock outstanding for the three months ended March 31, 2023 and 2022 includes the weighted average effect of 628,403 prefunded warrants for the purchase of shares of common stock, for which the remaining unfunded exercise price is $ 0.01 per share.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares, including potentially dilutive common shares assuming the dilutive effect of outstanding stock options, outstanding restricted stock units, and unvested restricted common shares, as determined using the treasury stock method.

For periods in which the Company has reported net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is antidilutive.

The Company excluded 3,136,776 and 2,545,962 common stock equivalents outstanding as of September 30, 2022 and 2021, respectively, from the computation of diluted net loss per share for the three and nine months ended September 30, 2022 and 2021 because they had an anti-dilutive impact due to the net loss incurred for the periods presented.

The Company excluded 4,974,521 and 3,078,511 common stock equivalents outstanding as of March 31, 2023 and 2022, respectively, from the computation of diluted net loss per share for the three months ended March 31, 2023 and 2022 because they had an anti-dilutive impact due to the net loss incurred for the periods presented.

Recently Issued and Adopted Accounting Pronouncements

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Fair Value Measurements

The Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 are measured in accordance with the standards of ASC 820, Fair Value Measurements and Disclosures , which establishes a three-level valuation hierarchy for measuring fair value and expands financial statement disclosures about fair value measurements.

The Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 are measured in accordance with the standards of ASC 820, " Fair Value Measurements and Disclosures" , which establishes a three-level valuation hierarchy for measuring fair value and expands financial statement disclosures about fair value measurements.

The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date.

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Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s financial instruments consist primarily of cash, cash equivalents, marketable debt securities, accounts payable and accrued liabilities.

For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of September 30, 2022 and December 31, 2021 were considered representative of their fair values due to their short term to maturity.

The following tables summarize the Company’s cash equivalents and marketable debt securities as of September 30, 2022 and cash equivalents as of December 31, 2021:

The Company’s financial instruments consist primarily of cash, cash equivalents, marketable securities, accounts payable and accrued liabilities.

For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of March 31, 2023 and December 31, 2022 were considered representative of their fair values due to their short term to maturity.

The following tables summarize the Company’s cash equivalents as of March 31, 2023 and its cash equivalents and marketable securities as of December 31, 2022 (The Company had no marketable securities as of March 31, 2023):

(in thousands)

September 30, 2022

March 31, 2023

Cash equivalents:

Money market funds

Money market funds invested in government securities

Total cash equivalents

Marketable debt securities:

Government and agency securities

Total marketable debt securities

Total cash equivalents and marketable debt securities

December 31, 2022

Cash equivalents:

Money market funds

Commercial paper

Corporate bonds

Money market funds invested in government securities

Total cash equivalents

The accrued interest receivable related to the Company’s investments was $ 0.2 million as of September 30, 2022 and is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

There was no accrued interest receivable and December 31, 2021.

Marketable securities:

U.S Government and agency securities

Total marketable securities

Total cash equivalents and marketable securities

The accrued interest receivable related to the Company’s investments was $ 0.3 million and $ 0.1 million as of March 31, 2023 and December 31, 2022, respectively, and is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

The Company classifies its money market funds, which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

The Company classifies its investments in U.S.

treasury securities corporate commercial paper, and corporate debt securities as Level 2 assets within the fair value hierarchy.

treasury securities, corporate commercial paper, and corporate debt securities, if any, as Level 2 assets within the fair value hierarchy.

The fair values of these investments are estimated by taking into consideration valuations obtained from third-party pricing services.

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These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

As of September 30, 2022 and December 31, 2021, the unrealized losses for available-for-sale investments were non-credit related, and the Company does not intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized cost basis, which may be maturity.

As of September 30, 2022 and December 31, 2021, no allowances for credit losses for the Company’s investments were recorded.

During the three and nine months ended September 30, 2022 and 2021 , the Company did no t recognize any impairment losses related to investments.

Marketable debt securities

The following table summarizes the Company's marketable debt securities as of September 30, 2022 .

The Company held no marketable debt securities as of December 31, 2021.

As of March 31, 2023 , the Company had no unrealized gains or losses related to available-for-sale investments.

As of December 31, 2022, the unrealized losses for available-for-sale investments were non-credit related, and the Company does not intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized cost basis, which may be maturity.

As of March 31, 2023 and December 31, 2022 , no allowances for credit losses for the Company’s investments were recorded.

During the three months ended March 31, 2023 and 2022 , the Company did no t recognize any impairment losses related to investments.

Marketable securities

As stated above, the Company had no marketable securities as of March 31, 2023.

The following table summarizes the Company's marketable debt securities as of December 31, 2022.

(in thousands)

September 30, 2022

Government and agency securities

December 31, 2022

U.S Government and agency securities

Total marketable securities

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

September 30,

(in thousands)

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Prepaid insurance

Payroll tax receivable

Other prepaid expenses and other assets

Fixed assets, net consisted of the following:

September 30,

(in thousands)

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Accumulated depreciation

Depreciation expense during the three and nine months ended September 30, 2022 was $ 0.1 million and $ 0.2 million, respectively.

Depreciation expense during the three and nine months ended September 30, 2021 was also $ 0.1 million and $ 0.2 million, respectively.

Depreciation expense was $ 0.1 million for the three months ended March 31, 2023 and 2022, respectively.

In addition, for the three months ended March 31, 2023 and 2022 , there was less than $ 0.1 million of depreciation related to sublet assets recorded as other expense.

Accrued Expenses

September 30,

(in thousands)

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Common Stock and Prefunded Warrants

As of September 30, 2022 , the Company’s Certificate of Incorporation, as amended and restated, authorized the Company to issue up to 115,000,000 shares of $ 0.001 par value common stock, of which 43,269,200 shares were issued and outstanding, and up to 5,000,000 shares of $ 0.001 par value undesignated preferred stock, of which no shares were issued or outstanding.

The voting, dividend, and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers, and preferences of the holders of the preferred stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders .

Common stockholders are entitled to receive dividends, as may be declared by the board of directors of the Company (the “Board”), if any.

No cash dividends have been declared or paid to date.

On May 28, 2020, the Company entered into a securities purchase agreement with certain accredited investors (the “Purchasers”) for the sale by the Company in a private placement of 6,105,359 shares of the Company’s common stock and prefunded warrants to purchase an aggregate of 628,403 shares of the Company’s common stock, for a price of $ 11.88 per share of the common stock and $ 11.87 per prefunded warrant.

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As partial compensation for these services, the Company issued MTS Health Partners 35,260 shares of common stock.

In July 2021, the Company sold 2,342,720 shares under an “at-the-market”

equity distribution agreement (the "Prior ATM Agreement") with Piper Sandler & Co.

for net proceeds of $ 19.9 million.

The Prior ATM Agreement was terminated in November 2022 in connection with the establishment of a new "at-the-market' offering program (see 2022 ATM Agreement below).

An aggregate of 2,354,244 shares of common stock were sold pursuant to the Prior ATM Agreement for net proceeds of $ 20.1 million

As of March 31, 2023 , the Company’s Certificate of Incorporation, as amended and restated, authorized the Company to issue up to 115,000,000 shares of $ 0.001 par value common stock, of which 43,269,200 shares were issued and outstanding, and up to 5,000,000 shares of $ 0.001 par value undesignated preferred stock, of which no shares were issued or outstanding.

The voting, dividend, and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers, and preferences of the holders of the preferred stock, if any.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders .

Common stockholders are entitled to receive dividends, as may be declared by the board of directors of the Company (the “Board”), if any.

No cash dividends have been declared or paid to date.

In September 2022, the Company sold 25,558,750 shares of common stock at a public offering price of $ 3.15 per share and received net proceeds, net of underwriting discounts and commissions and offering costs of $ 75.2 million.

2022 ATM Agreement

On November 10, 2022, the Company entered into a sales agreement (the "ATM Agreement") with an investment bank (Guggenheim Securities, LLC) in connection with the establishment of an “at-the-market”

On November 10, 2022, the Company entered into a sales agreement (the "ATM Agreement") with Guggenheim Securities, LLC in connection with the establishment of an “at-the-market”

offering program under which the Company may sell up to an aggregate of $ 50.0 million of shares of common stock (the “ATM Shares”) from time to time.

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as defined in Rule 415 under the Securities Act.

The Company pays its investment

bank a commission equal to 3.0 % of the gross proceeds of any ATM Shares sold through its investment bank under the ATM Agreement and reimburses the investment bank for certain specified expenses.

The Company pays its investment bank a commission equal to 3.0 % of the gross proceeds of any ATM Shares sold through its investment bank under the ATM Agreement and reimburses the investment bank for certain specified expenses.

The ATM Agreement contains customary representations, warranties and agreements by the Company, indemnification obligations of the Company and its investment bank, other customary obligations of the parties and termination provisions.

The Company has no obligation to sell any of the ATM Shares and may at any time suspend offers under the ATM Agreement.

The ATM Shares will be offered and sold pursuant to the Company’s Registration Statement on Form S-3, filed by the Company on November 10, 2022 (the “Registration Statement”), and the sales agreement prospectus that forms a part of such Registration Statement, following such time, if ever, as the Registration Statement is declared effective by the SEC.

The ATM Shares will be offered and sold pursuant to the Company’s Registration Statement on Form S-3, filed by the Company on November 10, 2022 and effective as of November 21, 2022 (the “Registration Statement”),

and the sales agreement prospectus that forms a part of such Registration Statement.

As of the date of this Quarterly Report on Form 10-Q, no ATM Shares have been sold pursuant to the ATM Agreement.

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However, if any award previously granted under the Prior Plans, expires, terminates, is canceled, or is forfeited for any reason after the approval of the 2020 Plan, the shares subject to that award will be added to the 2020 Plan share pool so that they can be utilized for new grants under the 2020 Plan.

The 2020 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, and cash or other stock-based awards.

ISOs may be granted only to the Company’s employees, including the Company’s officers, and the employees of the Company’s affiliates.

The 2020 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit ("RSU") awards, and cash or other stock-based awards.

ISOs may be granted only to the Company’s employees, including the Company’s officers, and the Company's employees, as well as officers and employees of its affiliates.

All other awards may be granted to the Company’s employees, including the Company’s officers, the Company’s non-employee directors and consultants, and the employees and consultants of the Company’s affiliates.

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The maximum aggregate number of shares that may be issued under the 2020 Plan is 8,000,000 over the ten-year term of the 2020 Plan.

During the nine months ended September 30, 2022 and twelve months ended December 31, 2021, respectively, options to purchase 130,516 and 56,966 shares issued under the Prior Plans were cancelled and became available for grant under the 2020 Plan.

During the twelve months ended December 31, 2022 , options to purchase 148,623 shares issued under the Prior Plans were cancelled and became available for grant under the 2020 Plan.

No such options were cancelled in the three months ended March 31, 2023.

As permitted by the 2020 Plan, the Company added 1,730,768 and 708,418 shares available for grant to the 2020 Plan on January 1, 2023 and January 1, 2022, respectively.

As of September 30, 2022 , 991,687 shares of common stock were available for grant under the 2020 Plan.

Stock Valuation

As of March 31, 2023 , 1,061,915 shares of common stock were available for grant under the 2020 Plan.

Stock Option Valuation

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees:

September 30,

Risk-free interest rate

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Stock Options

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2022 (amounts in millions, except for share and per share data):

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2023 (amounts in millions, except for share, contractual term, and per share data):

Weighted Average

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Outstanding as of December 31, 2022

Forfeited/Expired

Outstanding as of September 30, 2022

Exercisable as of September 30, 2022

Vested and expected to vest as of September 30, 2022

(a) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were "in the money" at September 30, 2022 .

Options granted

Options forfeited/expired

Outstanding as of March 31, 2023

Exercisable as of March 31, 2023

Vested and expected to vest as of March 31, 2023

Option Grants

During the nine months ended September 30, 2022 , the Company granted options to purchase 868,450 shares of common stock to employees and directors of the Company under the 2020 Plan.

The options have an exercise price equal to the closing stock price as of the grant date.

Of the 868,450 options granted in 2022, 826,950 were granted to employees and vest over four years with 25 % vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter.

The remaining 41,500 options were annual grants to the Company's directors and vest one year from the grant date.

The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 was $ 5.24 .

During the three months ended March 31, 2023 , the Company granted options to purchase 1,108,000 shares of common stock to employees under the 2020 Plan.

The options have an exercise price equal to the closing stock price as of the grant date, and vest over four years , with 25 % vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter.

The weighted-average grant date fair value of options granted under the 2020 Plan during the three months ended March 31, 2023 was $ 3.33 .

At December 31, 2022, the aggregate intrinsic value of outstanding options granted under the 2020 Plan was $ 0.3 million.

As of March 31, 2023 , total unrecognized compensation expense related to unvested stock options granted under the 2020 Plan was $ 14.1 million, which is expected to be recognized over a weighted average period of 2.49 years.

Inducement Stock Option Grant

During the three months ended March 31, 2023 , the Company granted options to purchase 180,000 shares of common stock granted outside of the 2020 Plan.

This grant was made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq listing rule 5635(c)(4).

The options issued under this inducement grant have an exercise price equal to the closing stock price as of the grant date, and vest over four years , with 25 % vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter.

The weighted-average grant date fair value of options granted under this inducement grant during the three months ended March 31, 2023 was $ 4.62 .

As of March 31, 2023 , total unrecognized compensation expense related to unvested inducement options granted was $ 0.8 million, which is expected to be recognized over a weighted average period of 3.86 years.

Restricted Stock Units

In January 2023, RSUs were granted under the 2020 Plan to the Company's employees in order to maintain retention of key employees.

The value of an RSU award is based on the Company's stock price on the date of the grant.

The shares underlying the RSUs are not issued until the RSUs vest.

Activity with respect to the Company's RSUs during the three months ended March 31, 2023 was as follows (in millions, except share, contractual term, and per share data):

Weighted Average

Term (in years)

(in millions)

Outstanding as of December 31, 2022

Restricted stock units granted

Restricted stock units forfeited

Outstanding as of March 31, 2023

Unvested and expected to vest as of March 31, 2023

Restricted Stock Unit Grants

The RSUs vest annually over four years and have a weighted-average grant date fair value of $ 4.94 per unit.

As of March 31, 2023 , total unrecognized compensation expense for RSUs was $ 3.1 million, which is expected to be recognized over a weighted-average period of 3.84 years.

Stock-Based Compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Research and development

General and administrative

As of September 30, 2022 , total unrecognized compensation expense related to unvested stock options was $ 14.0 million, which is expected to be recognized over a weighted average period of 2.36 years.

Commitments and Contingencies

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In the event that the Company disputes the validity of any of the licensed patents, the royalty rate would be tripled during such dispute.

The Company is also obligated to pay to IU a minimum annual royalty of less than $ 0.1 million per annum starting in the 2020 calendar year for the term of the agreement.

The Company is also obligated to pay to IU a minimum annual royalty of less than $ 0.1 million per annum.

In the event that the Company is required to pay IU consideration, then the Company may deduct 20 % of such IU consideration on a dollar-for-dollar basis from the consideration due to WFUHS.

In the event that the Company is required to pay WFUHS consideration, then the Company may deduct 60 % of such WFUHS consideration on a dollar-for-dollar basis from the consideration due to IU.

In October 2022, the Company initiated dosing of a phase 2 study.

Pursuant to the terms of both the WFUHS License and the IU License, the company recognized milestone expense of $ 0.3 million within research and development expenses.

Both agreements continue from their effective date through the last to expire of the licensed patents unless earlier terminated by either party in accordance with their terms.

On November 5, 2018, the Company entered into an operating lease for office and lab space in Philadelphia, Pennsylvania, effective as of January 1, 2019 , and expiring on December 31, 2020 with an option to extend the lease for two additional years.

On August 4, 2020, the Company executed the first option to extend the lease for an additional year, expiring on December 31, 2021 .

On August 9, 2021, the Company executed the remaining option to extend the lease for an additional year, expiring on December 31, 2022 .

In January 2023, the Company executed an extension of this lease for an additional year, expiring on December 31, 2023.

The Company has determined this lease extension qualifies as a short-term lease and have applied the accounting policy election to not record the related right-of-use asset and lease liabilities.

On August 8, 2019, the Company entered into an operating lease for office space in Bala Cynwyd, Pennsylvania, effective as of December 15, 2019, for a period of three years and six months with an option to extend the lease for three additional years.

Due to required tenant improvements to be completed by the landlord, the Company did not take immediate possession of the leased property and the lease term commenced on February 15, 2020 .

On March 9, 2023, the Company executed the option to extend the lease for an additional three year term and to lease additional space.

The lease term will commence on September 1, 2023 for both the extension of the current lease and the lease of additional operating space, no right of use asset or lease liability will be recorded until the lease commencement date.

On May 28, 2020, the Company acquired a non-cancellable operating lease for approximately 17,705 square feet of office space (the “Premises”).

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The initial term of the Sublease commenced on December 4, 2020 and continues until October 30, 2029 .

In connection with the Sublease, the Company evaluated the need for impairment under ASC 360 and determined there was no impairment.

In connection with the Sublease, the Company evaluated the need for impairment under ASC 360 " Impairment Testing:

Long-Lived Assets Classified as Held and Used," and determined there was no impairment.

The Sublease provided for an initial annual base rent of $ 0.8 million, which increases annually up to a maximum annual base rent of $ 1.0 million.

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The Company records sublease income on this sublease on a straight-line basis as a component of other income/(expense).

On August 4, 2020, the Company executed the first option to extend the lease for an additional year, expiring on December 31, 2021 .

On August 9, 2021, the Company executed the remaining option to extend the lease for an additional year, expiring on December 31, 2022 .

The Company has determined this lease extension qualifies as a short-term lease and have applied the accounting policy election to not record the related right-of-use asset and lease liabilities.

Expense arising from operating leases was $ 0.1 million and $ 0.2 million during the three and nine months ended September 30, 2022 and also $ 0.1 million and $ 0.2 million during the three and nine months ended September 30, 2021, respectively.

For operating leases, the weighted-average remaining lease term for leases at September 30, 2022 and December 31, 2021 was 7.0 and 7.6 years, respectively.

For operating leases, the weighted average discount rate for leases at September 30, 2022 and December 31, 2021 was 11.0 %.

Expense arising from operating leases was $ 0.1 million during the three months ended March 31, 2023 and 2022, respectively.

For operating leases, the weighted-average remaining lease term for leases at March 31, 2023 and December 31, 2022 was 6.5 and 6.8 years, respectively.

For operating leases, the weighted average discount rate for leases at March 31, 2023 and December 31, 2022 was 11.0 %.

The Company has not entered into any financing leases.

Maturities of lease liabilities due under these lease agreements as of September 30, 2022 are as follows:

Maturities of lease liabilities due under these lease agreements as of March 31, 2023 are as follows:

(in thousands)

Three months ending December 31, 2022

Nine months ending December 31, 2023

Year ended December 31, 2024

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The Company is not currently a party to any litigation, nor is management aware of any pending or threatened litigation against the Company, that it believes would materially affect the Company's business, operating results, financial condition or cash flows.

Related Party Transactions

In November 2016, the Company entered into a consulting agreement with Mark Payne, M.D (the “Consulting Engagement”).

Payne was a director of Chondrial Therapeutics, Inc.

("Chondrial") at that time.

Chondrial was the name of the Company prior to its merger with Zafgen in May 2020.

Payne was, and continues to be, a full-time employee of IU and one of the inventors of the licensed IU intellectual property, and as such is entitled to a certain share of the revenues received by IU under the IU License.

Pursuant to the terms of his consulting agreement the Company agreed to pay Dr.

Payne $ 0.1 million per year over the term of the agreement and granted to Dr.

Payne 123,853 restricted Common Units in Chondrial Holdings, LLC, the sole investor in Chondrial .

On November 30, 2016, 30 % immediately vested and was associated with Chondrial Therapeutics IP, LLC (“IP LLC”) becoming a subsidiary of Holdings, which was subsequently contributed to the Company on December 31, 2018.

The remaining 70 % vested ratably over 48 months beginning on December 1, 2016 and were fully vested as of December 31, 2020.

The consulting agreement had a four-year term, subject to earlier termination.

On November 30, 2020, the Company entered into a 1 -month extension of the Consulting Engagement, expiring on December 31, 2020 and on January 1, 2021, the Company entered into a new consulting agreement with Dr.

Payne which extended the term of the Consulting Engagement for a four-year term beginning on January 1, 2021.

During the three and nine months ended September 30, 2022 and 2021 the Company recognized less than $ 0.1 million and $ 0.1 million, respectively, related to this consulting agreement, recorded as research and development expense in the Condensed Consolidated Statements of Operations.

During 2021, the Company purchased a piece of laboratory equipment and lab supplies for a cumulative $ 0.1 million from a supplier of which one of the Company's directors is also a current director.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 25, 2022 ("2021 Annual Report").

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations 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 14, 2023 ("the 2022 Annual Report").

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, includes forward-looking statements that involve risks, uncertainties, and assumptions.

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You should read the “Risk Factors”

section included in our 2021 Annual Report and our subsequently filed Quarterly Reports on Form 10-Q in addition to the "Risk Factors" and “Cautionary Note Regarding Forward-Looking Statements”

section included in our 2022 Annual Report, in addition to the "Risk Factors" and “Cautionary Note Regarding Forward-Looking Statements”

sections of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide technology platform.

Our lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver human frataxin (“FXN”), an essential protein, to the mitochondria of patients with Friedreich’s ataxia ("FA").

FA is a rare, progressive, and fatal disease in which patients are unable to produce enough FXN due to a genetic abnormality.

There is currently no effective therapy for FA.

We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide ("CPP") technology platform.

Our lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver frataxin ("FXN"), an essential protein, to the mitochondria of patients with FA.

FA is a rare, progressive, and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality.

Currently, there are no treatment options that address the core deficit of FA, low levels of FXN.

CTI-1601 represents the first potential therapy designed to increase FXN levels in patients with FA.

We have completed two Phase 1 clinical trials in patients with FA.

We have received an orphan drug designation, fast track designation and rare pediatric disease designation, from the U.S.

Food and Drug Administration (the "FDA") for CTI‑1601.

In addition, we received orphan drug designation for CTI-1601 from the European Commission and a Priority Medicines ("PRIME") designation from the European Medicines Agency ("EMA").

The receipt of such designations or positive opinions may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA or EMA procedures and does not assure ultimate approval by the FDA or EMA.

Our cell penetrating peptide technology platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases.

We have also received an orphan drug designation, fast track designation and rare pediatric disease designation, from the FDA for CTI‑1601.

In addition, we received orphan designation for CTI-1601 from the European Commission and a Priority Medicines ("PRIME") designation from the EMA.

Food and Drug Administration, ("FDA") or the European Medicines Agency, ("EMA").

We believe that our CPP platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases.

We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity.

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CTI-1601 Program Update

On May 20, 2021 we announced that we had received an EMA PRIME designation for CTI-1601 in FA.

On May 20, 2021 we announced that we had received a PRIME designation for CTI-1601 in FA.

Through PRIME, the EMA offers early and proactive support to medicine developers to optimize the generation of robust data on a medicine’s benefits and risks and enable accelerated assessment of medicines applications so that these medicines can reach patients earlier.

The PRIME designation was based on both pre-clinical data as well as tolerability data from the CTI-1601 Phase 1 program in patients with FA.

In May 2021, we reported positive topline data from our Phase 1 FA program after completing dosing of the single ascending dose ("SAD") trial in December 2020 and of the multiple ascending dose ("MAD") trial in March 2021.

In May 2021, we reported positive top-line data from our Phase 1 FA program after completing dosing of the single ascending dose ("SAD") trial in December 2020 and of the multiple ascending dose ("MAD") trial in March 2021.

Data from these trials demonstrate proof-of-concept by showing that daily subcutaneous injections of CTI-1601 for up to 13 days resulted in dose-dependent increases in FXN levels from baseline compared to placebo in all evaluated tissues (buccal cells, skin, and platelets).

FXN levels achieved in peripheral tissues (buccal cells) following daily 50 mg and 100 mg subcutaneous injections of CTI-1601 were at or in excess of FXN levels that would be expected in phenotypically normal heterozygous carriers.

There were no serious adverse events ("SAEs") associated with either the MAD or SAD trials.

Also in May 2021, the FDA placed a clinical hold on our CTI-1601 clinical program after we notified the agency of mortalities at the highest dose levels of the 26-week non-human primate toxicology study that was designed to support extended dosing of patients with CTI-1601.

There were no serious adverse events associated with either the MAD or SAD trials.

Also in May 2021, the FDA placed a clinical hold on our CTI-1601 clinical program after we notified the agency of mortalities at the highest dose levels of a 26-week NHP toxicology study that was designed to support extended dosing of patients with CTI-1601.

At the time the hold was placed, we had no interventional clinical trials with patients enrolling or enrolled.

In February 2022, in response to the complete response we submitted to the FDA, the FDA stated that it was maintaining the clinical hold and that additional data are needed to resolve the clinical hold.

In February 2022, in response to the complete response we submitted to the FDA, the FDA stated that it was maintaining the clinical hold and that additional data were needed to resolve the clinical hold.

We subsequently submitted a request to the FDA for a Type C meeting, which was granted and was held in July 2022.

We submitted a complete response incorporating additional information requested by the FDA at the meeting as well as information on the proposed study in August 2022.

In September 2022, following the Type C meeting and the submission of our complete response, the FDA cleared the initiation of the 25 mg cohort of a Phase 2, four-week, placebo-controlled, dose exploration trial of CTI-1601 in Friedreich’s ataxia (FA) patients.

In connection therewith, the FDA lifted its full clinical hold on the CTI-1601 program and imposed a partial clinical hold.

This trial is designed to further characterize CTI-1601’s safety and PD and PK profiles to provide information about the preferred long-term dose and dose regimen.

We have since initiated the Phase 2 dose exploration trial, with top-line data expected in the second half of 2023.

In connection with the FDA’s partial clinical hold, the FDA will review the data from the 25 mg cohort prior to our being authorized to initiate a second cohort and/or other clinical trials.

Larimar does not know when, or if the partial clinical hold will be lifted.

In connection with this decision, the FDA lifted its full clinical hold on the CTI-1601 clinical development program and imposed a partial clinical hold.

The dose exploration trial is designed to further characterize CTI-1601’s safety, PD and PK profiles to provide information about the long-term dose and dose regimen.

In May, 2023, we reported preliminary top-line data from the 25 mg cohort of our Phase 2 four-week, placebo controlled dose exploration trial of CTI-1601 in FA patients.

Safety data indicate that repeated subcutaneous injections of 25 mg CTI-1601 were generally well tolerated when administered daily for 14 days and then every-other-day thereafter until day 28.

Daily subcutaneous injections of 25 mg CTI-1601 for 14 days led to increases in frataxin levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells).

During the course of our interactions with FDA, the Agency requested unblinded data from the trial which we submitted to the Agency.

We have submitted the unblinded data to FDA and we have a meeting scheduled with the Agency for later this quarter to discuss the information needed to gain clearance to initiate a 50 mg cohort in the Phase 2 trial.

We expect to provide an update on the next steps for the CTI-1601 program in the third quarter of 2023, after we have received feedback from the upcoming FDA meeting.

Financing Activities

We have funded our operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, restricted cash, cash equivalents and marketable debt securities upon the merger with Zafgen, Inc.

and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

In August 2020, we entered into an Equity Distribution Agreement ("the Prior ATM Agreement") with an investment bank in connection with the establishment of an “at-the-market”

offering program providing for the sale of up to an aggregate of 50,000,000 of shares of our common stock from time to time through the investment bank as sales agent.

In July 2021, we sold 2,342,720 shares pursuant to the Prior ATM Agreement for net proceeds of $19.9 million, after issuance costs.

The Prior ATM Agreement was terminated in November 2022 in connection with the establishment of a new "at-the-market" offering program.

We have funded our operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, marketable securities and restricted cash upon the merger with Zafgen, Inc.

("Zafgen") and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

In September 2022, we sold 25,558,750 shares of common stock in an underwritten offering for net proceeds of $75.2 million, after issuance costs.

In November 2022, we entered into a Sales Agreement (the "ATM Agreement") with an investment bank in connection with the establishment of an “at-the-market”

offering program providing for the sale of up to an aggregate of $50.0 million of shares of our common stock from time to time through this investment bank as sales agent.

In September 2022, the Company sold 25,558,750 shares of common stock, for a price of $3.15 per share, in an underwritten offering for net proceeds of $75.2 million.

COVID-19 Update

In 2020, the pandemic resulted in a four-month temporary stoppage of the Company’s CTI-1601Phase 1 clinical trials in patients with Friedreich’s ataxia.

Both of the Company's SAD and MAD clinical trials were completed in 2021.

In the future, the COVID-19 pandemic and responsive measures thereto may result in negative impacts on the Company, including possible delays in our clinical and regulatory activities.

Financial Operations Overview

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allocated facility-related costs.

Costs for certain activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators.

Research and development activities are central to our business.

We expect to increase our investment in research and development in order to advance CTI-1601 through additional clinical trials.

As a result, we expect that our research and development expenses will increase in the foreseeable future as we pursue clinical development of CTI-1601 and/or any other product candidates we develop.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of CTI-1601 or any other product candidates we develop.

We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates.

The duration, costs, and timing of clinical trials and development of CTI-1601 or any other product candidates we develop will depend on a variety of factors, including:

the scope, rate of progress and expense of clinical trials and other research and development activities, including the ongoing impact of COVID-19 on these activities;

the scope, rate of progress and expense of clinical trials and other research and development activities;

clinical trial results;

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the timing and receipt of any regulatory approvals;

the influence of the FDA’s or other regulatory authority’s on our clinical trial design and timing;

establishing manufacturing capabilities or making arrangements with third-party manufacturers and risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;

the impact of the on-going COVID-19 pandemic including the variants of the original virus that may prove more contagious and deadly;

the influence of the FDA or other regulatory authorities on our clinical trial design and timing;

establishing manufacturing capabilities or making arrangements with third-party manufacturers and risks involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;

liquidity constraints, failure and instability of the U.S.

and international banking systems, including possible impacts of a default by the U.S.

government on its debt obligation, which could have broad macroeconomic effects that could, among other things, disrupt access to capital markets and deepen recessionary conditions;

our ability to obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates;

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General and Administrative Expenses

General and administrative expenses (consisting primarily of personnel costs, composed of salaries, related benefits and stock-based compensation), costs related to our executive, finance, information technology, and costs related to other administrative functions.

related to other administrative functions.

General and administrative expenses also include insurance expenses and professional fees for auditing, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property.

We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve and scale our operational, financial, commercial and management systems.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP.

The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures.

We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our condensed consolidated financial statements and, therefore, consider these to be our critical accounting policies.

We evaluate these estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different assumptions and conditions.

Research and Development Expenses

As part of the process of preparing our condensed consolidated financial statements, we are required to estimate our accrued research and development expenses and evaluate payments made to vendors in advance of actual work activities being performed.

This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs.

The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance sheet date in our condensed consolidated financial statements based on facts and circumstances known to us at that time.

Examples of estimated accrued research and development expenses include fees paid to:

CROs, in connection with clinical trials;

vendors in connection with non-clinical development activities;

contract manufacturing organizations in connection with the production of non-clinical and clinical trial materials;

vendors related to product candidate manufacturing, development, and distribution of clinical supplies.

We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs or CMOs that conduct and manage clinical trials or manufacture clinical trial material on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense, non-clinical expense, or manufacturing activities.

Payments under some of these contracts depend on factors such as the completion of clinical trial milestones.

In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period.

In accruing CMO costs, we estimate the time period that manufacturing will be completed, the achievement of milestones and the percentage of completion of each specific CMO agreement.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us recognizing adjustments in future periods as additional information becomes available.

Stock-Based Compensation

We measure all stock-based awards granted to employees, directors and non-employee consultants based on the fair value on the date of grant using the Black-Scholes option-pricing model.

Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award.

Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method.

We account for forfeitures as they occur.

We classify stock-based compensation expense in our condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock.

Therefore, we estimate our expected common stock price volatility based on the historical volatility of publicly traded peer companies and expect to continue to do so until we have adequate historical data regarding the volatility of our own traded stock price.

The expected term of our stock options have been determined utilizing the “simplified”

method for awards that qualify as “plain-vanilla”

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

Results of Operations

Comparison of three months ended September 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

Comparison of three months ended March 31, 2023 and 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(in thousands)

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Research and development expenses

Research and development expenses for the three months ended September 30, 2022 decreased $8.4 million compared to the three months ended September 30, 2021.

The decrease in research and development expenses was primarily driven by a decrease of $6.7 million in drug manufacturing costs, a decrease of $1.0 million in nonclinical development costs, a decrease of $0.5 million in consulting expenditures, a decrease of $0.5 million in clinical expense and a decrease of $0.3 million in internal lab costs.

These decreases were partially offset by an increase of $0.4 million in personnel expense and an increase of $0.1 million in non-cash, stock-based compensation expense associated with stock option grants made in 2021 and 2022.

Research and development expenses for the three months ended March 31, 2023 decreased $1.2 million compared to the three months ended March 31, 2022.

The decrease in research and development expenses was primarily driven by a decrease of $0.7 million in nonclinical development costs (primarily related to lower process development costs), a decrease of $0.4 million in drug manufacturing costs, and a decrease of $0.1 million in clinical trial expense.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2022 increased $0.2 million compared to the three months ended September 30, 2021.

The increase in general and administrative expense was primarily driven by an increase of $0.2 million in professional fees associated with legal and accounting services and an increase of $0.2 million in personnel expense, partially offset by a decrease of $0.2 million in operational costs primarily related to insurance, technology and recruiting services.

Results of Operations

Comparison of nine months ended September 30, 2022 and 2021

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

(in thousands)

Statement of Operations Data:

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

General and administrative expenses for the three months ended March 31, 2023 were comparable to general and administrative expenses for the three months ending March 31, 2022.

Decreases in recruiting and professional service fees were offset by increases in stock-based compensation expense and other personnel-related expenses.

Other income (expense), net

Research and development expenses

Research and development expenses for the nine months ended September 30, 2022 decreased $15.1 million compared to the nine months ended September 30, 2021.

The decrease in research and development expenses was primarily driven by a decrease of $9.0 million in drug manufacturing costs, a decrease of $3.5 million in clinical trial expense, a decrease of $3.3 million in nonclinical development costs, a decrease of $0.5 million in consulting expenses and a decrease of $0.4 million in internal lab costs.

These decreases were partially offset by an increase of $0.8 million in personnel expense and an increase of $0.5 million in non-cash, stock-based compensation expense associated with stock option grants made in 2021 and 2022.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2022 decreased $0.2 million compared to the nine months ended September 30, 2021.

The decrease in general and administrative expense was primarily driven by a decrease of $0.5 million in operational costs primarily related to technology and recruiting services and a decrease of $0.4 million in professional fees primarily associated with legal and consulting expense, partially offset by an increase of $0.5 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022 and an increase of $0.2 million in personnel expense.

Other income (expense), net was $1.1 million (income) in the first quarter of 2023 compared to ($0.1) million expense in the first quarter of 2022.

The first quarter of 2023 primarily relates to interest income which increased as compared to the first quarter of 2022 due to a higher investment base and higher interest rates on that base.

Liquidity and Capital Resources

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The following table summarizes our sources and uses of cash for each of the periods presented below:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Net cash used in operating activities

Net cash (used in)/provided by investing activities

Net cash provided by investing activities

Net cash provided by financing activities

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Net cash used in operating activities

During the nine months ended September 30, 2022, operating activities used $20.9 million of cash, resulting from our net loss of $25.9 million, adjusted for noncash expenses of $5.2 million and changes in our operating assets and liabilities resulting in a source of cash of $0.1 million.

During the three months ended March 31, 2023, operating activities used $7.6 million of cash, resulting from our net loss of $6.5 million, adjusted for noncash expenses of $1.3 million and changes in our operating assets and liabilities resulting in a source of cash of $2.3 million.

Our net loss was primarily attributed to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above.

Noncash expenses are primarily stock-based compensation expense.

During the nine months ended September 30, 2021, operating activities used $34.2 million of cash, resulting from our net loss of $41.5 million, adjusted for noncash expenses of $4.2 million.

Our net loss was primarily attributable to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above.

Noncash expenses primarily include stock-based compensation expense.

For the nine months ended September 30, 2021 the increase in accrued expenses and prepaid expenses, partially offset by the paydown of accounts payable resulted in a source of cash of $3.1 million.

Net cash (used in)/provided by investing activities

During the nine months ended September 30, 2022, investing activities used $38.7 million of cash, including $61.6 million in purchases of new marketable debt securities and $0.1 million in purchases of property and equipment, partially offset by a $23.0 million increase from maturities of marketable debt securities.

During the nine months ended September 30, 2021, investing activities provided $17.7 million of cash, resulting from maturities of marketable debt securities of $26.3 million, partially offset by $8.3 million in purchases of new marketable debt securities.

Noncash expenses are primarily stock-based compensation expenses.

The change in operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses.

During the three months ended March 31, 2022, operating activities used $7.5 million of cash, resulting from our net loss of $8.9 million, adjusted for noncash expenses of $1.7 million.

Our net loss was primarily attributed to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above.

Noncash expenses primarily include stock-based compensation expenses.

The change in operating assets and liabilities was primarily due to a decrease in accrued expenses and offset by an increase in accounts payable and prepaid expenses.

Net cash provided by investing activities

During the three months ended March 31, 2023, investing activities provided $92.3 million of cash from maturities of marketable debt securities.

During the three months ended March 31, 2022, there were no investing activities.

Net cash provided by financing activities

During the nine months ended September 30, 2022, financing activities provided $75.6 million of cash from sale of common stock in an underwritten public offering, net of issuance costs.

During the nine months ended September 30, 2021 financing activities provided $19.9 million of net cash, from sale of common stock under the Prior ATM Agreement, after issuance costs.

During the three months ended March 31, 2023 and 2022 there were no financing activities.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures.

We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies.

We evaluate these estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different assumptions and conditions.

Research and Development Expense

Costs for certain research and development activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators, and accordingly, are considered an area of significant judgement and management's review of manufacturing, nonclinical and clinical expenses.

This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to

identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs.

We work with vendors and suppliers to ensure that our estimates of our research and development expenses are reasonable.

Research and development activities are central to our business.

We expect to increase our investment in research and development in order to advance CTI-1601 through additional clinical trials.

As a result, we expect that our research and development expenses will increase in the foreseeable future as we pursue clinical development of CTI-1601 and/or any other product candidates we develop.

Stock Compensation Expense

We measure all stock-based awards granted to employees, non-employee consultants and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards.

The assumptions used in our option-pricing model represent management’s best estimates.

These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, so that they are inherently subjective.

If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock.

Prior to January 1, 2023, the Company estimated its expected common stock price volatility solely based on the historical volatility of publicly traded peer companies with comparable characteristics including enterprise value, risk profiles and position within the industry.

Beginning on January 1, 2023, the Company began blending it historical data beginning in June 2020 (following its merger with Zafgen in 2020) with its historical peer group.

We regularly evaluate our peer group to assess changes in circumstances where identified companies may no longer be similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

We expect to continue to do so until we have full historical data regarding the volatility of our own traded stock price.

The expected term of our stock options has been determined utilizing the “simplified”

method for awards that qualify as “plain-vanilla”

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

The expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award.

Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method.

We account for forfeitures as they occur.

Operating Capital Requirements

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We have to date incurred net losses.

We incurred net losses of approximately $25.9 million and $41.5 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, we had an accumulated deficit of $142.2 million and cash, cash equivalents and marketable debt securities of $124.7 million, excluding restricted cash of $1.3 million.

We incurred net losses of approximately $6.5 million and $8.9 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, we had an accumulated deficit of $158.1 million and cash and cash equivalents of $111.5 million, excluding restricted cash of $1.3 million.

Losses have resulted principally from costs incurred in connection with research and development activities, and general and administrative costs associated with the development of CTI-1601 and our operations.

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expand our operational, financial, commercial and management systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company.

We believe that based on our current operating plan our cash, cash equivalents and marketable debt securities will be able fund operating expenses and capital expenditure requirements for at least the next twelve months from the filing of these financial statements with the SEC.

We believe that based on our current operating plan our cash and cash equivalents will be able to fund operating expenses and capital expenditure requirements for at least the next twelve months from the filing of these financial statements with the SEC.

If we encounter unexpected delays in our clinical trials or if there are other unanticipated changes to our operating plan from our current assumptions that negatively impact our operations, we may reduce expenditures in order to further extend our existing cash resources.

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We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

In addition, geopolitical unrest, the impact of the COVID-19 pandemic and/or the potential impact of other health crises on the global financial markets may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern.

In addition, geopolitical tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, bank instability and the ability of the U.S.

government to manage federal debt limits, as well as the potential impact of health crises on the global financial markets may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern.

If we are unable to obtain sufficient funding when needed and/or on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion or pre commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations.

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Recently Issued Accounting Pronouncements

Please read Note 2 to our condensed consolidated financial statements included in Part I of Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business.

Other Company Information

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

What changed 10-Q

Item 1. Financial Statements