What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-10 · 213 added, 170 removed, 503 unchanged (43% of the section changed)

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2023 and 2022

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2023 and 2022

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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:

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5,000,000 shares authorized

as of June 30, 2023 and December 31, 2022;

as of September 30, 2023 and December 31, 2022;

no shares issued and

outstanding as of June 30, 2023 and December 31, 2022

outstanding as of September 30, 2023 and December 31, 2022

Common stock, $ 0.001 par value per share;

115,000,000 shares

authorized as of June 30, 2023 and December 31, 2022;

43,269,200 shares issued and outstanding as of

June 30, 2023 and December 31, 2022

authorized as of September 30, 2023 and December 31, 2022;

43,905,903 and 43,269,200 shares issued and outstanding as of

September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

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(In thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses:

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Loss from operations

Other income (expense), net

Other income, net

Net loss per share, basic and diluted

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Balances as of June 30, 2023

Stock-based compensation expense

Exercise of stock options

Exercise of warrants

Unrealized loss on marketable debt securities

Balances as of September 30, 2023

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 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.

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(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

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Cash flows from financing activities:

Proceeds from issuance of equity securities, net of issuance costs

Proceeds from exercise of stock options and warrants

Net cash provided by financing activities

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

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental disclosure of non-cash investing and financing activities:

Offering costs included in accounts payable and accrued expense

Leased asset obtained in exchange for new operating lease liability

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 ("FA").

Larimar's lead product candidate, nomlabofusp (nomlabofusp is the new International Nonproprietary Name ("INN") and the United States Adopted Name ("USAN") for 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 sufficient FXN due to a genetic abnormality.

The Company has completed two phase 1 studies of CTI-1601 and the first cohort of a Phase 2 in patients with FA.

The Company has completed two phase 1 studies of nomlabofusp and the first cohort of a Phase 2 study in patients with FA.

In May 2021, after reporting positive top-line data from the Company’s Phase 1 FA program, 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.

In August 2022, the Company submitted a complete response to the clinical hold, following a Type C Meeting with the FDA, and proposed as CTI-1601’s next clinical trial a Phase 2, four-week, dose exploration study in FA patients starting at the lower dose levels tested in the Company’s Phase 1 multiple-ascending dose clinical trial.

In September 2022, the FDA lifted its full clinical hold on the CTI-1601 program and imposed a partial clinical hold.

In May 2023, the Company announced top-line data from its completed a 25 mg cohort of a Phase 2, four-week, dose exploration trial of CTI-1601 in patients with FA and provided a complete response to the FDA in June 2023, which included unblinded safety, pharmacokinetic ("PK"), and pharmacodynamic data from the Phase 2 trial’s completed 25 mg cohort.

Data from the completed 25 mg cohort (n = 13) indicated that CTI-1601 was generally well tolerated and showed increases in FXN levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells) at day 14 (the final day of daily dosing in the trial).

Food and Drug Administration (“FDA”) placed a clinical hold on the Company’s nomlabofusp clinical program after the Company notified the FDA 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 nomlabofusp.

In August 2022, the Company submitted a complete response to the clinical hold following a Type C Meeting with the FDA, and proposed as nomlabofusp's next clinical trial a Phase 2, four-week, dose exploration study in FA patients starting at the lower dose levels tested in the Company’s Phase 1 multiple-ascending dose clinical trial.

In September 2022, the FDA lifted its full clinical hold on the nomlabofusp program and imposed a partial clinical hold.

In May 2023, the Company announced top-line data from its completed 25 mg cohort of a Phase 2, four-week, dose exploration trial of nomlabofusp in patients with FA and provided a complete response to the FDA in June 2023, which included unblinded safety, pharmacokinetic ("PK"), and pharmacodynamic ("PD") data from the Phase 2 trial’s completed 25 mg cohort.

Data from the completed 25 mg cohort (n = 13) indicated that nomlabofusp was generally well tolerated and showed increases in FXN levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells) at day 14 (the final day of daily dosing in the trial).

In June 2023, the Company met with the FDA.

Following that meeting, the Company submitted a complete response to the FDA’s partial clinical hold that included unblinded safety, pharmacokinetic (“PK”) and frataxin data from the Phase 2 trial’s completed 25 mg cohort.

In July 2023, the FDA cleared the Company’s four-week, placebo-controlled, Phase 2 dose exploration trial of CTI-1601 in patients with FA to proceed to a 50 mg cohort in which participants will be dosed daily for the first 14 days, and then every other day until day 28.

Additionally, the FDA cleared for initiation the Company’s open label extension (“OLE”) trial in which participants will receive 25 mg of CTI-1601 daily.

Further dose escalation in the Phase 2 and OLE trials and the initiation of additional U.S.

clinical trials evaluating CTI-1601 are contingent on FDA review of results from the Phase 2 trial’s 50 mg cohort in accordance with a partial clinical hold.

Following that meeting, the Company submitted a complete response to the FDA’s partial clinical hold that included unblinded safety, PK and frataxin data from the Phase 2 trial’s completed 25 mg cohort.

In July 2023, the FDA cleared the Company’s four-week, placebo-controlled, Phase 2 dose exploration trial of nomlabofusp in patients with FA to proceed to a 50 mg cohort in which participants are dosed daily for the first 14 days, and then every other day until day 28.

Additionally, the FDA cleared for initiation the Company’s open label extension (“OLE”) trial in which participants are currently expected to receive 25 mg of nomlabofusp daily.

In November 2023, the Company completed enrollment and dosing of the 50 mg cohort of its Phase 2 double-blind dose exploration trial evaluating nomlabofusp for the treatment of FA.

Treatment assignment of the fully enrolled cohort of 15 participants remains blinded as they complete the follow up period.

Participants were dosed daily with nomlabofusp or placebo for the first 14 days, and then every other day until day 28.

Based on blinded Phase 2 observations during the dosing period, there were no serious adverse events for either the nomlabofusp or placebo groups.

Top-line Phase 2 safety, pharmacokinetics and frataxin data from skin and buccal cells from both the 25 mg and 50 mg cohorts are now expected in the first quarter of 2024 refined from the first half of 2024.

Initiation of additional U.S.

clinical trials or potential further dose escalation in these trials is contingent on FDA review of Phase 2 data from the 50 mg cohort due to the partial clinical hold.

In November 2023, the Company reaffirmed guidance for initiation of the OLE trial evaluating daily subcutaneous injections of 25 mg of nomlabofusp self-administered or administered by a caregiver.

Participants who complete treatment in the Phase 2 dose exploration trial, or who previously completed a prior clinical trial of nomlabofusp are potentially eligible for the OLE.

The OLE will evaluate the safety and tolerability and PK and measures of frataxin levels in peripheral tissues as well as other exploratory PD markers (lipid profiles and gene expression data) following long-term subcutaneous administration of nomlabofusp.

Clinical measures collected during the trial will be compared to a data from a synthetic control arm derived from participants in the Friedreich’s Ataxia Clinical Outcome Measures Study (FACOMS) database.

The OLE trial is expected to begin in the first quarter of 2024 with interim data expected in the fourth quarter of 2024.

The Company is subject to risks and uncertainties common to pre-commercial companies in the biotechnology industry, including, but not limited to, development and commercialization 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.

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

Product candidates 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.

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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 June 30, 2023 and for the three and six months ended June 30, 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.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2023 and for the three and nine months ended September 30, 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 and the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 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 June 30, 2023, condensed consolidated results of operations for the three and six months ended June 30, 2023 and 2022 and condensed consolidated statement of cash flows for the six months ended June 30, 2023 and 2022 have been made.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023 .

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

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, 2023, condensed consolidated results of operations for the three and nine months ended September 30, 2023 and 2022 and condensed consolidated statement of cash flows for the nine months ended September 30, 2023 and 2022 have been made.

The results of operations for the three and nine months ended September 30, 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

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

The Company has incurred net losses of $ 14.9 million and $ 17.6 million for the six months ended June 30, 2023 and 2022, respectively.

In addition, as of June 30, 2023, the Company had an accumulated deficit of $ 166.5 million .

The Company has incurred net losses of $ 24.0 million and $ 25.9 million for the nine months ended September 30, 2023 and 2022, respectively.

In addition, as of September 30, 2023, the Company had an accumulated deficit of $ 175.6 million .

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

As of June 30, 2023, the Company had approximately $ 104.2 million of cash, cash equivalents and marketable securities available for use to fund its operations and capital requirements.

As of September 30, 2023, the Company had approximately $ 95.6 million of cash, cash equivalents and marketable 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 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.

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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 these 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 securities 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.

expenditure requirements, for at least twelve months from the issuance of these condensed consolidated financial statements into the first quarter of 2025.

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 would 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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Unless and until the Company can generate substantial revenue, management continuously evaluates different strategies to obtain the required funding for future operations.

These strategies include seeking additional funding through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements, strategic partnerships with pharmaceutical and/or larger biotechnology companies, or other sources.

These strategies include seeking additional funding through a combination of public or private equity offerings, debt or royalty financings, collaborations and licensing arrangements, strategic partnerships with pharmaceutical and/or larger biotechnology companies, or other sources.

The incurrence of indebtedness would result in increased fixed payment obligations and the Company may be required to agree to certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell or license intellectual property rights, minimum required cash balances and other operating restrictions that could adversely impact the Company's ability to conduct its business.

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Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expense, the recording as prepaid expense of payments made in advance of the actual provision of goods or services, valuation of stock-based awards and valuation of leases.

Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates.

On an ongoing basis, the Company evaluates its estimates and assumptions.

Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates.

Research and Development Costs

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Research and development expenses include costs for salaries, employee benefits, subcontractors, stock-based compensation, facility-related expenses, third-party license fees, laboratory supplies, and external costs of outside vendors engaged to conduct discovery, non-clinical and clinical development activities, and clinical trials as well as to manufacture clinical trial materials, depreciation and other costs.

The Company recognizes external research and development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its service providers.

The Company recognizes external research and development

costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its service providers.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.

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Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.

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 six months ended June 30, 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.

Prior to August 11, 2023, 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.

These prefunded warrants were exercised on August 11, 2023 and the Company received cash proceeds of six thousand two hundred and eighty-four dollars.

Accordingly, subsequent to August 11, 2023 the 628,403 shares issued upon the exercise of these warrants are included in issued and outstanding common stock.

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 stock equivalents 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 (all periods since inception), 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 stock equivalents are not assumed to have been issued if their effect is antidilutive.

The Company excluded 5,129,327 and 3,130,370 common stock equivalents outstanding as of June 30, 2023 and 2022, respectively, from the computation of diluted net loss per share for the three and six months ended June 30, 2023 and 2022 because they had an anti-dilutive impact due to the net loss incurred for the periods presented.

The Company excluded 5,100,997 and 3,136,776 common stock equivalents outstanding as of September 30, 2023 and 2022, respectively, from the computation of diluted net loss per share for the three and nine months ended

September 30, 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 June 30, 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 Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 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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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 June 30, 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 and marketable securities as of June 30, 2023 and December 31, 2022.

For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of September 30, 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 and marketable securities as of September 30, 2023 and December 31, 2022.

(in thousands)

June 30, 2023

September 30, 2023

Cash equivalents:

Money market funds invested in government securities

U.S Treasury bills

Corporate bonds

Total cash equivalents

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U.S Treasury bills

Corporate bonds

Total marketable securities

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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 June 30, 2023 and December 31, 2022, respectively, and is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

The accrued interest receivable related to the Company’s investments was $ 0.2 million and $ 0.1 million as of September 30, 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 and U.S.

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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 June 30, 2023 and December 31, 2022 , no allowances for credit losses for the Company’s investments were recorded.

three and six months ended June 30, 2023 and 2022 , the Company did no t recognize any impairment losses related to investments.

As of September 30, 2023 and December 31, 2022 , no allowances for credit losses for the Company’s investments were recorded.

During the three and nine months ended September 30, 2023 and 2022 , the Company did no t recognize any impairment losses related to investments.

Marketable securities

The following table summarizes the Company's marketable securities as of June 30, 2023 and December 31, 2022.

The following table summarizes the Company's marketable securities as of September 30, 2023 and December 31, 2022.

(in thousands)

June 30, 2023

September 30, 2023

U.S Treasury bills

Corporate bonds

Total marketable securities

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Prepaid expenses and other current assets consisted of the following:

September 30,

(in thousands)

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Fixed assets, net consisted of the following:

September 30,

(in thousands)

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Accumulated depreciation

Depreciation expense was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2023 , respectively.

Depreciation expense was $ 0.1 million for the three and six months ended June 30, 2022, respectively.

In addition, for the three and six months ended June 30, 2023 , there was less than $ 0.1 million and $ 0.1 million, respectively, of depreciation related to sublet assets recorded as other expense.

For the three and six months ended June 30, 2022 , there was less than $ 0.1 million and $ 0.1 million, respectively, of depreciation related to sublet assets recorded as other expense.

Depreciation expense was $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2023 , respectively.

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

In addition, for the three and nine months ended September 30, 2023 , there was less than $ 0.1 million and $ 0.1 million, respectively, of depreciation related to sublet assets recorded as other expense.

For the three and nine months ended September 30, 2022 , there was less than $ 0.1 million and $ 0.1 million, respectively, of depreciation related to sublet assets recorded as other expense.

Accrued Expenses

September 30,

(in thousands)

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The private placement closed on June 1, 2020.

The aggregate gross proceeds for the issuance and sale of the common stock and prefunded warrants were $ 80.0 million;

transaction costs totaled $ 4.6 million and resulted in net proceeds of $ 75.4 million.

The aggregate gross proceeds for the issuance and sale of the common stock and prefunded warrants were $ 80.0 million, transaction costs totaled $ 4.6 million and resulted in net proceeds of $ 75.4 million.

The Company’s Registration Statement on Form S-3, filed with the SEC on June 26, 2020, registered the resale of 6,105,359 shares of common stock sold and the 628,403 shares of common stock underlying the prefunded warrants.

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

As of June 30, 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.

In August 2023, the 628,403 shares of prefunded warrants were exercised and the Company received cash proceeds of six thousand two hundred and eighty-four dollars .

As of September 30, 2023 , the Company’s Certificate of Incorporation, as amended and restated, authorized the Company to issue up to 115,000,000 shares of common stock, par value $ 0.001 per share, of which 43,905,903 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.

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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.

In September 2022, the Company sold 25,558,750 shares of common stock at an 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

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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 June 30, 2023 , 906,429 shares of common stock were available for grant under the 2020 Plan.

As of September 30, 2023 , 1,106,459 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 six months ended June 30, 2023 (amounts in millions, except for share, contractual term, and per share data):

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2023 (amounts in millions, except for share, contractual term, and per share data):

Weighted Average

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Options granted

Options forfeited/expired

Outstanding as of June 30, 2023

Exercisable as of June 30, 2023

Vested and expected to vest as of June 30, 2023

(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 June 30, 2023 .

Options exercised

Options forfeited/expired/exercised

Outstanding as of September 30, 2023

Exercisable as of September 30, 2023

Vested and expected to vest as of September 30, 2023

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

Option Grants

During the six months ended June 30, 2023 , the Company granted options to purchase 1,293,200 shares of common stock to employees under the 2020 Plan.

During the nine months ended September 30, 2023 , the Company granted options to purchase 1,328,400 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 six months ended June 30, 2023 was $ 3.77 .

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

As noted in the table above, the aggregate intrinsic value of outstanding options at June 30, 2023 was $ 0.1 million.

As of June 30, 2023 , total unrecognized compensation expense related to unvested stock options granted under the 2020 Plan was $ 12.8 million, which is expected to be recognized over a weighted average period of 2.38 years.

The weighted-average grant date fair value of options granted under the 2020 Plan during the nine months ended September 30, 2023 was $ 2.95 .

As of September 30, 2023 , total unrecognized compensation expense related to unvested stock options granted under the 2020 Plan was $ 10.3 million, which is expected to be recognized over a weighted average period of 2.22 years.

Inducement Stock Option Grant

During the six months ended June 30, 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).

During the nine months ended September 30, 2023 , the Company granted options to purchase 360,000 shares of common stock granted outside of the 2020 Plan.

These grants were 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 six months ended June 30, 2023 was $ 4.62 .

As of June 30, 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 3.61 years.

The weighted-average grant date fair value of options granted under this inducement grant during the nine months ended September 30, 2023 was $ 3.59 .

As of September 30, 2023 , total unrecognized compensation expense related to unvested inducement options granted was $ 1.1 million, which is expected to be recognized over a weighted average period of 3.53 years.

Restricted Stock Units

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

Activity with respect to the Company's RSUs during the six months ended June 30, 2023 was as follows (in millions, except share, contractual term, and per share data):

Activity with respect to the Company's RSUs during the nine months ended September 30, 2023 was as follows (in millions, except share, contractual term, and per share data):

Weighted Average

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Restricted stock units forfeited

Outstanding as of June 30, 2023

Unvested and expected to vest as of June 30, 2023

Outstanding as of September 30, 2023

Unvested and expected to vest as of September 30, 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 June 30, 2023 , total unrecognized compensation expense for RSUs was $ 2.9 million, which is expected to be recognized over a weighted-average period of 3.59 years.

As of September 30, 2023 , total unrecognized compensation expense for RSUs was $ 2.5 million, which is expected to be recognized over a weighted-average period of 3.34 years.

Stock-Based Compensation

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

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The Company is party to an exclusive License Agreement (the “WFUHS License”), dated November 30, 2016, as amended, with Wake Forest University Health Sciences (“WFUHS”) and an exclusive License Agreement (the “IU License”), dated November 30, 2016, as amended, with Indiana University (“IU”).

Such agreements provide for a transferable, worldwide license to certain patent rights regarding technology used by the Company with respect to the development of CTI-1601.

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

Such agreements provide for a transferable, worldwide license to certain patent rights regarding technology used by the Company with respect to the development of nomlabofusp.

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

In partial consideration for the right and license granted under these agreements, the Company will pay each of WFUHS and IU a royalty of a low single digit percentage of net sales of licensed products depending on whether there is a valid patent covering such products.

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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.

Both agreements continue from their effective date through the last date of expiration 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.

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

The lease term commenced on September 1, 2023 for the extension of the current lease and October 1, 2023 for the lease of additional office space.

In September 2023, upon the commencement of the lease extension, the Company recorded a right of use asset and lease liability of $ 0.5 million, which are reflected in these condensed consolidated financial statements.

In October 2023, upon the commencement of the lease of the additional office, the Company recorded a right of use asset and lease liability of $ 0.3 million.

This right of use asset and lease liability will be reflected in the financial statements for the year ended December 31, 2023.

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

Expense arising from operating leases was $ 0.1 million and $ 0.2 million during the three and six months ended June 30, 2023 , respectively.

Expense arising from operating leases was $ 0.1 million and $ 0.2 million during the three and six months ended June 30, 2022, respectively.

For operating leases, the weighted-average remaining lease term for leases at June 30, 2023 and December 31, 2022 was 6.3 and 6.8 years, respectively.

For operating leases, the weighted average discount rate for leases at June 30, 2023 and December 31, 2022 was 11.0 %.

Expense arising from operating leases was $ 0.1 million and $ 0.2 million during the three and nine months ended September 30, 2023 , respectively.

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

For operating leases, the weighted-average remaining lease term for leases at September 30, 2023 and December 31, 2022 was 5.9 and 6.8 years, respectively.

For operating leases, the weighted average discount rate for leases at September 30, 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 June 30, 2023 are as follows:

Maturities of lease liabilities due under these lease agreements as of September 30, 2023 are as follows:

(in thousands)

Six months ending December 31, 2023

Three months ending December 31, 2023

Year ended December 31, 2024

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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 (the “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") and our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2023.

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 (the “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"), and our Quarterly Reports on Form 10-Q, filed with the SEC on May 15, 2023 and August 10, 2023.

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

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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.

sections of this Quarterly Report as well as previous quarterly reports, 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 ("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 Friedreich's ataxia (“FA”).

Our lead product candidate, nomlabofusp (nomlabofusp is the new International Nonproprietary Name ( "INN") and the United States Adopted Name ("USAN") for CTI-1601), is a subcutaneously administered, recombinant fusion protein intended to deliver 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 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.

Nomlabofusp represents the first potential therapy designed to increase FXN levels in patients with FA.

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.

Since our inception, we have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, and providing general and administrative support for such operations.

CTI-1601 Program Update

We have completed two phase 1 clinical trials of CTI-1601 and the first cohort of a phase 2 trial in patients with FA:

Since our inception, we have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, and providing general and administrative support for such operations.

Nomlabofusp Program Update

We have completed two Phase 1 clinical trials of nomlabofusp and the first cohort of a phase 2 trial in patients with FA:

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.

Data from these trials demonstrated proof-of-concept by showing that daily subcutaneous injections of nomlabofusp 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 nomlabofusp were at or in excess of FXN levels that would be expected in phenotypically normal heterozygous carriers.

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

In May 2023, we reported preliminary unblinded 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.

Data from the cohort indicate CTI-1601 was generally well tolerated and showed increases in FXN levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells) at day 14.

From May 2021 through July 2023, we have had ongoing interactions and discussions with the FDA regarding the clinical development of CTI-1601:

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 non-human ("NHP") toxicology study that was designed to support extended dosing of patients with CTI-1601.

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

Data from the cohort indicated nomlabofusp was generally well tolerated and showed increases in FXN levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells) at day 14.

From May 2021, we have had ongoing interactions and discussions with the FDA regarding the clinical development of nomlabofusp:

In May 2021, the FDA placed a clinical hold on our nomlabofusp clinical program after we notified the FDA of mortalities at the highest dose levels of a 26-week non-human ("NHP") toxicology study that was designed to support extended dosing of patients with nomlabofusp.

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

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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 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 discussed above 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.

In June 2023 we met with the Agency.

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 nomlabofusp in FA patients discussed above to proceed.

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

In June 2023 we met with the FDA.

Following that meeting, we submitted a complete response to the FDA’s partial clinical hold that included unblinded safety, pharmacokinetic (“PK”) and frataxin data from the Phase 2 trial’s completed 25 mg cohort.

Following the FDA’s review of our complete response, in July 2023, the FDA cleared initiation of a second cohort of our four-week, placebo-controlled, Phase 2 dose exploration trial of CTI-1601 in patients with FA to proceed to a 50 mg cohort in which participants will be dosed daily for the first 14 days, and then every other day until day 28.

This second cohort is designed to further characterize CTI-1601’s safety, PK and pharmacodynamic profiles.

We expect to report data from the Phase 2 trial’s 50 mg cohort in the first half of 2024.

In addition, the FDA cleared for initiation our open label extension (“OLE”) trial in which participants will receive 25 mg of CTI-1601 daily.

Participants who complete treatment in the first or second cohort of our Phase 2 dose exploration trial, or who previously participated in and completed a prior phase 1 clinical trial of CTI-1601, are eligible to screen for this OLE trial.

The OLE trial is expected to begin in the first quarter of 2024 with interim data expected in the last quarter of 2024.

Further dose escalation in the Phase 2 and OLE trials and the initiation of additional U.S.

clinical trials evaluating CTI-1601 are contingent on FDA review of results from the Phase 2 trial’s 50 mg cohort in accordance with a partial clinical hold.

CTI-1601 has been granted Orphan Drug (U.S.

Following the FDA’s review of our complete response, in July 2023, the FDA cleared initiation of a second cohort of our four-week, placebo-controlled, Phase 2 dose exploration trial of nomlabofusp in patients with FA to proceed to a 50 mg cohort in which participants would be dosed daily for the first 14 days, and then every other day until day 28.

In November 2023, we completed enrollment and dosing of the 50 mg cohort of our Phase 2 double-blind dose exploration trial evaluating nomlabofusp for the treatment of FA.

Treatment assignment of the fully enrolled cohort of 15 participants remains blinded as they complete the follow up period.

Participants were dosed daily with nomlabofusp for the first 14 days, and then every other day until day 28.

Based on blinded Phase 2 observations during the dosing period, there were no serious adverse events for either the nomlabofusp or placebo groups.

Top-line Phase 2 safety, PK, and frataxin data from skin and buccal cells from both the 25 mg and 50 mg cohorts is now expected in the first quarter of 2024, refined from the first half of 2024.

Initiation of additional U.S.

clinical trials or potential further dose escalation in these trials is contingent on FDA review of Phase 2 data from the 50 mg cohort due to the partial clinical hold.

In November 2023, we reaffirmed guidance for initiation of the OLE trial evaluating daily subcutaneous injections of 25 mg of nomlabofusp self-administered or administered by a caregiver.

Participants who complete treatment in the Phase 2 dose exploration trial, or who previously completed a prior clinical trial of nomlabofusp are potentially eligible for the OLE.

The OLE will evaluate the safety and tolerability and PK and measures of frataxin levels in peripheral tissues as well as other exploratory PD (lipid profiles and gene expression data) following long-term subcutaneous administration of nomlabofusp.

Clinical measures collected during the trial will be compared to data from a synthetic control arm derived from participants in the Friedreich’s Ataxia Clinical Outcome Measures Study (FACOMS) database.

The OLE trial is expected to begin in the first quarter of 2024 with interim data expected in the fourth quarter of 2024.

Nomlabofusp has been granted Orphan Drug (U.S.

and Europe), Rare Pediatric Disease (U.S.), Fast Track (U.S.), and PRIME (Europe) designations for FA.

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allocated facility-related costs.

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 may 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 nomlabofusp or any other product candidates we may 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 duration, costs, and timing of clinical trials and development of nomlabofusp 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;

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

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.

We expect to increase our investment in research and development in order to advance nomlabofusp 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 nomlabofusp and/or any other product candidates we develop.

Stock Compensation Expense

We measure all stock-based awards granted to employees 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 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.

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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 starting 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.

Beginning on January 1, 2023, the Company began blending its historical data starting 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.

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Results of Operations

Comparison of three months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Comparison of three months ended September 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

(in thousands)

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Research and development expenses

Research and development expenses for the three months ended June 30, 2023 increased $0.2 million compared to the three months ended June 30, 2022.

The increase in research and development expenses was primarily driven by an increase of $0.5 million in test method development and optimization, an increase of $0.4 million in personnel related costs, an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023, partially offset by a decrease of $1.1 million in clinical supply manufacturing costs.

Research and development expenses for the three months ended September 30, 2023 increased $1.0 million compared to the three months ended September 30, 2022.

The increase in research and development expenses was primarily driven by an increase of $0.9 million in clinical trial costs primarily associated with the Phase 2 dose exploration study, an increase of $0.7 million in personnel related costs, an increase of $0.4 million in professional fees primarily associated with an increase in legal IP costs and consulting fees, partially offset by a decrease of $1.2 million in clinical supply manufacturing costs.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2023 increased $0.7 million compared to the three months ended June 30, 2022.

The increase in general and administrative expense was primarily driven by an increase of $0.3 million of professional fees primarily related to increased legal expense, an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023 and an increase of $0.2 million in personnel related costs related to increases in headcount.

General and administrative expenses for the three months ended September 30, 2023 increased $0.8 million compared to the three months ended September 30, 2022.

The increase in general and administrative expense was primarily driven by an increase of $0.3 million of professional fees primarily related to increased legal expense, an increase of $0.2 million in operational expense primarily related to recruiting costs, and an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2023 and prior periods.

Other income (expense), net

Other income (expense), net was $1.3 million of income in the three months ended June 30, 2023 compared to less than $0.1 million in the three months ended June 30, 2022.

The increase primarily relates to interest income on a higher investment base and higher interest rates on that base during the period.

Other income (expense), net was $1.3 million of income in the three months ended September 30, 2023 compared to $0.2 million in the three months ended September 30, 2022.

The increase primarily relates to interest income on a higher investment base and higher investment yields on that base during the current period.

Results of Operations

Comparison of six months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

Comparison of nine months ended September 30, 2023 and 2022

The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

(in thousands)

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Research and development expenses

Research and development expenses for the six months ended June 30, 2023 decreased $1.0 million compared to the six months ended June 30, 2022.

The decrease in research and development expenses was primarily driven by a decrease of $1.5 million in clinical supply manufacturing costs, a decrease in assay development costs of $0.2 million partially offset by an increase of $0.5 million in personnel related costs, an increase of $0.3 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023.

Research and development expenses were comparable between periods.

A decrease of $3.2 million in clinical supply manufacturing costs was offset by an increase of $1.2 million in personnel related costs, an increase of $0.9 million in clinical trial costs primarily associated with the Phase 2 dose exploration study, an increase of $0.4 million in professional fees primarily associated with an increase in legal IP costs and consulting fees, and an increase of $0.4 million in test method development and optimization and an increase of $0.3 million in stock-based compensation expense associated with stock option grants made in 2023 and prior periods.

General and administrative expenses

General and administrative expenses for the six months ended June 30, 2023 increased $0.7 million compared to the six months ended June 30, 2022.

The increase in general and administrative expense was primarily driven by an increase of $0.3 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023, an increase of $0.3 million of professional fees primarily related to increased legal expense, and an increase of $0.2 million in personnel related costs related to increases in headcount.

General and administrative expenses for the nine months ended September 30, 2023 increased $1.5 million compared to the nine months ended September 30, 2022.

The increase in general and administrative expense was primarily driven by an increase of $0.5 million of professional fees primarily related to increased legal expense, an increase of $0.5 million in stock-based compensation expense associated with stock option grants made in 2023 and prior periods, an increase of $0.4 million in operational expense primarily related to recruiting costs, and an increase of $0.4 million in personnel related costs related to increases in headcount, partially offset by a decrease of $0.3 million in insurance expense.

Other income (expense), net

Other income (expense), net was $2.4 million of income in the six months ended June 30, 2023 compared to less than $0.1 million of net expense in the six months ended June 30, 2022.

The increase primarily relates to interest income on a higher investment base and higher interest rates on that base during the period.

Other income (expense), net was $3.6 million of income in the nine months ended September 30, 2023 compared to $0.2 million of net expense in the nine months ended September 30, 2022.

The increase primarily relates to interest income on a higher investment base and higher investment yields on that base during the current period as compared to the prior period.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations.

We have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations.

We have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Net cash provided by financing activities

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

Net increase in cash, cash equivalents and restricted cash

Net cash used in operating activities

During the six months ended June 30, 2023, operating activities used $14.9 million of cash, resulting from our net loss of $14.9 million, adjusted for noncash expenses of $3.3 million and changes in our operating assets and liabilities utilizing cash of $3.4 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 relate to 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.

During the six months ended June 30, 2022, operating activities used $15.0 million of cash, resulting from our net loss of $17.6 million, adjusted for noncash expenses of $3.5 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.

During the nine months ended September 30, 2023, operating activities used $24.1 million of cash, resulting from our net loss of $24.0 million, adjusted for noncash expenses of $4.7 million and changes in our operating assets and liabilities utilizing cash of $4.8 million.

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

Noncash expenses are primarily stock-based compensation expense.

The change in operating assets and liabilities was primarily due to decreases in prepaid expenses and accounts payable.

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 $5.1 million and changes in our operating assets and liabilities resulting in a use of cash of $0.1 million.

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

Noncash expenses are primarily stock-based compensation expense.

Net cash provided by (used in) investing activities

During the six months ended June 30, 2023, investing activities provided $82.4 million of cash, including $92.3 million from maturities of marketable securities and partially offset by $9.8 million in purchases of marketable securities.

During the six months ended June 30, 2022, investing activities used $35.3 million of cash, including $35.2 million in purchases of new marketable securities and $0.1 million in purchases of property and equipment.

During the nine months ended September 30, 2023, investing activities provided $36.0 million of cash, including $102.3 million from maturities of marketable securities partially offset by $66.3 million in purchases of marketable securities.

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 securities and $0.1 million in purchases of property and equipment, partially offset by a $23.0 million increase from maturities of marketable securities.

Net cash provided by financing activities

During the six months ended June 30, 2023 and 2022 there were no financing activities.

During the nine months ended September 30, 2023, financing activities provided less than $0.1 million of cash from the exercise of stock options and warrants.

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

Operating Capital Requirements

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We have to date incurred net losses.

We incurred net losses of approximately $14.9 million and $17.6 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, we had an accumulated deficit of $166.5 million and cash, cash equivalents and marketable securities of $104.2 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.

We incurred net losses of approximately $24.0 million and $25.9 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, we had an accumulated deficit of $175.6 million and cash, cash equivalents and marketable securities of $95.6 million, excluding restricted cash of $1.3 million.

We expect to incur significant expenses and operating losses for the foreseeable future as we expect to continue to incur expenses in connection with our ongoing activities, if and as we:

continue to advance the development of CTI-1601 through additional clinical trials;

continue to advance the development of nomlabofusp through additional clinical trials, including related manufacturing costs;

seek to identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates;

seek to obtain regulatory approvals for CTI-1601 and other potential product candidates;

seek to obtain regulatory approvals for nomlabofusp and other potential product candidates;

identify, acquire or in-license other product candidates and technologies;

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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 securities 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.

Based on our current expected level of operating expenditures, we expect to be able to fund our operations for at least twelve months from the issuance of these condensed consolidated financial statements into the first quarter of 2025.

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.

Until we can generate substantial revenue, if ever, we expect to seek additional funding through a combination of public or private equity

offerings, debt financings, collaborations, strategic alliances and licensing arrangements or other sources.

Until we can generate substantial revenue, if ever, we expect to seek additional funding through a combination of public or private equity offerings, debt/royalty financings, collaborations, strategic alliances and licensing arrangements or other sources.

The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, minimum cash balances, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

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Off-Balance Sheet Arrangements

During the periods presented we did not have, and we currently do not have, any off-balance sheet arrangements, as defined under applicable SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

Recently Issued Accounting Pronouncements

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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