Larimar Therapeutics, Inc. 10-Q

Item 1 Financial Statements (unaudited) 3 Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 3 Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023 4 Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2024 and 2023 5 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk 28 Item 4. Controls and Procedures 28 PART II - OTHER INFORMATION Item 1. Legal Proceedings 29 Item 1A. Risk Factors 29 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29 Item 3. Defaults Upon Senior Securities 29 Item 4. Mine Safety Disclosures 29 Item 5. Other Information 29 Item 6. Exhibits 30 Signatures 31 2 PART I-FINANCIA L INFORMATION Item 1. Financi al Statements LARIMAR THERAPEUTICS, INC. CONDENSED CONSOLIDAT ED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited) March 31, December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 110,125 $ 26,749 Short-term marketable securities 117,171 60,041 Prepaid expenses and other current assets 3,657 3,385 Total current assets 230,953 90,175 Long-term marketable securities 11,711 — Property and equipment, net 604 684 Operating lease right-of-use assets 2,920 3,078 Restricted cash 1,339 1,339 Other assets 678 659 Total assets $ 248,205 $ 95,935 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,918 $ 1,283 Accrued expenses 10,098 7,386 Operating lease liabilities, current 825 837 Total current liabilities 12,841 9,506 Operating lease liabilities 4,520 4,709 Total liabilities 17,361 14,215 Commitments and contingencies (See Note 8) Stockholders’ equity: Preferred stock; $ 0.001 par value per share; 5,000,000 shares authorized as of March 31, 2024 and December 31, 2023; no shares issued and outstanding as of March 31, 2024 and December 31, 2023 — — Common stock, $ 0.001 par value per share; 115,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 63,800,017 and 43,909,069 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 64 43 Additional paid-in capital 434,013 270,150 Accumulated deficit ( 203,208 ) ( 188,554 ) Accumulated other comprehensive gain (loss) ( 25 ) 81 Total stockholders’ equity 230,844 81,720 Total liabilities and stockholders’ equity $ 248,205 $ 95,935 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 LARIMAR THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) (Unaudited) Three Months Ended March 31, 2024 2023 Operating expenses: Research and development $ 12,939 $ 4,562 General and administrative 3,795 3,075 Total operating expenses 16,734 7,637 Loss from operations ( 16,734 ) ( 7,637 ) Other income, net 2,080 1,111 Net loss $ ( 14,654 ) $ ( 6,526 ) Net loss per share, basic and diluted $ ( 0.27 ) $ ( 0.15 ) Weighted average common shares outstanding, basic and diluted 53,553,707 43,897,603 Comprehensive loss: Net loss $ ( 14,654 ) $ ( 6,526 ) Other comprehensive gain (loss): Unrealized gain (loss) on marketable securities ( 106 ) 31 Total other comprehensive gain (loss) ( 106 ) 31 Total comprehensive loss $ ( 14,760 ) $ ( 6,495 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 4 LARIMAR THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS O F CHANGES IN STOCKHOLDERS’ EQUITY (In thousands, except share data) (Unaudited) Accumulated Additional Other Total Common Stock Paid-in Accumulated Comprehensive Stockholders’ Shares Par Value Capital Deficit Gain (Loss) Equity Balances as of December 31, 2023 43,909,069 $ 43 $ 270,150 $ ( 188,554 ) $ 81 $ 81,720 Issuance of common stock, net 19,736,842 20 161,736 — — 161,756 Vesting of restricted stock units 153,750 1 ( 1 ) — — — Exercise of stock options 356 — — — — — Stock-based compensation expense — — 2,128 — — 2,128 Unrealized loss on marketable securities — — — — ( 106 ) ( 106 ) Net loss — — — ( 14,654 ) — ( 14,654 ) Balances as of March 31, 2024 63,800,017 $ 64 $ 434,013 $ ( 203,208 ) $ ( 25 ) $ 230,844 Accumulated Additional Other Total Common Stock Paid-in Accumulated Comprehensive Stockholders’ Shares Par Value Capital Deficit Gain (Loss) Equity Balances as of December 31, 2022 43,269,200 $ 43 $ 262,496 $ ( 151,605 ) $ ( 31 ) $ 110,903 Stock-based compensation expense — — 1,833 — — 1,833 Unrealized gain on marketable securities — — — — 31 31 Net loss — — — ( 6,526 ) — ( 6,526 ) Balances as of March 31, 2023 43,269,200 $ 43 $ 264,329 $ ( 158,131 ) $ — $ 106,241 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 LARIMAR THERAPEUTICS, INC. CONDENSED CONSOLIDATED ST ATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 14,654 ) $ ( 6,526 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 2,128 1,833 Lease expense ( 43 ) ( 24 ) Depreciation expense 80 78 Amortization of premium on marketable securities ( 583 ) ( 616 ) Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 272 ) 371 Accounts payable 290 ( 991 ) Accrued expenses 2,662 ( 1,682 ) Other assets ( 19 ) 6 Net cash used in operating activities: ( 10,411 ) ( 7,551 ) Cash flows from investing activities: Purchase of marketable securities ( 84,864 ) — Maturities and sales of marketable securities 16,500 92,250 Net cash provided by (used in) investing activities ( 68,364 ) 92,250 Cash flows from financing activities: — — Proceeds from issuance of equity securities, net of issuance costs 162,151 — Net cash provided by financing activities 162,151 — Net increase in cash, cash equivalents and restricted cash 83,376 84,699 Cash, cash equivalents and restricted cash at beginning of period 28,088 28,164 Cash, cash equivalents and restricted cash at end of period $ 111,464 $ 112,863 Supplemental disclosure of non-cash investing and financing activities: Offering costs included in accounts payable and accrued expense $ 395 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 6 LARIMAR THERAPEUTICS, INC. NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS (Unaudited) 1. Description of Business and Basis of Presentation Larimar Therapeutics, Inc., together with its subsidiary (the “Company” 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, nomlabofusp (nomlabofusp is the International Nonproprietary Name and the United States Adopted Name 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 nomlabofusp, a Phase 2 dose exploration study, and recently initiated an open label extension study (“OLE”) 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 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. 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, PK and frataxin data from the Phase 2 trial’s completed 25 mg cohort. In July 2023, following the FDA’s review of the Company's complete response to the partial clinical hold, the FDA cleared initiation of a second cohort at 50 mg of our four-week, placebo-controlled, Phase 2 dose exploration trial and initiation of an OLE study with daily dosing of 25 mg. In February 2024, the Company reported positive top-line data and successful completion of their four-week, placebo-controlled Phase 2 dose exploration study of nomlabofusp in participants with FA. Nomlabofusp was generally well tolerated throughout the four-week treatment periods, had a predictable pharmacokinetic profile and let to dose dependent increases in FXN levels in all evaluated tissues (skin and buccal cells) after daily dosing of 14 days followed by every other day dosing until day 28 in the 25 mg and 50 mg cohorts. Participants in the 25 mg (n=13) and 50 mg (n=15) cohorts were randomized 2:1 to receive subcutaneous injections of nomlabofusp or placebo. The initiation of additional U.S. clinical trials evaluating nomlabofusp are contingent on FDA review of data under the partial clinical hold. In January 2024, the Company initiated the OLE trial, discussed above, evaluating daily subcutaneous injections of 25 mg of nomlabofusp self-administered or administered by a caregiver, with the first patient dosed in March 2024. Additional patients continue to be enrolled and dosed and additional clinical sites added. Participants who completed treatment in the Phase 2 dose exploration study, or who previously completed a prior clinical trial of nomlabofusp, are potentially eligible to screen for the OLE study. The OLE study will evaluate the safety and tolerability, pharmacokinetics, and frataxin levels in peripheral tissues as well as other exploratory pharmacodynamic markers (lipid profiles and gene expression data) following long-term subcutaneous administration of nomlabofusp. Dose escalation in the OLE study is contingent on the FDA’s review of data from the 50 mg cohort of the Phase 2 study and available data from the OLE study, due to the continued partial clinical hold. Interim data is expected in the fourth quarter of 2024. In addition, clinical assessments collected during the study will be compared to data from a matched control arm derived from participants in the Friedreich’s Ataxia Clinical Outcome Measures Study (FACOMS) database. 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 7 ability to secure additional capital to fund its operations. 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. 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 The condensed consolidated financial statements include the accounts of Larimar and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated. 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, 2023 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, 2024 and for the three months ended March 31, 2024 and 2023, 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, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2024. 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, 2024, condensed consolidated results of operations for the three months ended March 31, 2024 and condensed consolidated statement of cash flows for the three months ended March 31, 2024 have been made. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024 . 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 $ 14.7 million and $ 6.5 million for the three months ended March 31, 2024 and 2023, respectively. In addition, as of March 31, 2024, the Company had an accumulated deficit of $ 203.2 million . The Company expects to continue to generate operating losses for the foreseeable future. As of March 31, 2024, the Company had approximately $ 239.0 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 and marketable securities upon the merger with Zafgen, Inc. ("Zafgen") and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC. In February 2024, the Company completed an underwritten public offering in which the Company issued and sold 19,736,842 shares of its common stock at a public offering price of $ 8.74 per share. The Company received net proceeds of approximately $ 161.8 million after deducting underwriting discounts, commissions and other offering expenses. 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 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, including its net proceeds from the February 2024 public offering, will be sufficient to fund its forecasted operating expenses and capital expenditure requirements into 2026. If the timing 8 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. The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, that it will need additional capital to fund its future operating and capital requirements. 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 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. Any additional fundraising efforts may divert the Company's management from their day-to-day activities, which may adversely affect its ability to develop and commercialize its product candidates. There can be no assurance that the Company will be able to raise sufficient additional capital on acceptable terms, if at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or if the Company does not have sufficient authorized shares, the Company may be required to delay, limit, or eliminate the development of business opportunities and its ability to achieve its business objectives, its competitiveness, and its business, financial condition, and results of operations will be materially adversely affected. 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 tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, 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, pre commercialization efforts and/or commercial operations, which could adversely affect its business prospects, or the Company may be unable to continue operations. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. 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. 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. Research and Development Costs Costs associated with internal research and development and external research and development services, including drug development, clinical studies and non-clinical studies, are expensed as incurred. Research and 9 development expenses include costs for salaries, employee benefits, subcontractors, facility-related expenses, depreciation, stock-based compensation, 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, 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 key 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. Such prepaid expenses are recognized as an expense when the goods have been delivered or the related services have been performed, or when it is no longer expected that the goods will be delivered, or the services rendered. Upfront payments, milestone payments and annual maintenance fees under license agreements are currently expensed in the period in which they are incurred. Patent Costs All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses. Stock-Based Compensation The Company measures 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. Compensation expense of those awards is recognized over the requisite service period, which is the vesting period of the respective award. Typically, the Company issues awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company accounts for forfeitures as they occur. The Company classifies stock-based compensation expense in its 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, the Company had been a private company and lacked company-specific historical and implied volatility information for its 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. 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 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” options. 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 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 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. 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 less than $ 0.1 million. Accordingly, the 628,403 shares were issued upon the exercise of these warrants and 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 10 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 6,555,145 and 4,974,521 common stock equivalents outstanding as of March 31, 2024 and 2023, respectively, from the computation of diluted net loss per share for the three months ended March 31, 2024 and 2023 because they had an anti-dilutive impact due to the net loss incurred for the periods presented. Recently Issued and Adopted Accounting Pronouncements From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted by us as of the effective date or, in some cases where early adoption is permitted, in advance of the effective date. We have assessed the recently issued guidance that is not yet effective and believe the new guidance will not have a material impact on the condensed consolidated results of operations, cash flows or financial position. 3. Fair Value Measurements and Marketable Securities Fair Value Measurements The Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 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. The three levels are defined as follows: Level – 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level – 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level – 3 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 securities, accounts payable and accrued liabilities. For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of March 31, 2024 and December 31, 2023 were considered representative of their fair values due to their short term to maturity. 11 The following tables summarize the Company’s cash equivalents and marketable securities as of March 31, 2024 and December 31, 2023: Total Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) March 31, 2024 Cash equivalents: Money market funds invested in government securities $ 69,905 $ 69,905 $ — $ — U.S. Treasury Bills 39,813 39,813 — — Total cash equivalents 109,718 109,718 — — Marketable securities: U.S. Treasury Bills 23,058 23,058 — — U.S. Government securities 79,835 — 79,835 — Corporate bonds 25,989 — 25,989 — Total marketable securities 128,882 23,058 105,824 — Total cash equivalents and marketable securities $ 238,600 $ 132,776 $ 105,824 $ — December 31, 2023 Cash equivalents: Money market funds invested in government securities $ 24,701 $ 24,701 $ — $ — Total cash equivalents 24,701 24,701 — — Marketable securities: U.S. Treasury Bills 17,334 17,334 — — U.S. Government securities 35,719 — 35,719 — Corporate bonds 6,988 — 6,988 — Total marketable securities 60,041 17,334 42,707 — Total cash equivalents and marketable securities $ 84,742 $ 42,035 $ 42,707 $ — The accrued interest receivable related to the Company’s investments was $ 1.1 million and $ 0.3 million as of March 31, 2024 and December 31, 2023, 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. treasury bills, 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. government and agency securities, corporate commercial paper, and corporate bonds, 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. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. 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 March 31, 2024 and December 31, 2023, 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, 2024 and December 31, 2023 , no allowances for credit losses for the Company’s 12 investments were recorded. During the three months ended March 31, 2024 and 2023 , 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 March 31, 2024 and December 31, 2023. Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (in thousands) March 31, 2024 Assets: U.S. Treasury Bills $ 23,061 $ — $ ( 3 ) $ 23,058 U.S. Government securities 79,849 6 ( 20 ) 79,835 Corporate bonds 25,997 3 ( 11 ) 25,989 Total marketable securities $ 128,907 $ 9 $ ( 34 ) $ 128,882 December 31, 2023 Assets: U.S. Treasury Bills $ 17,330 $ 4 $ — $ 17,334 U.S. Government securities 35,653 66 — 35,719 Corporate bonds 6,977 11 — 6,988 Total marketable securities $ 59,960 $ 81 $ — $ 60,041 No marketable securities held as of March 31, 2024 or December 31, 2023, had remaining maturities greater than two years. As of March 31, 2024 and December 31, 2023 , the Company held no investments that have been in a continuous loss position for 12 months or longer. 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: March 31, December 31, 2024 2023 (in thousands) Prepaid research and development expenses $ 1,786 $ 1,994 Interest receivable 1,079 332 Prepaid insurance 448 682 Other prepaid expenses and other assets 344 377 $ 3,657 $ 3,385 5. Fixed Assets Fixed assets, net consisted of the following: March 31, December 31, Useful Life 2024 2023 (in thousands) Computer equipment 5 years $ 117 $ 117 Lab equipment 5 years 1,192 1,192 Furniture and fixtures 7 years 555 555 Leasehold improvements lease term 45 45 1,909 1,909 Less: Accumulated depreciation ( 1,305 ) ( 1,225 ) $ 604 $ 684 13 Depreciation expense was $ 0.1 million for each of the three months ended March 31, 2024 and 2023. In addition, for the three months ended March 31, 2024 and 2023 , there was less than $ 0.1 million of depreciation related to sublet assets recorded as other expense. 6. Accrued Expenses Accrued expenses consisted of the following: March 31, December 31, 2024 2023 (in thousands) Accrued research and development expenses $ 8,804 $ 4,594 Accrued payroll and related expenses 788 2,365 Accrued other 506 427 $ 10,098 $ 7,386 7. Stockholders’ Equity and Stock Options Common Stock and Prefunded Warrants 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. The prefunded warrants were exercisable at an exercise price of $ 0.01 and were exercisable indefinitely. 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 . 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 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. MTS Health Partners served as placement agent to the Company in connection with the private placement. As partial compensation for these services, the Company issued MTS Health Partners 35,260 shares of common stock. As of March 31, 2024 ,the Company’s Ninth Amended and Restated Certificate of Incorporation, as amended, authorized the Company to issue up to 115,000,000 shares of common stock, par value $ 0.001 per share, of which 63,800,017 shares were issued and outstanding, and up to 5,000,000 shares of undesignated preferred stock, par value $ 0.001 per share, 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. In February 2024, the Company completed an underwritten public offering in which the Company issued and sold 19,736,842 shares of its common stock at a public offering price of $ 8.74 per share. The Company received net proceeds of approximately $ 161.8 million after deducting underwriting discounts, commissions and other offering expenses. ATM Agreement In November 2022, the Company entered into a Sales Agreement (the "2022 ATM Agreement") with a Guggenheim Securities, LLC as a sales agent in connection with the establishment of an “at-the-market” offering program under which the Company could sell up to an aggregate of $ 50.0 million of shares of common stock (the “2022 ATM Shares”) from time to time. In February 2024, in connection with the underwritten public offering described above, the Company terminated the 2022 ATM Agreement. No ATM Shares were ever sold pursuant to the 2022 ATM Agreement. In May 2024, the Company entered into a sales agreement (the "ATM Agreement") with a Guggenheim Securities, LLC in connection with the establishment of an “at-the-market” offering program under which the Company could sell up to an aggregate of $ 100.0 million of shares of common stock (the “ATM Shares”) from time to time. 14 2020 Equity Incentive Plan The Board adopted the 2020 Equity Incentive Plan (the "2020 Plan") on July 16, 2020 and the stockholders of the Company approved the 2020 Plan on September 29, 2020. The 2020 Plan replaced the predecessor plans (the "Prior Plans") that the Company assumed following its merger with Zafgen in May 2020. Options outstanding under the Prior Plans will remain outstanding, unchanged, and subject to the terms of the Prior Plans and the respective award agreements, and no further awards will be made under the Prior Plans. 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. 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. The maximum number of shares that may be issued in respect of any awards under the 2020 Plan is the sum of: (i) 1,700,000 shares plus (ii) an annual increase on January 1, 2021 and each anniversary of such date thereafter through January 1, 2030, equal to the lesser of (A) 4 % of the shares issued and outstanding on the last day of the immediately preceding fiscal year, or (B) such smaller number of shares as determined by the Board (collectively, the “Plan Limit”). 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. As permitted by the 2020 Plan, the Company added 1,756,363 and 1,730,768 shares available for grant to the 2020 Plan on January 1, 2024 and January 1, 2023, respectively. As of March 31, 2024 , 1,222,219 shares of common stock were available for grant under the 2020 Plan. During the twelve months ended December 31, 2023 , options to purchase 224,437 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, 2024. 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: March 31, 2024 Risk-free interest rate 4.06 % Expected term (in years) 6.25 Expected volatility 96 % Dividend yield 0.00 % 15 Stock Options The following table summarizes the Company’s stock option activity for the three months ended March 31, 2024 (amounts in millions, except for share, contractual term, and per share data): Weighted Weighted Average Aggregate Average Remaining Intrinsic Number of Exercise Contractual Value (a) Shares Price Term (in years) (in millions) Outstanding as of December 31, 2023 4,273,502 $ 9.06 7.8 Options granted 1,580,377 4.42 Options exercised ( 356 ) 2.95 Options forfeited/expired ( 5,000 ) 11.38 Outstanding as of March 31, 2024 5,848,523 $ 7.81 8.1 $ 11.0 Exercisable as of March 31, 2024 2,419,698 $ 11.39 6.7 $ 1.5 Vested and expected to vest as of March 31, 2024 5,848,523 $ 7.81 8.1 $ 11.0 (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 March 31, 2024 . Option Grants During the three months ended March 31, 2024 , the Company granted options to purchase 1,580,377 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, 2024 was $ 3.52 . As of March 31, 2024 , total unrecognized compensation expense related to unvested stock options granted under the 2020 Plan was $ 12.5 million, which is expected to be recognized over a weighted average period of 2.57 years. Inducement Stock Option Grant There were no inducement awards granted in the three months ended March 31, 2024. As of March 31, 2024 , total unrecognized compensation expense related to unvested inducement options granted was $ 1.0 million, which is expected to be recognized over a weighted average period of 3.03 years. Restricted Stock Units In January 2024, RSUs were granted under the 2020 Plan to certain of 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 grant. The shares underlying the RSUs are not issued until the RSUs vest. 16 Activity with respect to the Company's RSUs during the three months ended March 31, 2024 was as follows (in millions, except share, contractual term, and per share data): Weighted Weighted Average Aggregate Average Remaining Intrinsic Number of Grant Date Contractual Value (a) Shares Fair Value Term (in years) (in millions) Outstanding as of December 31, 2023 615,000 $ 4.94 1.6 Restricted stock units granted 245,372 4.21 Restricted stock units vested ( 153,750 ) 4.94 Outstanding as of March 31, 2024 706,622 $ 4.69 2.0 $ 5.4 Unvested and expected to vest as of March 31, 2024 706,622 $ 4.69 2.0 $ 5.4 Restricted Stock Unit Grants During the three months ended March 31, 2024 , the Company granted 245,372 shares of RSUs to employees under the 2020 Plan. The RSUs vest annually over four years and have a weighted-average grant date fair value of $ 4.21 per unit. As of March 31, 2024 , total unrecognized compensation expense for RSUs was $ 3.1 million, which is expected to be recognized over a weighted-average period of 3.14 years. Stock-Based Compensation Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows: Three Months Ended March 31, 2024 2023 Research and development $ 911 $ 743 General and administrative 1,217 1,090 $ 2,128 $ 1,833 8. Commitments and Contingencies Intellectual Property Licenses 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 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. As additional consideration for these agreements, the Company is obligated to pay each of WFUHS and IU certain milestone payments of up to $ 2.6 million in the aggregate upon the achievement of certain developmental milestones, which commenced with the enrollment of the first patient in a Phase 1 clinical trial. The Company enrolled the first patient in its SAD trial on December 11, 2019 and paid WFUHS and IU less than $ 0.1 million. The Company will also pay each of WFUHS and IU sublicensing fees ranging from a high-single digit to a low double-digit percentage of sublicense consideration depending on the Company’s achievement of certain regulatory milestones as of the time of receipt of the sublicense consideration. The Company is also obligated to reimburse WFUHS and IU for patent-related expenses. 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. 17 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 date of expiration of the licensed patents, unless earlier terminated by either party in accordance with their terms. Leases Bala Cynwyd Office Space 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 a lease extension agreement on its original 4,642 square footage of office space in Bala Cynwyd, Pennsylvania (which was set to expire in August 2023 ) and agreed to lease an additional 3,462 square feet of office space from the same landlord. The lease extension on the original 4,642 square footage commenced on September 1, 2023 and the Company recorded a right of use asset and lease liability of $ 0.5 million as of that date. The new lease on 3,462 additional square footage commenced on October 1, 2023 and the Company recorded a right of use asset and lease liability of $ 0.3 million as of that date. The right of use assets and lease liabilities with both these leases are reflected in the financial statements for three months ended March 31, 2024 as are the right of use asset and lease liability of the Company's Boston office space discussed below. Boston Office Lease In connection with the Company's 2020 merger with Zafgen described in footnote 1, on May 28, 2020, the Company acquired a non-cancellable operating lease for approximately 17,705 square feet of office space (the “Premises”). The lease expires on October 30, 2029 . As part of the agreement, the Company is required to maintain a letter of credit, which upon signing was $ 1.3 million and is classified as restricted cash within the condensed consolidated financial statements. In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, which costs are not included in the determination of the leases’ right-of-use assets or lease liabilities. The right-of-use asset is being amortized to other income/(expense) over the remaining lease term as a result of the sublease described below. On October 27, 2020, the Company entered into a sublease agreement (the “Sublease”) with Massachusetts Municipal Association, Inc. (the “Subtenant”), whereby the Company sublet the entire Premises to the Subtenant. 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 "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. The Subtenant also is responsible for paying to the Company future increases in operating costs (commencing on January 1, 2022), future increases in annual tax costs (commencing July 1, 2021) and all utility costs (commencing March 1, 2021) attributable to the Premises during the term of the Sublease. As part of the Sublease, the subtenant deposited a letter of credit in the amount of $ 0.8 million to assure their performance under the sublease. If there are no uncured events of default under the sublease, the amount of this security deposit decreases over time to $ 0.4 million on the sixth anniversary of the Sublease. The Company records sublease income on this sublease on a straight-line basis as a component of other income/(expense). 18 Lab Space 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 October 16, 2023, the Company entered into an operating lease for lab space in King of Prussia, Pennsylvania for a period of four year s. 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 is expected to commence in the second quarter of 2024. The Company will not record a right of use asset or lease liability until the lease commencement date. Lease Expense Expense arising from operating leases was $ 0.1 million during each of the three months ended March 31, 2024 and 2023. For operating leases, the weighted-average remaining lease term for leases at March 31, 2024 and December 31, 2023 was 5.2 and 5.5 years, respectively. For operating leases, the weighted average discount rate for leases at March 31, 2024 and December 31, 2023 was 11.0 %. The Company has not entered into any financing leases. Maturities of lease liabilities due under these lease agreements as of March 31, 2024 are as follows: Operating (in thousands) Leases Nine months ending December 31, 2024 $ 1,036 Year ended December 31, 2025 1,403 Year ended December 31, 2026 1,328 Year ended December 31, 2027 1,118 Year ended December 31, 2028 1,136 Thereafter 959 Total lease payments 6,980 Less: imputed interest ( 1,635 ) Present value of lease liabilities $ 5,345 Legal Proceedings 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. 19