Mineralys Therapeutics, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis and the unaudited interim financial statements included in this Quarterly Report on Form 10-Q (Quarterly Report) should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Annual Report on Form 10-K for the year ended December 31, 2022. Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, research and development plans, the anticipated timing, costs, design, and conduct of our ongoing and planned preclinical studies and planned clinical trials for lorundrostat and any future product candidates, the timing and likelihood of regulatory filings and approvals for lorundrostat and any future product candidates, our ability to commercialize our product candidates, if approved, the potential to develop future product candidates, the potential benefits of strategic collaborations and our intent to enter into any strategic arrangements, the timing and likelihood of success, and plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. This Quarterly Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions, and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “continue” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or "would" or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties, and assumptions, including, without limitation, the risk factors described in Part II, Item 1A, “Risk Factors,” in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, and under a similar heading in any other periodic or current report we may file with the U.S. Securities and Exchange Commission (the SEC) in the future. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Overview We are a clinical-stage biopharmaceutical company focused on developing medicines to target diseases driven by abnormally elevated aldosterone. Our clinical-stage product candidate, lorundrostat, is a proprietary, orally administered, highly selective aldosterone synthase inhibitor that we are initially developing for the 15 Table of Contents treatment of cardiorenal conditions affected by abnormally elevated aldosterone, including hypertension and chronic kidney disease (CKD). In the United States, there are over 115 million patients who have sustained elevated blood pressure (BP), or hypertension, and more than half of this population fails to achieve their BP goals, defined as BP of below 130/80 mmHg, with currently available medications. There are over 30 million treated patients who do not achieve their BP goal, of whom approximately 20 million have systolic BP levels greater than 140 mmHg. Patients with hypertension that persists despite taking two or more medications have 1.8 and 2.5 times greater mortality risk due to either cardiovascular disease or stroke, respectively. In a Phase 2 proof-of-concept clinical trial evaluating 200 subjects with uncontrolled hypertension (uHTN) or resistant hypertension (rHTN), lorundrostat demonstrated a clinically meaningful and statistically significant reduction in BP with once-daily dosing and was well tolerated. In addition to hypertension, we intend to develop lorundrostat for the treatment of CKD and believe that our product candidate holds promise to be an innovative solution for the rapidly growing unmet need in multiple cardiorenal disorders. Clinical Highlights Pivotal Hypertension Program In April 2023, we initiated our first pivotal trial, Advance-HTN, a randomized, double-blind, placebo-controlled Phase 2 clinical trial to evaluate the safety and efficacy of lorundrostat for the treatment of uHTN or rHTN, when used as an add-on therapy to standardized background treatment of two or three antihypertensive medications in up to approximately 300 adult subjects. The topline data from this trial is expected in the first half of 2024. We also plan to initiate our second pivotal trial, Launch-HTN, a randomized, double-blind, placebo-controlled Phase 3 clinical trial in the second half of 2023 to evaluate the safety and efficacy of lorundrostat for the treatment of uHTN or rHTN, when used as an add-on therapy to prescribed treatment of two to five antihypertensive medications in up to approximately 1,000 adult subjects. The trial is expected to have a similar design as Advance-HTN. The topline data from this trial is expected in mid-2025. In mid-2023, we initiated an open-label extension trial to obtain additional safety data. All subjects in the pivotal hypertension program, including the Advance-HTN and Launch-HTN trials, will be given the opportunity to participate in the extension trial. Other Indications Lorundrostat has been developed to normalize the production of aldosterone, and we believe this mechanism can be applied to other indications where abnormal aldosterone biology plays a role, including CKD and cardiorenal indications. Uninhibited aldosterone is known to play a critical role in the progression of CKD. CKD is characterized by the gradual loss of kidney function, is estimated to affect more than 10% of the global population and over 23 million people in the United States, and is one of the leading causes of mortality worldwide. According to the U.S. Centers for Disease Control and Prevention (CDC), an estimated 1-in-7 (15%) of U.S. adults have CKD. Diabetes and hypertension are responsible for approximately two-thirds of CKD cases. Early detection and treatment can often keep CKD from getting worse. When CKD progresses, it may eventually lead to kidney failure, which requires dialysis or a kidney transplant to maintain life. We plan to initiate a Phase 2 trial in the second half of 2023 for lorundrostat as a potential therapy to treat patients with Stage 2 to 4 CKD. The planned Phase 2 clinical trial includes an initial proof-of-concept portion (Part A) and a profiling portion (Part B). As this is an exploratory trial, interim data analyses may be conducted at one or more time points. Topline data from this trial is anticipated between the fourth quarter of 2024 and the first quarter of 2025. 16 Table of Contents Financial Overview We commenced our operations in May 2019 and have devoted substantially all of our resources to date to organizing and staffing our company, business planning, raising capital, in-licensing our product candidate, lorundrostat, establishing our intellectual property portfolio, conducting research, preclinical studies, and clinical trials, and providing other general and administrative support for our operations. As of June 30, 2023, we had cash, cash equivalents, and investments of $282.8 million. From inception to June 30, 2023, we raised aggregate gross proceeds of approximately $378.8 million from the sale of common stock, convertible preferred stock, and convertible notes. In February 2023, we completed our initial public offering (IPO) of 13,800,000 shares of our common stock at a price to the public of $16.00 per share, including the exercise in full by the underwriters of their option to purchase 1,800,000 additional shares of our common stock. Including the option exercise, our aggregate net proceeds from the IPO were approximately $201.4 million, net of underwriting discounts, commissions, and offering costs. We do not have any products approved for sale, have not generated any revenue, and have incurred net losses since our inception. Our operations to date have been limited to business planning, raising capital, in-licensing and developing lorundrostat, conducting clinical trials, and other research and development activities. Our net losses for the six months ended June 30, 2023 and 2022 were $24.7 million and $14.0 million, respectively. As of June 30, 2023 and December 31, 2022, we had an accumulated deficit of $77.6 million and $52.8 million, respectively. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical development activities and other research and development activities. We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned clinical trials for lorundrostat, potentially seek regulatory approval for lorundrostat and any future product candidates we may develop, expand our clinical, regulatory, quality, manufacturing, and commercialization capabilities, obtain, maintain, protect and enforce our intellectual property, expand our general and administrative support functions, including hiring additional personnel, and incur additional costs associated with operating as a public company. Based on our current operating plan, we believe that our cash, cash equivalents, and investments will be sufficient to allow us to fund our operations for at least twelve months. We have never generated any revenue and do not expect to generate any revenue from product sales unless and until we successfully complete the development of, and obtain regulatory approval for, lorundrostat, which will not be for several years, if ever. Accordingly, until such time as we can generate significant revenue from sales of lorundrostat, if ever, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, including potential collaborations, licenses, and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. For more information, see “ Liquidity and Capital Resources. ” License Agreement with Mitsubishi Tanabe In July 2020, we entered into a license agreement (the Mitsubishi License) with Mitsubishi Tanabe Pharmaceutical Company (Mitsubishi Tanabe), pursuant to which Mitsubishi Tanabe granted us an exclusive, worldwide, royalty-bearing, sublicensable license under Mitsubishi Tanabe’s patent and other intellectual property rights to exploit products incorporating lorundrostat (formerly MT-4129) (Lorundrostat Products) for the prevention, treatment, diagnosis, detection, monitoring, or predisposition testing with respect to indications, diseases, and conditions in humans. Pursuant to the Mitsubishi License, we paid Mitsubishi Tanabe a $1.0 million upfront fee, and we are obligated to pay Mitsubishi Tanabe development milestone payments of up to $9.0 million in the aggregate and commercial milestone payments of up to $155.0 million in the aggregate upon first commercial sale and upon meeting certain annual sales targets, as well as additional commercial milestone payments of up to $10.0 million for a second indication. Additionally, we are obligated to pay 17 Table of Contents Mitsubishi Tanabe tiered royalties at percentages ranging from the mid-single digits to ten percent ( 10% ) of aggregate net sales of each Lorundrostat Product on a Lorundrostat Product-by-Lorundrostat Product and country-by-country basis, until the later of (i) the expiration of the last-to-expire valid Mitsubishi Tanabe patent claim covering a Lorundrostat Product, (ii) ten years from the first commercial sale of a Lorundrostat Product, or (iii) the expiration of regulatory exclusivity in such country. Such royalties are subject to reduction under specified conditions, including lack of patent coverage and generic competition. We incurred $4.0 million of research and development expenses during the six months ended June 30, 2023 associated with an achieved development milestone in March 2023 related to the planned initiation of our pivotal clinical program of lorundrostat. We are obligated to use commercially reasonable efforts to conduct and complete the development activities and to file for regulatory approval for at least one Lorundrostat Product in a major market country and consider in good faith developing at least one Lorundrostat Product in a non-major market country. If we elect to sublicense our rights under the Mitsubishi License to a third party with respect to exploitation of lorundrostat or any Lorundrostat Product in certain countries in Asia, we have agreed to negotiate such a sublicense first, for a specified period of time, with Mitsubishi Tanabe, if Mitsubishi Tanabe notifies us that it would like to obtain such a sublicense. We also agreed not to commercialize any competing product prior to three years following the first commercial sale of the first Lorundrostat Product in any country without Mitsubishi Tanabe’s prior consent. Key Components of Results of Operations Operating Expenses Research and Development Research and development expenses consist primarily of external and internal costs related to the development of lorundrostat. Research and development expenses are recognized as incurred, and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods are received or when the services are performed. Research and development expenses include: • salaries, bonuses, employee benefits, and stock-based compensation charges for those individuals involved in research and development efforts; • external research and development expenses incurred under agreements with contract research organizations and consultants to conduct and support our clinical trials of lorundrostat, and payments made under the Mitsubishi License; and • costs related to manufacturing lorundrostat for our clinical trials. We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of lorundrostat. We cannot determine with certainty the timing of initiation, the duration, or the completion costs of current or future clinical trials and preclinical studies of lorundrostat or any future product candidates due to the inherently unpredictable nature of clinical and preclinical development. Clinical and preclinical development timelines, the probability of success, and development costs can differ materially from expectations. In addition, we cannot forecast whether lorundrostat or any future product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. Our future development costs may vary significantly based on factors such as: • the initiation, type, number, scope, progress, expansions, results, costs, and timing of clinical trials and preclinical studies of lorundrostat and any future product candidates we may choose to pursue, 18 Table of Contents including any modifications to clinical development plans based on feedback that we may receive from regulatory authorities; • our ability and strategic decision to develop future product candidates other than lorundrostat, and the timing of such development, if any; • our ability to receive timely regulatory approvals for lorundrostat, any future product candidates, and additional indications of lorundrostat and any future product candidates, in the jurisdictions in which we or any future partners apply for such approvals; • the costs and timing of manufacturing lorundrostat or any future product candidates for use in our trials, including as a result of inflation, any supply chain issues, or component shortages; • any additional jurisdictions in which we may seek approval for lorundrostat and any future product candidates and timing of seeking approval in such jurisdictions; • the drop-out or discontinuation rates of clinical trial patients; • potential additional safety monitoring requested by regulatory agencies; • the duration of patient participation in the trials and follow-up; • the phase of development of the product candidate; • the impact of any interruptions to our operations or to those of the third parties with whom we work due to the ongoing COVID-19 pandemic; • the efficacy and safety profile of the relevant product candidate; and • the extent to which we establish strategic collaborations or other arrangements. General and Administrative Expenses General and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, and stock-based compensation charges, for personnel in executive and administrative functions. Other significant general and administrative expenses include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services, and insurance costs. We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development activities, manufacturing activities, and the increased costs associated with operating as a public company. These increased costs will likely include increased expenses related to the hiring of additional personnel, audit, legal, regulatory, and tax-related services associated with maintaining compliance with the exchange listing and the SEC requirements and requirements of the Sarbanes-Oxley Act of 2002, director and officer insurance costs, and investor and public relations costs. Other Income, Net Interest Income, Net Interest income reported in each period is associated with our investments in money market funds and U.S. treasuries, net of fees or other related expenses. 19 Table of Contents Results of Operations Comparison of the Three Months Ended June 30, 2023 and 2022 Three Months Ended, June 30, 2023 2022 Change (in thousands) Research and development expenses $ (11,884) $ (5,595) $ (6,289) General and administrative expenses (3,851) (884) (2,967) Total other income, net 3,594 — 3,594 Net loss $ (12,141) $ (6,479) $ (5,662) Research and Development Expenses Research and development expenses increased by $6.3 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, which was primarily due to increases of $4.0 million in preclinical and clinical costs, driven by the initiation of the lorundrostat pivotal program in the second quarter of 2023, $1.3 million in higher compensation expense as a result of additions to headcount, and $1.0 million in clinical supply, manufacturing, and regulatory costs. General and Administrative Expenses General and administrative expenses increased by $3.0 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase was primarily due to $1.4 million in higher compensation expense as a result of additions to headcount, $1.1 million in higher professional fees associated with operating as a public company, $0.3 million of higher insurance expense associated with new director and officer insurance policies, and $0.2 million in higher other administrative expenses. Total Other Income, Net Total other income, net increased by $3.6 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, which was primarily attributable to interest earned during the three months ended June 30, 2023 on our investments in money market funds and U.S. treasuries that began earning interest in the third quarter of 2022. Results of Operations Comparison of the Six Months Ended June 30, 2023 and 2022 Six Months Ended, June 30, 2023 2022 Change (in thousands) Research and development expenses $ (24,177) $ (12,373) (11,804) General and administrative expenses (6,496) (1,675) (4,821) Total other income, net 5,924 — 5,924 Net loss $ (24,749) $ (14,048) $ (10,701) Research and Development Expenses Research and development expenses increased by $11.8 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, which was primarily due to increases of $4.0 million in license fees under the Mitsubishi License upon achieving a development milestone of lorundrostat in March 2023, $3.8 million in preclinical and clinical costs, driven by the initiation of the lorundrostat pivotal program in 20 Table of Contents the second quarter of 2023, $2.2 million in higher compensation expense as a result of additions to headcount, $1.7 million in clinical supply, manufacturing, and regulatory costs, and $0.1 million in other research and development expenses. General and Administrative Expenses General and administrative expenses increased by $4.8 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase was primarily due to $2.1 million in higher compensation expense as a result of additions to headcount, $1.9 million in higher professional fees associated with operating as a public company, $0.5 million of higher insurance expense associated with new director and officer insurance policies, and $0.3 million in higher other administrative expenses. Total Other Income, Net Total other income, net increased by $5.9 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, which was primarily attributable to interest earned during the six months ended June 30, 2023 on our investments in money market funds and U.S. treasuries that began earning interest in the third quarter of 2022. Liquidity and Capital Resources We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses and have negative cash flows from operations for the foreseeable future as we continue the development of, seek regulatory approval for, and potentially commercialize lorundrostat, seek to identify, assess, acquire, and in-license intellectual property related to or develop additional product candidates and operate as a public company. From inception to June 30, 2023, we raised aggregate gross proceeds of approximately $378.8 million from the sale of common stock, convertible preferred stock, and convertible notes. As of June 30, 2023, we had cash, cash equivalents, and investments of $282.8 million. In February 2023, we completed our IPO of 13,800,000 shares of our common stock sold at a price to the public of $16.00 per share, including the exercise in full by the underwriters of their option to purchase 1,800,000 additional shares of our common stock, for net proceeds of approximately $201.4 million, net of underwriting discounts, commissions, and offering costs. Our primary uses of cash to date have been to fund our research and development activities, including with respect to lorundrostat, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations. Funding Requirements Based on our current operating plan, we believe that our cash, cash equivalents, and investments as of June 30, 2023 will be sufficient to allow us to fund our operations for at least twelve months. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain. Our future capital requirements will depend on many factors, including, but not limited to: • the initiation, type, number, scope, progress, expansions, results, costs, and timing of clinical trials and preclinical studies of lorundrostat and any future product candidates we may choose to pursue, including any modifications to clinical development plans based on feedback that we may receive from regulatory authorities; 21 Table of Contents • our ability and strategic decision to develop future product candidates other than lorundrostat, and the timing of such development, if any; • our ability to receive timely regulatory approvals for lorundrostat, any future product candidates, and additional indications of lorundrostat and any future product candidates, in the jurisdictions in which we or any future partners apply for such approvals; • the costs and timing of manufacturing for lorundrostat, or any future product candidate, including commercial manufacture at sufficient scale, if any product candidate is approved, including as a result of inflation, any supply chain issues, or component shortages; • any additional jurisdictions in which we may seek approval for lorundrostat and any future product candidates and timing of seeking approval in such jurisdictions; • the costs, timing, and outcome of regulatory meetings and reviews of lorundrostat or any future product candidates; • any delays and cost increases that may result from any pandemic or other healthcare emergency; • the costs of obtaining, maintaining, enforcing, and protecting our patents and other intellectual property and proprietary rights; • our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal control over financial reporting; • the costs associated with hiring additional personnel and consultants as our business grows, including additional executive officers and clinical development, regulatory, CMC, quality, and commercial personnel; • the timing and amount of the milestone, royalty, or other payments we must make to Mitsubishi Tanabe, from whom we have in-licensed lorundrostat, or any future licensors; • the costs and timing of establishing or securing sales and marketing capabilities if lorundrostat or any future product candidate is approved; • our ability to achieve sufficient market acceptance, coverage, and adequate reimbursement from third-party payors, and adequate market share and revenue for any approved products; • patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors; • the terms and timing of establishing and maintaining collaborations, licenses, and other similar arrangements; • costs associated with any products or technologies that we may in-license or acquire; and • the other risks and uncertainties described under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and in “Special Note Regarding Forward-Looking Statements and Market Data” and elsewhere in this Quarterly Report. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, including potential collaborations, licenses, and other similar arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, 22 Table of Contents may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from factors that include but are not limited to, inflation, the conflict between Russia and Ukraine, diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. If we raise additional funds through future collaborations, licenses, or other similar arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, product candidates, research programs intellectual property or proprietary technology, or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed or on terms acceptable to us, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves, or on less favorable terms than we would otherwise choose. Cash Flows Comparison of the Six Months Ended June 30, 2023 and 2022 Since our inception, we have primarily used our available cash to fund expenditures related to the in-license and development of lorundrostat. The following table sets forth a summary of cash flows for the periods presented: Three Months Ended June 30, 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ (33,161) $ (12,047) Investing activities (156,390) — Financing activities 202,990 129,648 Net $ 13,439 $ 117,601 Operating Activities Net cash used in operating activities of $33.2 million during the six months ended June 30, 2023 increased, compared to $12.0 million during the six months ended June 30, 2022, which was primarily attributable to an increase in cash used to support our operating activities, including but not limited to, the development of lorundrostat and related clinical trial expenses, personnel and compensation expense, legal and professional fees to support our operations, and general working capital requirements. The $21.1 million increase in cash used consisted of an increase in net loss, adjusted for non-cash expenses, of approximately $11.5 million and the net effect of changes in working capital of $9.6 million. Investing Activities Net cash used in investing activities of $156.4 million during the six months ended June 30, 2023 increased, compared to zero during the six months ended June 30, 2022, which was attributable to purchases of marketable securities of $218.9 million during the six months ended June 30, 2023 subsequent to receiving cash proceeds from our IPO in February 2023, partially offset by maturities of the marketable securities of $62.5 million during the six months ended June 30, 2023. 23 Table of Contents Financing Activities Net cash provided by financing activities of $203.0 million during the six months ended June 30, 2023 increased, compared to $129.6 million during the six months ended June 30, 2022. During the six months ended June 30, 2023, we received aggregate gross proceeds of $220.8 million from the sale of our common stock in our IPO in February 2023 and paid $17.8 million of underwriting discounts, commissions, and offering costs in the same period. During the six months ended June 30, 2022, we received $129.6 million in net proceeds from the issuance and sale of our Series A and Series B convertible preferred stock. Contractual Obligations and Commitments Under the Mitsubishi License, we have milestone payment obligations that are contingent upon the achievement of certain development milestones and specified levels of product sales and are required to make certain royalty payments in connection with the sale of products developed under the agreement. We are currently unable to estimate the timing or likelihood of achieving future milestones or making future product sales. See above and Note 4. “ Commitments and Contingencies ” to our financial statements included elsewhere in this Quarterly Report for additional information regarding the Mitsubishi License. We enter into contracts in the normal course of business for contract research services, contract manufacturing services, professional services, and other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts. Critical Accounting Estimates We have prepared the condensed financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures at the date of the condensed financial statements, and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its critical estimates, including those related to prepaid and accrued research and development expenses and stock-based compensation. We base our estimates on our historical experience and on assumptions that we believe are reasonable; however, actual results may differ materially from these estimates under different assumptions or conditions. There were no changes during the six months ended June 30, 2023 to our critical accounting estimates as disclosed in our 2022 Annual Report on Form 10-K. For information on our significant accounting policies, please refer to Note 2. “ Summary of Significant Accounting Policies ” within our 2022 Annual Report on Form 10-K. JOBS Act and Smaller Reporting Company Status As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended (the JOBS Act), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur 24 Table of Contents if, among other factors, the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year (subject to certain conditions), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. Recently Issued Accounting Pronouncements We have reviewed all recently issued accounting pronouncements and have determined that, other than as disclosed elsewhere in this Quarterly Report, such standards do not have a material impact on our financial statements or do not otherwise apply to our operations.