What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-03-25 compared with 2020-03-12 · 7 added, 322 removed, 6 unchanged (98% of the section changed)

1 unchanged sentence

Price Range of Our Common Stock

common stock is traded on The Nasdaq Global Market under the symbol NLTX.

Our common stock is traded on The Nasdaq Global Market under the symbol “NLTX.”

As of March 22, 2021, there were 42,326,033 shares of our common stock outstanding, which were held by 10 holders of record of our common stock, including The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.

Dividend Policy

We have not paid any cash dividends on our common stock since our inception.

We do not intend to pay any cash dividends in the foreseeable future, but intend

to retain all earnings, if any, for use in our business operations.

As of March 12, 2020, there were 38,373,160 shares of our common stock outstanding, which were held by 41 holders of record of our common stock, including

The Depository Trust Company, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.

Authorized for Issuance under Equity Compensation Plans

The information required by this item will be included in an amendment to this Annual

Report on Form 10-K or incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A.

We do not intend to pay any cash dividends in the foreseeable future, but intend to retain all earnings, if any, for use in our business operations.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this item will be included in an amendment to this Annual Report on Form 10-K or incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A.

Stock Performance Graph

Our common stock trades

on The Nasdaq Global Market.

The graph and table below show the cumulative total return to our stockholders during the period from December 31, 2014 through December 31, 2019 in comparison to the cumulative return on the Nasdaq Composite

Index and the Nasdaq Biotechnology Index during that same period.

The results assume that $100 was invested on December 31, 2014 in our common stock and each of the indexes listed above, including reinvestment of dividends, if any.

For the period December 31, 2014 to December 31, 2019

Neoleukin Therapeutics, Inc.

Nasdaq Composite Index

Nasdaq Biotechnology Index

This information under Stock Performance Graph is not deemed filed with the Securities and Exchange Commission and

is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in those filings.

Recent Sales of Unregistered Equity Securities.

As additional consideration for the rights we license from UW under the Exclusive License Agreement, on December 20, 2019 we issued 12,647 shares of

common stock to UW pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Instruction 6 to Item 201(e) of Regulation S-K we are not required to provide the stock performance graph.

Selected Financial Data.

The following selected financial data should be read in conjunction with our consolidated financial statements and notes to our consolidated financial

statements and Managements Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere in this Annual Report on Form 10-K.

The selected Consolidated

Statements of Operations data for the years ended December 31, 2019, 2018 and 2017 and Consolidated Balance Sheet data as of December 31, 2019 and 2018 have been derived from our audited consolidated financial statements appearing

elsewhere in this Annual Report on Form 10-K.

The selected Consolidated Statements of Operations data for the years ended December 31, 2016 and 2015 and Consolidated Balance Sheet data as of

December 31, 2017, 2016 and 2015 have been derived from our audited consolidated financial statements prepared in accordance with U.S.

GAAP which are not included in this Annual Report on Form 10-K.

Historical results are not necessarily indicative of future results.

Consolidated Statement of Operations Data

(In thousands of U.S.

dollars, except per share and share amounts)

Operating expenses:

Research and development

Acquired in-process research &

General and administrative

Total operating expenses

Loss from operations

Total loss attributable to common stockholders

Net loss per common stockbasic and diluted

Basic and diluted weighted average common stock outstanding

Consolidated Balance Sheet Data (1)

(In thousands of U.S.

Cash, cash equivalents and short-term investments

Working capital

Total liabilities

Total stockholders equity

Total liabilities and stockholders equity

The 2019 Consolidated Balance Sheet Data reflect $80.7 million in net proceeds received from an

underwritten public offering of our common stock that was completed in December 2019.

The 2016 Consolidated Balance Sheet Data reflect $70.7 million in net proceeds received from an underwritten public offering of our common stock that was

completed in September 2016.

The 2015 Consolidated Balance Sheet Data reflect $91.8 million in net proceeds received from an underwritten public offering of our common stock that was completed in September 2015.

The following table contains selected financial data for each quarter of 2019 and 2018.

The information

should be read in conjunction with our consolidated financial statements and related notes included in the quarterly filings with the SEC in our Quarterly Reports on Form 10-Q.

We believe that the following

information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

The operating results for any quarter are not necessarily indicative of results for any future period.

Quarterly Financial Data

(In thousands of U.S.

dollars except per share information)

THREE MONTHS ENDED

Total operating expenses

Net loss attributable to common stockholders

Net loss per common stockbasic and diluted

THREE MONTHS ENDED

Total operating expenses

Net loss attributable to common stockholders

Net loss per common stockbasic and diluted

Managements Discussion and Analysis of Financial Condition

and Results of Operations.

Forward-Looking Statements

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and

related notes appearing elsewhere in this Annual Report on Form 10-K.

This discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and involve risks and uncertainties.

Actual events or results may differ materially.

Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors.

We discuss many of these risks, uncertainties and

other factors in this Annual Report on Form 10-K in greater detail under the heading Item 1ARisk Factors. We caution investors that our business and financial performance are subject to

substantial risks and uncertainties.

are a biopharmaceutical company creating next generation immunotherapies for cancer, inflammation and autoimmunity using de novo protein design technology.

We use sophisticated computational methods to design proteins that

demonstrate specific pharmaceutical properties that provide potentially superior therapeutic benefit over native proteins.

Our lead product candidate, NL-201, is a combined

IL-2 and IL-15 agonist designed to eliminate alpha receptor binding.

Neoleukin/Aquinox Merger

On August 8, 2019,

Neoleukin Therapeutics, Inc., or Former Neoleukin, completed its merger with Aquinox Pharmaceuticals, Inc., or Aquinox, in accordance with the terms of the Agreement and Plan of Merger dated August 5, 2019, or the Merger Agreement, by and among

Former Neoleukin, Aquinox and Apollo Sub, Inc., a wholly-owned subsidiary of Aquinox.

Pursuant to the Merger Agreement, Apollo Sub, Inc.

merged with and into Former Neoleukin, with Former Neoleukin surviving the Merger as a wholly-owned subsidiary

of Aquinox, referred to herein as the Merger.

Upon completion of the Merger, Aquinox was renamed Neoleukin Therapeutics, Inc.

and our common stock trades under the ticker symbol NLTX on the Nasdaq Global Market.

Results of Operations

In this section, we discuss the

results of our operations for the year ended December 31, 2019 compared to the year ended December 31, 2018.

For a discussion of the year ended December 31, 2018 compared to the year ended December 31, 2017,

please refer to Part II, Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31,

Prior to the Merger, we had

entered into an exclusive license and collaboration agreement with Astellas US LLC, a subsidiary of Astellas Pharma Inc., or Astellas, in May 2018.

As consideration for entering into this agreement, we received a

non-refundable upfront payment of $25.0 million and potential future royalties and milestone payments.

On November 8, 2018, we entered into an Early Termination Agreement with Astellas to

terminate the agreement.

The upfront payment of $25.0 million from Astellas was non-refundable and was recorded as revenue in 2018.

Operating Expenses

The following table summarizes

our operating expenses for the years ended December 31, 2019, 2018 and 2017:

YEAR ENDED DECEMBER 31,

(in thousands of U.S.

Research and development

Acquired in-process research and development

General and administrative

Total operating expenses

Research and Development Expenses

Prior to the Merger, we had suspended all research and development activities.

Since the completion of the Merger in August 2019, we have been actively engaged

in research and development activities to advance our lead product candidate, NL-201 and other Neoleukin technologies.

Research and development expenses for the year ended December 31, 2019 were $4.4 million compared to $41.8 million for the year ended

December 31, 2018.

The lower research and development costs during the year ended December 31, 2019 was the result of the suspension of all research and development activities with rosiptor in June 2018 and a $1.9 million credit

arising from reductions to accrued research and development expenses following confirmation by vendors that final costs were less than contracted.

This was partly offset by research and development expenses of

NL-201 incurred following the completion of the Merger.

in-process Research and Development

The acquired in-process

research and development that arose from the Merger was expensed immediately as management determined that the asset has no alternative future use in accordance with current accounting standards.

General and Administrative Expenses

administrative expenses consist primarily of personnel related costs (including severance, stock-based compensation and travel expenses), facility-related costs, insurance, public company expenses, professional fees for consulting, legal and

accounting services, and restructuring costs.

For the year ended December 31, 2019, general and administrative expenses were $18.8 million

compared to $15.8 million for the year ended December 31, 2018.

The increase in general and administrative expenses during the year ended December 31, 2019 as compared to the year ended December 31, 2018 was primarily due to

Merger related severance costs and the recognition of stock based compensation expense for certain options that vested as a result of the Merger but partly offset by lower personnel and overhead costs as a result of the restructurings in the second

half of 2018.

Other income, net

(in thousands)

Interest income

Foreign exchange losses

Miscellaneous expenses

Total other income, net

Interest income during the year ended December 31, 2019 was consistent with 2018 as a result of an increase in interest

rates offsetting a reduction in cash and investment balances for the year ended December 31, 2019.

Interest income increased during the year ended December 31, 2018 compared to 2017 as a result of increase in interest rates, partly offset

by a reduction in cash and investment balances during the year ended December 31, 2018.

Foreign exchange losses for the years ended

December 31, 2019 and 2018 were insignificant as the net effect of change in foreign exchange rates on our foreign currency holdings was offset by the net effect on our foreign currency liabilities.

Miscellaneous expenses for the year ended December 31, 2019 were primarily normal recurring bank charges.

Miscellaneous expenses during the year ended

December 31, 2018 were higher in comparison to 2018 was the result of loss on disposal of property and equipment related to the closing of the San Bruno office.

Liquidity and Capital Resources

Since our inception, we

have incurred net losses and negative cash flows from our operations and relied upon sales of common and preferred stock to fund our operations.

Our operating activities used $15.4 million, $31.6 million and $44.7 million of cash

flows during the years ended December 31, 2019, 2018 and 2017, respectively.

As of December 31, 2019, we had an accumulated deficit of $299.5 million, working capital of $138.9 million, and cash and cash equivalents of

$143.1 million.

We believe that our existing capital resources will be sufficient to fund our operations for at least the next 12 months.

The following table summarizes our cash flows for the years ended December 31, 2019, 2018 and 2017:

YEAR ENDED DECEMBER 31,

(in thousands of U.S.

Net cash (used in) provided by:

Operating activities

Investing activities

Financing activities

Effect of exchange rate changes

Net change in cash and cash equivalents

Net cash used in operating activities

Net cash used in operating activities for the year ended December 31, 2019 decreased significantly compared to the year ended December 31, 2018

primarily due to a reduction in operating expenses resulting from the restructuring in the second half of 2018 and the halt of all research and development activities relating to rosiptor in June 2018, partly offset by expenses incurred in

connection with our research and development activities relating to NL-201 following the completion of the Merger.

Net cash used in operating activities for the year ended December 31, 2018 decreased

compared to the year ended December 31, 2017 due to the recognition of the non-refundable upfront payment received from Astellas in June 2018, partly offset by higher operating expenses.

Net cash (used in) provided by investing activities

cash used in investing activities for the year ended December 31, 2019 was primarily the result of the acquisition of laboratory and computer equipment, partly offset by net cash received on the completion of the Merger.

Net cash provided by

investing activities for the years ended December 31, 2018 and 2017 resulted from the maturity of short and long-term investments.

provided by financing activities

Net cash provided by financing activities for the year ended December 31, 2019 resulted from the public offering

of shares of our common stock in December 2019 for gross proceeds of $86.2 million, before underwriting discounts, commissions and offering expenses of $5.5 million, and proceeds from the exercise of stock options of $1.5 million.

cash provided by financing activities for the years ended December 31, 2018 and 2017 resulted from the proceeds from the exercise of stock options.

Operating and Capital Expenditure Requirements

not generated product revenue or achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future.

As of December 31, 2019, we had approximately $143.1 million in cash and cash

Based on our current operating plan, we believe that our available cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements through 2022.

However, our future capital requirements

and the period for which we expect our existing resources to support our operations, fund expansion, develop new or enhanced products, or otherwise respond to competitive pressures, may vary significantly from our expectation and we may need to seek

additional funds sooner than planned.

Unless and until we generate sufficient revenue to be profitable, we will seek to fund our operations through public or private equity or debt financings or other sources.

If we raise additional funds through

the issuance of convertible debt securities, these securities could have rights senior to those of our common stock and could contain covenants that restrict our operations.

There can be no assurance that we will be able to obtain additional equity

or debt financing on terms acceptable to us, if at all.

Our failure to obtain sufficient funds on acceptable terms when needed could have a negative impact on our business, results of operations, financial condition, cash flows and future prospects.

Our future capital requirements will depend on many factors, including:

the number and characteristics of any future product candidates we develop or may acquire;

the scope, progress, results and costs of researching and developing our product candidates or any future product

candidates, and conducting preclinical studies and clinical trials;

the timing of, and the costs involved in, obtaining regulatory approvals for any future product candidates;

the cost of manufacturing our future product candidates and any products that may achieve regulatory approval;

the cost of commercialization activities if any future product candidates are approved for sale, including

marketing, sales and distribution costs;

the timing, receipt and amount of sales of, or royalties on, future approved products, if any;

our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial

terms of such agreements;

any product liability or other lawsuits related to our products;

the expenses needed to attract and retain skilled personnel;

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims,

including litigation costs and the outcome of such litigation.

Please see Item 1A of this Annual Report titled Risk Factors

for additional risks associated with our substantial capital requirements.

Contractual Obligations and Commitments

The following is a summary of our long-term contractual cash obligations as of December 31, 2019:

Operating lease obligations (1)(2)

Finance lease obligations

Laboratory equipment

We have a lease agreement for approximately 10,946 square feet of office space in Canada which was effective on

November 1, 2016 and expires October 31, 2021, with the option to extend the lease to October 31, 2026.

The dollar amounts shown in these columns reflect the U.S.

dollar equivalent of the obligations.

The amounts were converted to

dollars from CAD dollars using the December 31, 2019 daily closing exchange rate of US$0.76994.

lease agreement for approximately 6,272 square feet of office space in Seattle, Washington which was commenced on October 1, 2019 and expires October 31, 2021.

In addition to the basic rent, we are obligated to pay for taxes, operating

costs, utilities, additional services and other amounts.

On December 23, 2019, we entered into a lease agreement for the lease of approximately 33,300 square

feet of office space in Seattle, Washington, for our future principal executive offices, a laboratory for research and development and related uses.

The lease was signed on December 23, 2019, rent commences on December 1, 2020 and expires

on December 1, 2028, with the option to extend the lease for two five-year terms.

We will be obligated to pay approximately $2.0 million in annual basic rent for the first year of the lease, approximately $2.1 million in the second

year, approximately $2.1 million in the third year, approximately $2.2 million in the fourth year, approximately $2.2 million in the fifth year and approximately $9.1 million in the sixth, seventh and eighth years.

be responsible for the payment of additional rent to cover our share of the annual operating and tax expenses and utilities costs for the building.

The operating lease obligation related to this office lease agreement is included in the table above

as the lease was signed before December 31, 2019.

Purchase Commitments

We have no material non-cancelable purchase commitments with contract manufacturers or service providers as we have

generally contracted on a cancelable purchase order basis.

Milestone, Royalty-Based and Other Commitments

We have an exclusive license agreement with the University of Washington, or UW, under which UW (on behalf of itself and Stanford University) granted us an

exclusive worldwide license under certain patent rights, to make, have made, use, offer to sell, sell, offer to lease or lease, import, export or otherwise offer to dispose of licensed products in all fields of use, and a nonexclusive worldwide

license to use certain know-how.

The foregoing licenses are sublicensable without UWs consent, subject to certain limited conditions.

As consideration for the licensed rights, Former Neoleukin issued shares of common stock to UW, which upon the Merger were exchanged for 188,974 shares of our

common stock and 4,197 shares of our non-voting convertible preferred stock.

Pursuant to the license agreement, we also granted to UW an assignable right to participate in any of our future sale of equity

securities, subject to certain exclusions.

Furthermore, we are required to pay;

(i) an annual maintenance fee starting in January 2022 (but

excluding any year in which minimum annual royalties are paid);

(ii) up to $0.9 million in combined development and regulatory milestone payments with respect to each distinct class of licensed product;

(iii) up to $10.0 million in

combined commercial milestone payments based on cumulative net sales of licensed products within each distinct class of licensed products, beginning when cumulative net sales of the class of licensed products equals or exceeds $100.0 million,

with the majority payable when cumulative net sales of the class of licensed products equals or exceeds $1.0 billion;

(iv) a low single-digit royalty on net sales of licensed products sold by us and our sublicensees, which may be subject

to reductions, and subject to minimum annual royalty payments following the first commercial sale of a licensed product;

(v) a certain percentage of any sublicense consideration (other than royalties) we receive from sublicensees, based on the

stage of development at the time the sublicense is executed;

and (vi) a certain percentage of consideration we receive from an acquisition of us or our assets based on the stage of development at the relevant time.

We are obligated to pay

royalties on a country-by-country basis until the expiration of the last valid claim within the licensed patent rights in such country.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of these consolidated financial statements in accordance with U.S.

GAAP requires us to make estimates and judgments that affect the reported

amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued liabilities, stock-based compensation and

derivative liabilities.

We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the

carrying values of assets and liabilities that are not readily apparent from other sources.

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

While our significant accounting policies are described in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we

believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Research and Development Expenses

development costs are charged to expense as incurred and include, but are not limited to, employee-related expenses, including salaries, benefits and stock based compensation, expenses incurred under agreements with CROs and investigative sites that

conduct clinical trials and preclinical studies, the cost of acquiring, developing and manufacturing clinical trial materials, costs incurred in relation to purchase of technology licenses and patent rights, facilities and other expenses, which

include direct and allocated expenses for rent and maintenance of facilities, and other supplies and costs associated with clinical trials, preclinical activities, and regulatory operations.

Restructuring costs associated with the termination of

research and development programs and related employees are included in research and development costs.

Development costs are expensed in the period

incurred unless we believe a development project meets generally accepted accounting criteria for deferral and amortization.

No product development expenditures have been deferred to date.

We record costs for certain development activities, such as

clinical trials, based on our evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors on their actual costs incurred.

these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued liabilities, as the case may be.

Stock-Based Compensation

We measure the cost of

services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The cost of such award will be recognized over the period during which services are provided in exchange for the award, generally the

vesting period.

We account for forfeitures as they occur.

All share-based payments to employees are recognized in the consolidated financial statements based upon their respective grant-date fair values.

We estimate the fair value of options granted using the Black-Scholes option pricing model.

This approximation uses assumptions regarding a number of inputs

that required us to make significant estimates and judgments, including the expected term of the options.

We also make decisions regarding the method of calculating the expected stock price volatility and the risk-free interest rate used in the

The expected volatility assumption is based on industry peer information and the Company expects to continue to do so until it has adequate and relevant historical volatility of its common stock.

Additionally, because we have no significant

history to calculate the expected term, the simplified method calculation is used.

There is inherent uncertainty in our forecasts and projections and, if

we had made different assumptions and estimates than those described previously, the amount of our stock-based compensation expense, net loss and net loss per common stock amounts could have been materially different.

Asset Acquisition

We use assumptions and estimates in determining the fair value of assets acquired and liabilities assumed.

We accounted for our transaction with Neoleukin as

an asset acquisition as substantially all the value of the acquisition is concentrated in one identifiable intangible asset.

The determination of the fair value of intangible assets, which represent a significant portion of the purchase price in our

acquisition of Neoleukin, requires the use of significant judgment.

We estimate the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from the identifiable intangible assets acquired.

The present value of the projected cash flow are used to estimate the fair value of the assets acquired at the date of acquisition.

Actual cash flows arising from a particular intangible asset could vary from projected cash flows which could imply

different carrying values from those established at the dates of acquisition.

Other areas requiring significant judgement include (i) whether such intangibles have alternative future use;

and (ii) whether such intangibles are amortizable

or non-amortizable and, if the former, the period and the method by which the intangible asset will be amortized.

In relation to the Merger, we determined that the asset related to acquired in-process research and development has no alternative future use and was expensed immediately upon the completion of the transaction.

Recent Accounting Pronouncements

See Note 2(s),

Recently issued and recently adopted accounting standards in the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as of December 31, 2019.

As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Item 301(c) of Regulation S-K we are not required to provide selected financial data.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity