What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 397 added, 124 removed, 233 unchanged (69% of the section changed)

3 unchanged sentences

(In thousands, except share and par value data)

As of March 31, 2022

As of December 31, 2021

Current assets:

6 unchanged sentences

Other non-current assets

Liabilities and stockholders’ equity

Liabilities and stockholders’

Current liabilities:

8 unchanged sentences

Commitments and contingencies

Stockholders’ equity:

Stockholders’

Common stock, $ 0.0001 par value;

200,000,000 shares authorized at March 31, 2022 and December 31, 2021;

24,458,550 shares issued and outstanding at March 31, 2022;

and 24,457,838 and 24,455,390 shares issued and outstanding at December 31, 2021, respectively

200,000,000 shares authorized at June 30, 2022 and

December 31, 2021;

24,479,646 shares issued and outstanding at June 30, 2022;

24,457,838 and 24,455,390 shares issued and outstanding at December 31, 2021, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive income

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’

Total liabilities and stockholders’

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

2 unchanged sentences

(In thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating expenses:

3 unchanged sentences

Loss from operations

Other (loss) income

Unrealized gain on short-term investments

4 unchanged sentences

RENEO PHARMACEUTICALS, INC.

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit )

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’

Equity (Deficit )

(In thousands, except share data)

Three Months Ended March 31, 2022

Preferred Stock

3 unchanged sentences

Stock based compensation

Stock option exercise and common shares vested

Issuance of common stock in

connection with equity plans

Other comprehensive income

Balances, March 31, 2022

Three Months Ended March 31, 2021

Stock based compensation

Issuance of commons stock in

connection with equity plans

Other comprehensive income

Balances, June 30, 2022

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

RENEO PHARMACEUTICALS, INC.

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’

Equity (Deficit) (Continued)

(In thousands, except share data)

Preferred Stock

1 unchanged sentence

Stockholders'

Equity (Deficit)

Balances, December 31, 2020

Issuance of series B convertible preferred stock, net of issuance costs of $ 29

Issuance of series B convertible

preferred stock, net of issuance

costs of $ 29

Stock based compensation

Stock option exercise

Issuance of common stock in

connection with equity plans

Balances, March 31, 2021

Conversion of convertible preferred

stock into common stock upon

initial public offering

Issuance of common stock in initial

public offering, net of offering costs

Stock based compensation

Issuance of common stock in

connection with equity plans

Other comprehensive income

Balances, June 30, 2021

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

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

6 unchanged sentences

Changes in operating assets and liabilities:

Accounts payable and accrued expenses

Prepaid expenses and other assets

Accounts payable and accrued expenses

Operating lease liabilities

8 unchanged sentences

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

Proceeds from issuance of common stock pursuant to equity award plans

Costs paid in connection with initial public offering

Proceeds from initial public offering, net of offering costs

Proceeds from issuance of common stock in connection with equity plans

Net cash provided by financing activities

6 unchanged sentences

Property and equipment in accounts payable

Unpaid Series B convertible preferred stock issuance costs

Accrued deferred initial public offering costs

18 unchanged sentences

Since inception in 2014, the Company has incurred significant losses and negative cash flows from operations.

As of March 31, 2022, the Company had cash, cash equivalents and short-term investments of $ 138.7 million and an accumulated deficit of $ 97.8 million.

Due to the Company’s continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future and may never become profitable.

As of June 30, 2022, the Company had cash, cash equivalents and short-term investments of $ 126.9 million and an accumulated deficit of $ 110.1 million.

Due to the Company’s continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future and may never become profitable.

As a result, the Company will need to raise capital through public or private equity or debt financings, government or other third-party funding, collaborations, strategic alliances and licensing arrangements or a combination of these.

In May 2022, the Company entered into an at-the-market equity offering sales agreement with SVB Securities LLC (ATM facility) under which the Company may offer and sell, from time to time at its sole discretion, up to $ 20.0 million in shares of its common stock.

The Company has no t sold shares of common stock under the ATM facility as of June 30, 2022 .

Summary of Significant Accounting Policies

1 unchanged sentence

The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in

the United States of America (GAAP) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading.

The Company recommends that the unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements, have been included in the accompanying unaudited financial statements.

Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of March 31, 2021;

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of June 30, 2022 ;

all intercompany transactions and balances have been eliminated.

Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements for the three months ended March 31,2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The significant accounting policies used in the preparation of these consolidated financial statements for the six months ended June 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

New Accounting Pronouncements

13 unchanged sentences

The Company adopted this standard on January 1, 2022 .

Adoption of this standard had no material impact on the Company’s consolidated financial position, results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASC 326), Measurement of Credit Losses on Financial Instruments .

The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income.

For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in the carrying value of the asset.

2 unchanged sentences

The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

The ASU clarifies that (1) a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value, (2) an entity

cannot, as a separate unit of account, recognize and measure a contractual sale restriction, and (3) new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with ASC 820.

The new guidance is effective for the Company for fiscal years beginning after December 15, 2023.

The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

Net Loss Per Share

1 unchanged sentence

Diluted net loss per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive.

For purposes of this calculation, common stock equivalents include the Company’s stock options and convertible preferred stock, which are convertible into shares of the Company’s common stock.

As of March 31, 2022, no shares of convertible preferred stock were outstanding.

No shares related to the convertible preferred stock were included in the diluted net loss per share calculation for the three months ended March 31, 2021 because the inclusion of such shares would have had an anti-dilutive effect.

The shares to be issued upon exercise of all outstanding stock options and restricted stock units were also excluded from the diluted net loss per share calculation for the three months ended March 31, 2022 and 2021 because such shares are anti-dilutive.

For purposes of this calculation, common stock shares to be issued upon exercise of all outstanding stock options and restricted stock units were excluded from the diluted net loss per share calculation for the three and six months ended June 30, 2022 and 2021 because such shares are anti-dilutive.

Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following:

As of March 31,

Convertible preferred stock (as converted)

As of June 30,

Common stock options outstanding

1 unchanged sentence

Fair Value Measurements

ASC 820, Fair Value Measurement , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).

Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As a basis for considering market

participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than quoted prices in active markets, that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

Level 1 –

Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 –

Inputs, other than quoted prices in active markets, that are observable for the asset or liability, either directly or indirectly.

Level 3 –

Unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company’s financial assets are subject to fair value measurements on a recurring basis.

The Company categorized its money market funds as Level 1, using the quoted prices in active markets.

1 unchanged sentence

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.

The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets.

In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a special performance award in the amount of $ 7.5 million (Performance Award), payable in cash, common stock or a combination of cash and common stock, at the election of the Company, based on achievement of certain conditions as described in more detail in Note 8.

In connection with the Company's chief executive officer's (CEO) employment agreement, he is entitled to receive a special performance award in the amount of $ 7.5 million (Performance Award), payable in cash, common stock or a combination of cash and common stock, at the election of the Company, based on achievement of certain conditions as described in more detail in Note 8.

The Company estimated the fair value of the Performance Award using a Monte Carlo simulation, which incorporates the stock price at the date of the valuation and utilizes Level 3 inputs such as volatility, probabilities of success, and other inputs that are not observable in active markets.

The Performance Award is required to be measured at fair value on a recurring basis each reporting period, with changes in the fair value recognized in general and administrative expense in the consolidated statements of operations and comprehensive loss over the derived service period of the award.

No assets or liabilities were transferred into or out of their classifications during the three months ended March 31, 2022.

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at March 31, 2022 consisted of the following (in thousands):

No assets or liabilities were transferred into or out of their classifications during the six months ended June 30, 2022.

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at June 30, 2022 consisted of the following (in thousands):

Quoted Prices in

Active Markets

For Identical

Significant Other

For Identical Items

Observable Inputs

Cash and cash equivalents:

3 unchanged sentences

Performance award

The following table summarizes changes in fair value measurements of the Performance Award during the three months ended March 31, 2022 (in thousands):

The following table summarizes changes in fair value measurements of the Performance Award during the six months ended June 30, 2022 (in thousands):

Balance as of January 1, 2022

Change in fair value

Balance as of March 31, 2022

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at December 31, 2021 consisted of the following (in thousands):

Balance as of June 30, 2022

T he recurring fair value measurement of the Company’s assets and liabilities measured at fair value at December 31, 2021 consisted of the following (in thousands):

Quoted Prices in

Active Markets

For Identical

Significant Other

For Identical Items

Observable Inputs

Cash and cash equivalents:

5 unchanged sentences

Accrued expenses consisted of the following (in thousands):

As of March 31, 2022

As of June 30, 2022

As of December 31, 2021

4 unchanged sentences

Total accrued expenses

The Company’s headquarters are located in Irvine, California, where it leases office space.

The Company leases additional office space located in San Diego, California, and in Kent, United Kingdom.

The lease terms for the Irvine, San Diego, and Kent offices extend through November 30, 2026, July 31, 2023, and December 20, 2022, respectively.

The Company’s headquarters are located in Irvine, California, where it leases office space.

The Company leases additional office space located in San Diego, California, and in Sandwich, United Kingdom.

The lease terms for the Irvine, San Diego, and Sandwich offices extend through November 30, 2026, July 31, 2023, and December 20, 2022, respectively.

The Company adopted ASU 2016-02 on January 1, 2022, which requires it to recognize a liability for lease payments and a ROU asset on the balance sheet.

1 unchanged sentence

Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components.

At March 31, 2022, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 5 % and 4.1 years, respectively.

During the three months

ended March 31, 2022, operating lease expenses recognized and cash paid for amounts included for the measurement of lease liabilities were immaterial.

The Company has elected to net the amortization of the ROU assets and the reduction of the lease liabilities principal in other current and long-term liabilities in the consolidated statements of cash flows.

At June 30, 2022 , the weighted average incremental borrowing rate was 5 % and the weighted average remaining lease term was 4.0 years for the operating leases held by the Company.

During the three and six months ended June 30, 2022, cash paid for amounts included for the measurement of lease liabilities was $ 0.1 million and $ 0.3 million, respectively.

During the three and six months ended June 30, 2022, the Company recorded operating lease expense of $ 0.1 million and $ 0.3 million, respectively.

Maturities of lease liabilities by fiscal year for our operating leases are as follows:

As of March 31, 2022

2022 (remaining nine months)

As of June 30, 2022

2022 (remaining six months)

Total lease payments

1 unchanged sentence

Present value of lease liabilities

Convertible Preferred Stock and Stockholders’ Equity

Convertible Preferred Stock

Series A Convertible Preferred Stock

As of March 31, 2022, there were no shares of Series A convertible preferred stock outstanding.

As of June 30, 2022 , there were no shares of Series A convertible preferred stock outstanding.

In connection with the IPO (Note 1) in April 2021, all outstanding shares of Series A convertible preferred stock were converted into 5,430,957 shares of common stock.

Series B Convertible Preferred Stock

As of March 31, 2022, there were no shares of Series B convertible preferred stock outstanding.

In March 2021, the Company completed milestone closing of it’s the Series B convertible preferred stock financing and sold a total of 23,440,514 shares of Series B convertible preferred stock, at $ 2.0215 per share for aggregate net proceeds of approximately $ 47.4 million.

As of June 30, 2022 , there were no shares of Series B convertible preferred stock outstanding.

In March 2021, the Company completed the milestone closing of its the Series B convertible preferred stock financing and sold a total of 23,440,514 shares of Series B convertible preferred stock, at $ 2.0215 per share, for aggregate net proceeds of approximately $ 47.4 million.

In connection with the IPO in April 2021, all outstanding shares of Series B convertible preferred stock were converted into 10,476,672 shares of common stock.

Stock-Based Compensation

In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the 2014 Equity Incentive Plan (2014 Plan).

In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the Company's 2014 Equity Incentive Plan (2014 Plan).

As of the effectiveness of the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan.

Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s affiliates.

Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other awards to individuals who are employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s affiliates.

Under the 2014 Plan, certain employees were granted the ability to early exercise their options.

1 unchanged sentence

The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination.

The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until

those shares vest.

As of March 31, 2022, there were no shares subject to stock options that have been early exercised.

The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest.

As of June 30, 2022 , there were no shares subject to stock options that have been early exercised.

Shares Reserved for Future Issuance

As of March 31, 2022, the Company had reserved shares of its common stock for future issuance as follows:

As of June 30, 2022, the Company had reserved shares of its common stock for future issuance as follows:

Common stock options outstanding

2 unchanged sentences

Available for future grants under the 2021 Employee Stock Purchase Plan

Available for future grants outside of the 2021 Plan as inducement award

Available for future grants outside of the 2021 Plan as inducement awards

Total shares of common stock reserved

Stock Options

A summary of the Company’s stock option activity and related information during the three months ended March 31, 2022 is as follows:

Average Exercise

Weighted-Average

A summary of the Company’s stock option activity and related information during the six months ended June 30, 2022 is as follows:

Contractual Term

Intrinsic Value

Outstanding at December 31, 2021

Forfeited/Expired

Outstanding at March 31, 2022

Vested at March 31, 2022

Exercisable at March 31, 2022

Options exercisable at March 31, 2022 include vested options and options eligible for early exercise.

All outstanding options as of March 31, 2022 are expected to vest.

Unrecognized stock-based expense at March 31, 2022 was $ 10.4 million, which is expected to be recognized over a weighted-average vesting term of 2.9 years.

Outstanding at June 30, 2022

Vested at June 30, 2022

Exercisable at June 30, 2022

Options exercisable as of June 30, 2022 include vested options and options eligible for early exercise.

All outstanding options as of June 30, 2022 are expected to vest.

Unrecognized stock-based compensation expense at June 30, 2022 was $ 9.7 million, which is expected to be recognized over a weighted-average vesting term of 2.7 years.

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Risk-free interest rate

4 unchanged sentences

The Company bases the risk-free interest rate assumption on the U.S.

Treasury’s rates for U.S.

Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

8 unchanged sentences

Fair value of common stock.

For periods prior to the IPO, since there had been no public market for the Company’s common stock, the Company’s board of directors, with input from management, determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant.

assessment of additional objective and subjective factors that it believed were relevant.

Performance-Based Restricted Stock Units (PSUs)

The following table summarizes PSU activity as of March 31, 2022, under the 2021 Plan:

Average Grant Date

Outstanding at December 31, 2021

Outstanding at March 31, 2022

The PSUs vest based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date.

The fair value of the awards was based on the value of the Company’s common stock at the date of the award and expense recognition is based on the probability of achieving the performance metric.

The Company concluded that achievement of the performance conditions was not probable as of March 31, 2022, and therefore no compensation expense was recognized for the three months ended March 31, 2022 in connection with the PSUs.

Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions.

The following table summarizes PSU activity as of June 30, 2022:

Weighted-Average

Unvested at December 31, 2021

Unvested at June 30, 2022

The PSUs vest based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date.

The fair value of the awards was based on the value of the Company’s common stock at the grant date of the award and expense recognition is based on the probability of achieving the performance conditions.

Stock-based compensation expense is adjusted in future periods for subsequent changes in the expected outcome of the performance conditions.

The Company concluded that achievement of the performance conditions was not probable as of June 30, 2022 , and therefore no stock-based compensation expense was recognized for the three and six months ended June 30, 2022 in connection with the PSUs.

As of June 30, 2022, unrecognized stock-based compensation expense related to the PSUs that were deemed not probable was $ 1.4 million.

Market-Based Awards

Restricted Stock Units

In December 2021, the Company granted 100,000 market-based restricted stock units (MRSUs) to its chief executive officer (CEO) pursuant to the 2021 Plan.

The MRSUs vest based on the Company’s closing stock price trading above $ 20 per share for 30 consecutive trading days subject to the employee’s continued employment with the Company through the date of achievement.

The share price of the Company’s common stock on the date of issuance of the MRSUs was $ 6.69 per share.

In December 2021, the Company granted 100,000 market-based restricted stock units (MRSUs) to its CEO pursuant to the 2021 Plan.

The share price of the Company’s common stock on the date of issuance of the MRSUs was $ 6.69 per share.

The fair value was $ 0.4 million based on Monte Carlo simulation model on the grant date.

Compensation expense is recognized over the derived service period of 3 years .

based compensation expense in connection with the MRSUs was immaterial for the three months ended March 31, 2022.

As of March 31, 2022, there was $ 0.4 million of unrecognized compensation expense related to this MRSU.

Stock-based compensation expense is recognized over the derived service period of 3 years .

Stock-based compensation expense in connection with the MRSUs was immaterial for the six months ended June 30, 2022.

As of June 30, 2022, there was $ 0.4 million of unrecognized stock-based compensation expense related to this MRSU.

Performance Award

In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a Performance Award in the amount of $ 7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $ 750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $ 750 million.

The Company has determined that the Performance Award is subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions.

In connection with the CEO’s employment agreement, he is entitled to receive a Performance Award in the amount of $ 7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $ 750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $ 750 million.

The Company has determined that the Performance Award is subject to ASC 718, Compensation –

Stock Compensation and includes both market and performance conditions.

Since the IPO, neither of the events have yet been satisfied.

The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as compensation cost over the derived service period.

During the three-months ended March 31, 2022, the Company reversed $ 0.4 million in compensation expenses as a direct result of decreased value of the Performance Award caused by a decline in the Company’s common stock price.

As of March 31, 2021, prior to the IPO, the Performance Award was not probable of being achieved;

therefore, no stock-based compensation expense was recognized during the three months ended March 31, 2021.

The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as stock-based compensation expense over the derived service period.

During the six months ended June 30, 2022 , the Company reversed approximately $ 0.4 million in stock-based compensation expenses as a direct result of decreased value of the Performance Award caused by a decline in the Company’s common stock price.

2021 Employee Stock Purchase Plan (ESPP)

In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO.

As of March 31, 2022, 8,624 shares have been issued under the ESPP.

In September 2021, the Company’s board of directors adopted the Company’s 2021 UK Sharesave Sub-plan (SAYE).

In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO.

As of June 30, 2022 , 29,720 shares have been issued under the ESPP.

In September 2021, the Company’s board of directors adopted the Company’s 2021 UK Sharesave Sub-plan (SAYE).

An allocation of 25,875 shares of common stock from the ESPP reserve pool was approved and reserved for issuance under the SAYE.

No shares have been issued under the SAYE through March 31, 2022.

The stock-based compensation expense related to the ESPP and SAYE for the three months ended March 31, 2022, was immaterial.

The following table summarizes stock compensation expense, including expense associated with award modifications for unvested options, reflected in the unaudited consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended March 31,

No shares have been issued under the SAYE through June 30, 2022.

The stock-based compensation expense related to the ESPP and SAYE for the three and six months ended June 30, 2022 and 2021, was immaterial.

The following table summarizes stock-based compensation expense, including expense associated with award modifications for unvested options, reflected in the unaudited consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

1 unchanged sentence

License Agreement

In December 2017, the Company entered into a License Agreement with vTv Therapeutics LLC (vTv Therapeutics) (the vTv License Agreement), under which the Company obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans.

To date, the Company has paid a $ 3.0 million upfront payment and a total of $ 2.0 million in milestone payments and issued an aggregate of 576,443 shares of our common stock to vTv Therapeutics.

agonists and products containing such PPARδ

agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans.

To date, the Company has paid a

$ 3.0 million upfront payment and a total of $ 2.0 million in milestone payments and issued an aggregate of 576,443 shares of our common stock to vTv Therapeutics.

Upon the achievement of certain pre-specified development and regulatory milestones, the Company is also required to pay vTv Therapeutics milestone payments totaling up to $ 64.5 million.

1 unchanged sentence

In addition, the Company is obligated to make royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions.

There were no milestone payments achieved or recorded for the three months ended March 31, 2022 and 2021.

Subsequent Events

On May 2, 2022, the Company entered into a sales agreement with SVB Securities LLC (ATM facility), under which the Company may offer and sell, from time to time at its sole discretion, up to $ 20.0 million in shares of its common stock.

The Company has no t yet sold any shares of its common stock under the ATM facility.

There were no milestone payments achieved or recorded for the three and six months ended June 30, 2022 and 2021 .

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Unless otherwise indicated, all references in this Quarterly Report on Form 10-Q to “Reneo,”

the “company,”

“we,”

“our,”

“us”

or similar terms refer to Reneo Pharmaceuticals, Inc.

and its subsidiary.

Forward-Looking Statements

In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors”

under Part II, Item 1A below.

In some cases, you can identify forward-looking statements by terminology such as “anticipate,”

“believe,”

“continue,”

“could,”

“estimate,”

“expect,”

“intend,”

“may,”

“plan,”

“potentially,”

“predict,”

“should,”

“will”

or the negative of these terms or other similar expressions.

In addition, statements that “we believe”

and similar statements reflect our beliefs and opinions on the relevant subject.

These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

Reneo is a clinical-stage pharmaceutical company focused on the development and commercialization of therapies for patients with rare genetic mitochondrial diseases, which are often associated with the inability of mitochondria to produce adenosine triphosphate (ATP).

Our lead product candidate, REN001, is a potent and selective agonist of the peroxisome proliferator-activated receptor delta (PPARδ).

REN001 has been shown to increase transcription of genes involved in mitochondrial function and increase fatty acid oxidation, and may increase production of new mitochondria.

The PPAR family of nuclear hormone receptors, PPARα, PPARγ, and PPARδ, control the transcription of genes critical for regulating energy metabolism and homeostasis.

is highly expressed in muscle, kidney, brain, and liver tissue.

Activation of PPARδ

results in changes in the expression of genes involved with multiple aspects of energy metabolism including uptake of fatty acids, utilization of fatty acids as an energy source, and mitochondrial biogenesis.

Increases in PPARδ

activity also correlate with a shift in muscle tissue towards oxidative, fat-consuming type I fibers that are associated with endurance as opposed to glycolytic, type II fibers.

In preclinical and clinical studies, increased PPARδ

activity through transgenic overexpression or pharmacological activation increases muscular strength and endurance across a variety of functional measures.

REN001 was studied in healthy male volunteers with one leg immobilized to produce muscle atrophy.

Compared to placebo, administration of REN001 resulted in statistically significant increases in expression of genes involved in mitochondrial oxidative phosphorylation, and statistically significant improvements in muscle strength.

REN001 was also studied in an open-label trial in patients with primary mitochondrial myopathies (PMM).

In this trial, administration of REN001 improved function, reduced symptoms, and increased expression of genes involved in mitochondrial activity.

As a PPARδ

agonist, REN001 may benefit patients with genetic mitochondrial myopathies who experience weakness, fatigue, or deterioration in muscle due to impaired mitochondrial energy production.

We are currently developing REN001 in rare genetic diseases that typically present with myopathy and have high unmet medical needs, including PMM and long-chain fatty acid oxidation disorders (LC-FAOD).

Patients with these diseases are unable to perform many everyday activities, can experience cardiomyopathy and other organ dysfunction, and typically have a reduced life expectancy.

We completed an open-label Phase 1b study in PMM patients with mitochondrial DNA defects to assess the safety and tolerability of REN001, and measure changes in functional tests such as walk distance, exercise capacity and patient-reported symptoms that could serve as potential endpoints in future clinical studies.

REN001 was well-tolerated and had an adequate safety profile in this trial.

Compared to baseline, patients receiving REN001 once-daily for 12 weeks experienced an average increase in distance of 104.4 meters in the 12-minute walk test (12MWT), an average increase in weight-adjusted peak oxygen consumption (VO2) of 1.7 mL/kg/min, a reduction in fatigue and pain, and increased expression of genes involved with transport and metabolism of nutrients in the mitochondria including Pyruvate dehydrogenase lipoamide kinase isozyme 4 (PDK4), Angiopoietin-like 4 (ANGPTL4), and Solute carrier family 25 member 34 (SLC25A34).

Based on these results, we initiated a global, randomized, double-blind, placebo-controlled Phase 2b study of REN001 in patients with PMM (STRIDE).

We expect to complete enrollment by year-end 2022 and announce topline results in the second half of 2023.

We are also conducting a two-year, open-label, long-term safety trial outside the United States (STRIDE AHEAD).

Following our interactions with the U.S.

Food and Drug Administration (FDA), European Medicines Agency (EMA), and several other European regulatory agencies, we believe that positive results from the ongoing STRIDE and STRIDE AHEAD studies could support registration of REN001 for adult PMM patients with mitochondrial DNA defects in both the United States and in Europe.

We completed an open-label Phase 1b study in LC-FAOD patients with nuclear DNA defects to assess the safety and tolerability of REN001, and measure changes in functional tests such as walk distance, exercise capacity and patient-reported symptoms that could serve as potential endpoints in future clinical studies.

The study included patients with defective long-chain 3-hydroxy acyl-CoA dehydrogenase (LCHAD), carnitine palmitoyltransferase 2 (CPT2), very long-chain acyl-CoA dehydrogenase (VCLAD), or trifunctional protein (TFP).

REN001 was well-tolerated and had an adequate safety profile in this trial.

The LCHAD and CPT2 groups had the greatest improvement over baseline in 12MWT (73.3 and 51.9 meters, respectively).

We also completed an observational, non-interventional study in LC-FAOD patients with nuclear DNA defects to better understand the natural history of LC-FAOD and changes in patient function and symptoms over time (FORWARD).

Based on the results of the LC-FAOD Phase 1b study, in conjunction with the results of the FORWARD study, we intend to continue development of REN001 in patients with LC-FAOD.

We do not own or operate manufacturing facilities.

We rely, and expect to continue to rely, on third parties for the manufacture of REN001 for preclinical studies and clinical trials, as well as for commercial manufacturing if REN001 obtains marketing approval.

We also rely, and expect to continue to rely, on third parties to manufacture, package, label, store, and distribute REN001, if marketing approval is obtained.

We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of REN001.

Since our inception in 2014, our operations have primarily focused on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical, clinical and manufacturing development for REN001.

We do not have any product candidates approved for sale, have not generated any revenue from product sales, and do not expect to generate revenues from the commercial sale of our product candidate for several years, if ever.

Since inception, we have incurred significant operating losses.

Our net losses were $25.3 million and $16.4 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $110.1 million, and cash, cash equivalents and short-term investments of $126.9 million.

We have funded our operations primarily through the issuance and sale of equity securities.

In May 2022, we entered into an at-the-market equity offering sales agreement with SVB Securities LLC (ATM facility) under which we may offer and sell, from time to time at our sole discretion, up to $20.0 million in shares of our common stock.

We have not yet sold any shares of our common stock under the ATM facility.

We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase as we conduct our ongoing and planned clinical trials and preclinical studies, engage in other research and development activities, seek regulatory approvals for any product candidates that successfully complete clinical trials, incur development milestone payments related to our research and development activities, prepare for commercialization, hire additional personnel, and protect our intellectual property.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

As a result, we will need to raise additional capital.

Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations

through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources.

Additional funds may not be available to us on acceptable terms or at all.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, including those resulting from the ongoing COVID-19 pandemic, as well as actual or perceived changes in interest rates and economic inflation.

If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.

Based upon our current operating plan, we believe that our cash, cash equivalents, and short-term investments as of June 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements into 2024.

The COVID-19 pandemic continues to evolve, and we will continue to monitor the COVID-19 situation closely.

The extent of the impact of COVID-19 on our business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the pandemic, including new variants of the virus, and its impact on our clinical trial enrollment, trial sites, contract research organizations, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel.

For example, our Phase 1b study of REN001 in PMM patients was closed early as a result of COVID-19, and we may face future clinical trial disruptions.

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

As a result of COVID-19, we have taken precautionary measures in order to minimize the risk of the virus to our employees and the communities in which we operate.

While we have experienced impacts to our clinical development activities as a result of COVID-19, there has been minimal disruption to date in our ability to ensure the effective operation of our business.

We will continue to actively monitor the evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

At this point, the extent to which the COVID-19 pandemic may affect our business, operations and clinical development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.

License Agreement

In December 2017, we entered into a License Agreement with vTv Therapeutics LLC (vTv Therapeutics) (the vTv License Agreement), under which we obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ

agonists and products containing such PPARδ

agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans.

Under the terms of the vTv License Agreement, we paid vTv Therapeutics an initial upfront license fee of $3.0 million and $2.0 million of milestone payments and issued an aggregate of 576,443 shares of our common stock to vTv Therapeutics.

Upon the achievement of certain pre-specified development and regulatory milestones, we are also required to pay vTv Therapeutics milestone payments totaling up to $64.5 million.

We are also required to pay vTv Therapeutics up to $30.0 million in total sales-based milestones upon achievement of certain sales thresholds of the licensed product.

In addition, we are obligated to make tiered royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions.

There were no milestone payments achieved or recorded for the three and six months ended June 30, 2022 and 2021.

Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

To date, our research and development expenses have primarily related to preclinical and clinical development of REN001.

Research and development expenses include:

personnel expenses, including salaries, benefits, and stock-based compensation expense;

external expenses incurred under agreements with contract research organizations (CROs), investigative sites and consultants to conduct and support our preclinical studies and clinical trials;

raw materials related to manufacturing of our product candidate for clinical trials and preclinical studies, including fees paid to third-party manufacturers;

expenses related to regulatory activities, including filing fees paid to regulatory agencies;

facility costs including rent, depreciation, and maintenance expenses;

fees for maintaining licenses under our third-party licensing agreements.

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 or services are received.

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

We expense amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired.

The following table summarizes our research and development expenses (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Clinical and regulatory

Contract manufacturing cost

Research and development-other expense

We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidate into and through clinical trials, continue to conduct preclinical studies and pursue regulatory approval of our product candidate.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming.

The actual probability of success for our product candidate may be affected by a variety of factors including:

the safety and efficacy of our product candidate, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability.

We may never succeed in achieving regulatory approval for our product candidate.

As a result of the uncertainties discussed above, at this time we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of and obtain regulatory approval for our product candidate.

Our research and development costs may vary significantly based on factors such as:

the scope, rate of progress, expense and results of clinical trials and preclinical studies;

per patient trial costs;

the number of trials required for approval;

the number of sites included in the trials;

the countries in which the trials are conducted;

the number of patients that participate in the trials;

uncertainties in patient enrollment or drop out or discontinuation rates, particularly in light of the current COVID-19 pandemic environment;

potential additional safety monitoring requested by regulatory agencies;

the duration of patient participation in the trials and follow-up;

the safety and efficacy of our product candidate;

the cost and timing of manufacturing our product candidates;

the extent to which we establish strategic collaborations or other arrangements.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits, and stock-based compensation expense, for personnel in executive, finance, accounting, and human resource and other administrative functions.

General and administrative expenses also include corporate facility costs not otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters, insurance costs and fees for accounting and consulting services.

We expect our general and administrative expenses to increase for the foreseeable future to support continued research and development activities, including our ongoing and planned research and development of our product candidate for multiple indications.

Other income consists of interest income on our cash, cash equivalents, and short-term investments.

Results of Operations

Comparison of Three Months Ended June 30, 2022 and 2021 (Unaudited)

The following table summarizes our results of operations (in thousands):

Three Months Ended June 30,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Research and Development Expenses

Research and development expenses for the three months ended June 30, 2022 were $8.1 million, compared to $6.3 million for the three months ended June 30, 2021.

This increase of $1.8 million was primarily due to a $1.1 million increase in personnel-related costs due to the additional headcount required to support our clinical and manufacturing operation.

In addition, there was a $0.4 million increase in clinical trial and manufacturing costs and a $0.4 million increase in non-clinical activities.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2022 were $4.3 million, compared to $2.9 million during the three months ended June 30, 2021.

This increase of $1.4 million was primarily attributable to increased costs to operate as a public company, including increases in outside professional services of $1.1 million and personnel-related expenses of $0.1 million.

Other income for the three months ended June 30, 2022 and 2021 was immaterial.

Comparison of Six Months Ended June 30, 2022 and 2021 (Unaudited)

The following table summarizes our results of operations (in thousands):

Six Months Ended June 30,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Research and Development Expenses

Research and development expenses for the six months ended June 30, 2022 were $17.4 million, compared to $11.8 million for the six months ended June 30, 2021.

This increase of $5.7 million was primarily due to an increase of $2.6 million related to clinical trial and manufacturing costs associated with the launch of our STRIDE and FORWARD studies as well as our Phase 1b clinical trials of LC-FAOD.

In addition, there was a $1.9 million increase in personnel-related costs due to the additional headcount required to support our clinical and manufacturing operations and a $1.1 million increase in non-clinical activities.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2022 were $8.0 million, compared to $4.7 million during the six months ended June 30, 2021.

This increase of $3.3 million was primarily attributable to increased costs to operate as a public company, including increases in outside professional services of $1.7 million, personnel-related expenses of $0.5 million, and insurance premiums of $0.3 million.

Other income for the six months ended June 30, 2022 and 2021 was immaterial.

Liquidity and Capital Resources

Since inception, we have incurred operating losses and negative cash flows from operations and have funded our operations primarily through the sale of preferred and common stock.

We do not have any product candidates approved for sale and have not generated any revenue from product sales, and we do not expect to generate revenues from the commercial sale of our product candidate for at least the foreseeable future, if ever.

We are subject to all the risks related to the development and commercialization of novel therapeutics, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business.

We continue to incur additional costs associated with operating as a public company.

We anticipate that we will need substantial additional funding in connection with our continuing operations.

In May 2022, we entered into the ATM facility under which we may offer and sell, from time to time at our sole discretion, up to $20.0 million in shares of our common stock.

We have not yet sold any shares of our common stock under the ATM facility.

The following table summarizes our cash flows (unaudited and in thousands):

Six Months Ended June 30,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2022 was $21.0 million, consisting primarily of our net loss of $25.3 million adjusted for non-cash items of $2.0 million primarily due to stock-based compensation expense and $2.4 million net change in operating assets and liabilities.

The change in our net operating assets and liabilities was primarily due to an increase in accrued expenses of $1.7 million due to timing of receipt of invoices and payments and a decrease in prepaid and other current assets of $0.9 million.

Net cash used in operating activities for the six months ended June 30, 2021 was $18.3 million, consisting primarily of our net loss of $16.4 million and a $3.6 million net decrease in operating assets and liabilities, partially offset by $1.7 million in non-cash charges primarily consisting of stock-based compensation expense.

Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2022 was $14.5 million which was transferred to cash and cash equivalents, and consisted primarily of the proceeds from maturities of available-for-sale short-term investments of $30.5 million offset by the purchase of available-for-sale short-term investments of $15.9 million.

Net cash used in investing activities for the six months ended June 30, 2021 was $27.0 million consisting primarily of the purchase of available-for-sale short-term investments.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2022 was immaterial.

Net cash provided by financing activities for the six months ended June 30, 2021 was $132.1 million, consisting primarily of $84.6 million of net proceeds from our initial public offering (IPO), $47.4 million of net proceeds from the issuance of Series B convertible preferred stock, and $0.2 million of proceeds from the exercise of stock options.

Funding Requirements

We will need to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources.

Additional funds may not be available to us on acceptable terms or at all.

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

the scope, progress, results and costs of clinical trials and preclinical studies for REN001;

the scope, prioritization and number of our research and clinical indications we pursue;

the costs and timing of manufacturing for our product candidates;

the costs, timing, and outcome of regulatory review of REN001;

the timing and amount of the milestone or other payments we must make to vTv Therapeutics and any future licensors;

the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

the extent to which we acquire or in-license other product candidates and technologies;

the costs of securing manufacturing arrangements for commercial production;

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;

the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market any product candidates.

As of June 30, 2022, we had $126.9 million in cash, cash equivalents and short-term investments.

We believe, based upon our current operating plan, that our cash, cash equivalents and short-term investments as of June 30, 2022 will be sufficient to fund our planned operations into 2024.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive, and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales.

In addition, our product candidate, if approved, may not achieve commercial success.

Our commercial revenues, if any, will be derived from sales of a product candidate that we do not expect to be commercially available for many years, if at all.

Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder.

Debt financing, if available, 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.

If we raise funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidate that we would otherwise prefer to develop and market ourselves.

Material Cash Requirements

The discussion below summarizes our significant contractual obligations and commitments as of June 30, 2022.

See Note 6 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information, including the future operating lease minimum payments.

Performance Award.

See Note 8 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information, including the maximum payout.

vTv License Agreement .

See Note 9 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information, including the milestone payments, associated with the vTv License Agreement.

In addition to contractual obligations above, we also expect to have future material cash requirements related to our contract manufacturing, preclinical and clinical programs, personnel expenses, and commercialization activities.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements.

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

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

Our critical accounting policies are described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates”

in our Annual Report on Form 10-K for the year ended December 31, 2021, and the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

During the six months ended June 30, 2022, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

See Note 2 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

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

What changed 10-Q

Item 1. Financial Statements