What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 179 added, 128 removed, 440 unchanged (41% of the section changed)

24 unchanged sentences

200,000,000 shares authorized at

March 31, 2023 and December 31, 2022;

June 30, 2023 and December 31, 2022;

33,800,788 and 24,699,553 shares

issued and outstanding at March 31, 2023 and December 31, 2022,

issued and outstanding at June 30, 2023 and December 31, 2022,

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total stockholders’

4 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 income (loss)

Unrealized gain on short-term investments

Unrealized (loss) gain on short-term investments

Comprehensive loss

Net loss per share attributable to common stockholders, basic and diluted

Weighted-average shares used in computing net loss per share, basic and diluted

Net loss per share attributable to common stockholders,

basic and diluted

Weighted-average shares used in computing net

loss per share, basic and diluted

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

8 unchanged sentences

Issuance of common stock in connection

with the at-the-market facility, net of

with at-the-market facility, net of

issuance costs

1 unchanged sentence

Balances, March 31, 2023

Issuance of common stock in public

offering, net of offering costs

Issuance of common stock in private

placement, net of offering costs

Stock based compensation

Issuance of common stock in

connection with equity plans

Other comprehensive loss

Balances, June 30, 2023

RENEO PHARMACEUTICALS, INC.

Consolidated Statements of Changes in Stockholders’

Equity (Continued)

(In thousands, except share data)

Comprehensive

6 unchanged sentences

Balances, March 31, 2022

Stock based compensation

Issuance of common 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.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

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Proceeds from maturities of available-for-sale short-term investments

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities

Proceeds from at-the-market facility, net of offering costs

Proceeds from public offering of common stock, net of offering costs

Proceeds from private placement of common stock, net of offering costs

Proceeds from issuance of common stock under the at-the-market

facility, net of offering costs

Proceeds from issuance of common stock in connection with equity plans

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

2 unchanged sentences

Right-of-use assets obtained in exchange for lease obligations

Noncash investing and financing activities:

Property and equipment in accounts payable

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

4 unchanged sentences

(Reneo or the Company) commenced operations on September 22, 2014 as a clinical-stage pharmaceutical company focused on the development of therapies for patients with rare genetic mitochondrial diseases.

In December 2017, the Company in-licensed mavodelpar (REN001), a novel oral peroxisome proliferator-activated receptor delta (PPAR δ

In December 2017, the Company in-licensed mavodelpar (REN001), a novel oral peroxisome proliferator-activated receptor delta (PPARδ) agonist.

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

For the three and six months ended June 30, 2023, the Company had a net loss of $ 19.5 million and $ 34.6 million, respectively, and used $ 25.2 million cash in operating activities during the six months ended June 30, 2023.

Since inception through June 30, 2023, the Company had an accumulated deficit of $ 171.3 million.

The Company follows Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements—Going Concern , which requires that management perform a two-step analysis over its ability to continue as a going concern.

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If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt (step 2).

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

As of March 31, 2023, the Company had cash, cash equivalents and short-term investments of $ 93.8 million and an accumulated deficit of $ 151.8 million.

The Company had a net loss of $ 15.1 million and used cash of $ 9.0 million for operating activities for the three months ended March 31, 2023.

Since inception through March 31, 2023, the Company has funded its operations primarily with the net proceeds from the issuance of convertible preferred stock and common stock.

The Company expects that its existing balance of cash, cash equivalents and short-term investments as of March 31, 2023, together with the net proceeds from the May 2023 public offering and May 2023 private placement (see Footnote 10), are sufficient to fund operations through the Company’s planned near-term clinical milestones, but not for more than one year after the date of the filing of this Quarterly Report on Form 10-Q and therefore management has concluded that substantial doubt exists about the Company's ability to continue as a going concern.

As of June 30, 2023, the Company had cash, cash equivalents and short-term investments of $ 142.7 million, which the Company expects are sufficient to fund operations beyond the potential submission of a new drug application for mavodelpar for treatment of primary mitochondrial myopathies in the United States anticipated in the first half of 2024.

However, based on the anticipated increase in sales and marketing expenses for mavodelpar, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for more than one year from the date of the filing of this Quarterly Report on Form 10-Q.

Management plans to alleviate this risk by raising 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.

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Any of these actions could negatively impact the Company’s business, results of operations, and future prospects.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions, disruptions to, and volatility in, financial markets in the United States and worldwide, including those resulting from the coronavirus (COVID-19) pandemic, bank failures, actual or perceived changes in interest rates and economic inflation.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions, disruptions to, and volatility in, financial markets in the United States and worldwide, including those resulting from infectious diseases, bank failures, actual or perceived changes in interest rates and economic inflation.

The Company may not be able to secure additional financing in a timely manner or on favorable terms, if at all.

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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, 2023 ;

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of June 30, 2023 ;

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, 2023 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, 2022.

The significant accounting policies used in the preparation of these consolidated financial statements for the six months ended June 30, 2023 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, 2022.

New Accounting Pronouncements

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Recent Accounting Pronouncements Not Yet Adopted

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

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

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

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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 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 months ended March 31, 2023 and 2022 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, 2023 and 2022 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,

As of June 30,

Common stock options outstanding

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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, 2023.

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at March 31, 2023 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, 2023.

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at June 30, 2023 consisted of the following (in thousands):

Quoted Prices in

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Performance award

The following table summarizes changes in fair value measurements of the Performance Award during the three months ended March 31, 2023 (in thousands):

The following table summarizes changes in fair value measurements of the Performance Award during the six months ended June 30, 2023 (in thousands):

Balance as of January 1, 2023

Change in fair value

Balance as of March 31, 2023

Balance as of June 30, 2023

Marketable Debt Securities

During the three months ended March 31, 2023, the Company invested its excess cash balances in marketable debt securities and, at each balance sheet date presented, the Company classified all of its investments in debt securities as available-for-sale and as current assets as they mature within 12 months and represent the investment of funds available for current operations.

The following tables summarize the gross unrealized gains and losses of the Company’s available-for-sale securities as of March 31, 2023 and 2022 (in thousands):

As of March 31, 2023

The Company’s investments in debt securities are carried at fair value and classified as current assets available-for-sale as they mature within 12 months and represent the investment of funds available for current operations.

Unrealized gains and losses on available-for-sale debt securities are included in other comprehensive income or loss, and charged to income or expense in the period when realized.

The following tables summarize the gross unrealized gains and losses of the Company’s available-for-sale securities (in thousands):

As of June 30, 2023

Available-for-sale securities:

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Accrued expenses consisted of the following (in thousands):

As of March 31, 2023

As of June 30, 2023

As of December 31, 2022

5 unchanged sentences

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.

As of June 30, 2023, the Company leased 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 October 23, 2027, respectively.

The Company did not renew the office space located in San Diego upon the expiration of the lease.

Other information related to the Company ’s operating leases as of the balance sheet dates presented are as follows:

Three Months Ended

As of June 30,

Weighted incremental borrowing rate

3 unchanged sentences

Maturities of lease liabilities by fiscal year for the Company ’s operating leases are as follows (in thousands):

As of March 31, 2023

2023 (remaining nine months)

As of June 30, 2023

2023 (remaining six months)

Total lease payments

1 unchanged sentence

Present value of lease liabilities

Stockholders’

On May 8, 2023, the Company completed a public offering in which it sold an aggregate of 7,906,250 shares of common stock, which included the full exercise of the underwriters’

option to purchase an additional 1,031,250 shares of common stock, at a price of $ 8.00 per share.

The Company received total net proceeds from the offering of approximately $ 58.9 million, after deducting underwriting discounts and commissions and offering expenses.

On May 9, 2023, the Company completed a concurrent private placement in which it sold an aggregate of 625,000 shares of common stock to Abingworth Bioventures 8 L.P., a holder of more than 5 % of the Company’s common stock, at a price of $ 8.00 per share.

The Company received total net proceeds of approximately $ 4.7 million, after deducting advisor fees and other estimated fees and expenses.

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 Company’s 2014 Equity Incentive Plan (2014 Plan).

As of the effective date 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.

As of the effective date 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 awards, restricted stock units, and other awards to individuals who are employees, officers, directors or consultants of the Company and its affiliates.

3 unchanged sentences

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, 2023 , there were no shares subject to stock options that have been early exercised.

As of June 30, 2023 , there were no unvested shares of common stock outstanding that were issued pursuant to the early exercise of stock options.

Shares Reserved for Future Issuance

As of March 31, 2023, the Company had reserved shares of its common stock for future issuance as follows:

As of June 30, 2023, the Company had reserved shares of its common stock for future issuance as follows:

Common stock options outstanding

4 unchanged sentences

Stock Options

A summary of the Company’s stock option activity and related information during the three months ended March 31, 2023 is as follows:

A summary of the Company’s stock option activity and related information during the six months ended June 30, 2023 is as follows:

Contractual Term (in years)

1 unchanged sentence

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Vested at March 31, 2023

Exercisable at March 31, 2023

Options exercisable at March 31, 2023 include vested options and options eligible for early exercise.

All outstanding options as of March 31, 2023 are expected to vest.

Unrecognized stock-based compensation expense at March 31, 2023 was $ 9.3 million, which is expected to be recognized over a weighted-average vesting term of 2.7 years.

Forfeited/Expired

Outstanding at June 30, 2023

Vested at June 30, 2023

Exercisable at June 30, 2023

Options exercisable at June 30, 2023 include vested options and options eligible for early exercise.

All outstanding options as of June 30, 2023 are expected to vest.

Unrecognized stock-based compensation expense at June 30, 2023 was $ 9.9 million, which is expected to be recognized over a weighted-average vesting term of 2.6 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

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Expected volatility.

Since the Company does not have sufficient trading history for its common stock the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available.

Since the Company does not have sufficient trading history for its common stock the expected volatility assumption is based on a blend of volatilities of the Company’s share price and a peer group of similar companies whose share prices are publicly available.

For awards granted prior to April 2023, the expected volatility assumption was based on the volatilities of a peer group of similar companies whose share prices are publicly available.

The peer group was developed based on companies in the biotechnology industry.

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RSUs consist of performance-based units (PSUs) and market-based units (MSUs).

The following table summarizes RSU activities during the three months ended March 31, 2023:

The following table summarizes RSU activity during the six months ended June 30, 2023:

Weighted-Average

Unvested at December 31, 2022

Unvested at March 31, 2023

Unvested at June 30, 2023

Performance-Based Units

2 unchanged sentences

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

The Company has 249,500 unvested shares underlying PSUs as of March 31, 2023.

The Company concluded that achievement of the performance conditions was not probable as of March 31, 2023 , and therefore no stock-based compensation expense was recognized for the three months ended March 31, 2023.

As of March 31, 2023, there was $ 1.6 million of unrecognized stock-based compensation expense related to the PSUs that were deemed not probable.

The Company had 244,500 unvested shares underlying PSUs as of June 30, 2023.

The Company concluded that achievement of the performance conditions was not probable as of June 30, 2023 , and therefore

no stock-based compensation expense was recognized for the three and six months ended June 30, 2023.

As of June 30, 2023, there was $ 1.6 million of unrecognized stock-based compensation expense related to the PSUs that were deemed not probable of vesting.

Market-Based Units

2 unchanged sentences

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

The Company has 120,000 unvested shares underlying MSUs as of March 31, 2023.

Stock-based compensation expense related to the MSUs during the three months ended March 31, 2023 and 2022 was immaterial.

As of March 31, 2023, there was $ 0.2 million of unrecognized stock-based compensation expense related to MSUs.

The Company had 120,000 unvested shares underlying MSUs as of June 30, 2023.

Stock-based compensation expense related to the MSUs during the three and six months ended June 30, 2023 was immaterial.

As of June 30, 2023, there was $ 0.2 million of unrecognized stock-based compensation expense related to MSUs.

Performance Award

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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.

For the three months ended March 31, 2023 , the Company recognized approximately $ 0.3 million in stock-based compensation expense as a direct result of the increased value of the Performance Award primarily caused by the increase in the Company’s common stock price.

For the three months ended March 31, 2022, stock-based compensation expense was immaterial.

The Company recognized approximately $ 0.6 million and $ 0.8 million in compensation expense related to the change in the fair value of the Performance Award for the three and six months ended June 30, 2023, respectively.

The expense is reflected in consolidated statements of operations and comprehensive loss in the general and administrative expense.

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, 2023 , 103,719 shares have been issued under the ESPP.

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

During the six months ended June 30, 2023, 84,296 shares of common stock were purchased under the ESPP.

In September 2021, the Company’s board of directors adopted the Company’s 2021 United Kingdom 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, 2023.

No shares have been issued under the SAYE through June 30, 2023.

Stock-Based Compensation Expense

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

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The Company is 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.

As of March 31, 2023 , the Company has paid an aggregate of $ 2.0 million in development and regulatory milestone payments.

As of June 30, 2023 , the Company has paid an aggregate of $ 2.0 million in development and regulatory milestone payments.

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, 2023 and 2022 .

Subsequent Events

Public Offering and Private Placement

On May 8, 2023, the Company completed a public offering in which it sold an aggregate of 7,906,250 shares of common stock, which included the full exercise of the underwriters’

option to purchase an additional 1,031,250 shares of common stock, at a price of $ 8.00 per share.

The Company received total net proceeds from the offering of approximately $ 58.2 million, after deducting underwriting discounts and commissions and offering expenses.

The Company received total net proceeds from the private placement of approximately $ 4.7 million, after deducting advisor fees and other estimated fees and expenses.

There were no milestone payments achieved or recorded for the three and six months ended June 30, 2023 and 2022 .

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

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

Compared to baseline, patients receiving mavodelpar once-daily for 12 weeks experienced an average increase in distance of 104.4 meters in the 12MWT, an average increase in weight-adjusted peak VO 2 of 1.7 mL/min/kg, 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, Angiopoietin-like 4, and Solute carrier family 25 member 34.

Compared to baseline, patients receiving mavodelpar once-daily for 12 weeks experienced an average increase in distance of 104.4 meters in the 12MWT, an average increase in weight-adjusted peak VO2 of 1.7 mL/min/kg, 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 the STRIDE study, a global, randomized, double-blind, placebo-controlled pivotal Phase 2b trial of mavodelpar in adult patients with PMM due to mtDNA defects.

We completed enrollment of 213 patients in March 2023, exceeding target enrollment of 200 patients, in the pivotal STRIDE study.

We anticipate announcement of topline results in the fourth quarter of 2023 and potential filing of a new drug application (NDA) in the first half of 2024.

We anticipate announcement of topline results in the fourth quarter of 2023 and potential submission of a new drug application (NDA) in the first half of 2024.

The STRIDE study is designed to investigate the efficacy and safety of 100 mg mavodelpar administered once-daily over a 24-week period.

The primary efficacy endpoint of the trial is the change from baseline in the distance walked during the 12MWT at week 24.

Key secondary endpoints include changes from baseline in the Modified Fatigue Impact Scale (MFIS) measures and the patient global impression of change scale, the fatigue 30-second sit-to-stand test, step counts, patient global impression of severity scale, Brief Pain Inventory (BPI), and additional patient-reported outcome measures.

Key secondary endpoints include changes from baseline in PROMIS® Short Form Fatigue 13a, Modified Fatigue Impact Scale (MFIS), Patient Global Impression of Change (PGIC), Patient Global Impression of Severity (PGIS), 30 Second Sit-To-Stand (30STS) Test, Brief Pain Inventory (BPI), 36-Item Health Survey (SF-36), Work Productivity and Activity Impairment Questionnaire:

Specific Health Problem (WPAI:SHP), and Pedometer Step Count.

We are also conducting the STRIDE AHEAD study, a 24-month, open-label extension (OLE) trial outside of the United States in patients with PMM due to mtDNA.

We have enrolled over 100 patients in the STRIDE AHEAD study, with over 50 patients reaching 6-months in the study.

The STRIDE AHEAD study was recently amended to also allow enrollment of patients with PMM due to nuclear DNA (nDNA) defects and initiate enrollment of nDNA patients in the second quarter of 2023.

We have enrolled over 130 patients, with over 90 patients reaching at least 6-months of long-term safety exposure in this study.

The STRIDE AHEAD study was recently amended to allow enrollment of patients with PMM due to nuclear DNA (nDNA) defects, and initiation of patient screening began in the second quarter of 2023.

Based on interactions with the FDA, European Medicines Agency (EMA), and several other national regulatory agencies in Europe, we believe that positive results from the ongoing pivotal STRIDE and STRIDE AHEAD studies could potentially support registration of mavodelpar for adult patients with PMM in the United States and Europe.

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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.

As of March 31, 2023, we have paid an aggregate of $2.0 million in development and regulatory milestone payments.

As of June 30, 2023, we have paid an aggregate of $2.0 million in development and regulatory milestone payments.

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 months ended March 31, 2023 and 2022.

There were no milestone payments achieved or recorded for the three and six months ended June 30, 2023 and 2022.

Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses primarily relate to preclinical and clinical development of mavodelpar.

Research and development expenses include:

Research and Development

Research and development expenses primarily relate to preclinical and clinical development of mavodelpar and include:

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

2 unchanged sentences

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

expenses related to medical affairs activities, including field teams to initiate relevant disease education and publications;

facility costs including rent, depreciation, and maintenance expenses;

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Clinical and regulatory

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the number of patients that participate in the trials;

uncertainties in patient enrollment or drop out or discontinuation rates, whether related to COVID-19 or otherwise;

uncertainties in patient enrollment or drop out or discontinuation rates;

potential additional safety monitoring requested by regulatory agencies;

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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, 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 clinical trials of mavodelpar and commercialization of mavodelpar.

General and Administrative

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

General and administrative expenses also include professional fees for accounting, legal, and commercial development, corporate facility costs not otherwise included in research and development expenses, and insurance.

We expect our general and administrative expenses to increase for the foreseeable future to support overall growth of our corporate infrastructure, as well as our commercial development activities.

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

Results of Operations

Comparison of Three Months Ended March 31, 2023 and 2022 (Unaudited)

Comparison of Three Months Ended June 30, 2023 and 2022 (Unaudited)

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

Three Months Ended March 31,

Three Months Ended June 30,

Operating expenses:

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Loss from operations

Other income (loss)

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2023 were $11.0 million, compared to $9.3 million for the three months ended March 31, 2022.

This increase of $1.7 million was primarily due to an increase of $1.4 million related to clinical study costs in support of marketing registration for mavodelpar.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2023 were $5.1 million, compared to $3.7 million for the three months ended March 31, 2022.

This increase of $1.4 million was primarily due to an increase of $1.1 million in facility and personnel-related costs due to additional headcount.

The increase in other income for the three months ended March 31, 2023, compared to the same period in the prior year was due to a higher interest rate earned on our short-term investments.

Research and Development

Research and development expenses for the three months ended June 30, 2023 were $14.4 million, compared to $8.1 million for the three months ended June 30, 2022.

This increase of $6.3 million was primarily due to an increase of $4.7 million related to clinical and contract manufacturing costs to support the marketing registration for mavodelpar, an increase of $1.0 million in personal-related costs due to additional headcount, and an increase of $0.6 million in medical affairs costs.

General and Administrative

General and administrative expenses for the three months ended June 30, 2023 were $6.6 million, compared to $4.3 million for the three months ended June 30, 2022.

This increase of $2.3 million was primarily due to an

increase of $1.2 million in commercial development activities and an increase of $1.0 million in facility and personnel-related costs due to additional headcount.

The increase in other income for the three months ended June 30, 2023, compared to the same period in the prior year was due to a higher interest rate earned on our short-term investments and an increase in short-term investment balance.

Comparison of Six Months Ended June 30, 2023 and 2022 (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

Research and development expenses for the six months ended June 30, 2023 were $25.4 million, compared to $17.4 million for the six months ended June 30, 2022.

This increase of $8.0 million was primarily due to an increase of $5.0 million related to clinical and contract manufacturing costs to support the marketing registration for mavodelpar, an increase of $1.7 million in personal-related costs due to additional headcount, and an increase of $0.9 million in medical affairs costs.

General and Administrative

General and administrative expenses for the six months ended June 30, 2023 were $11.8 million, compared to $8.0 million for the six months ended June 30, 2022.

This increase of $3.7 million was primarily due to an increase of $2.0 million in facility and personnel-related costs due to additional headcount and an increase of $1.5 million in commercial development activities.

The increase in other income for the six months ended June 30, 2023, compared to the same period in the prior year was due to a higher interest rate earned on our short-term investments and an increase in short-term investment balance.

Liquidity and Capital Resources

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We have not generated any revenue from the sale of any products.

As of March 31, 2023, we had available cash, cash equivalents and short-term investments of approximately $93.8 million.

As of June 30, 2023, we had available cash, cash equivalents and short-term investments of approximately $142.7 million.

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.

As of March 31, 2023, we have sold and issued approximately 500,000 shares of our common stock pursuant to the ATM facility at a weighted-average price of $2.48 per share, resulting in aggregate gross proceeds to us of $1.2 million.

As of June 30, 2023, we have sold and issued approximately 500,000 shares of our common stock pursuant to the ATM facility at a weighted-average price of $2.48 per share, resulting in aggregate gross proceeds to us of $1.2 million.

Sales commissions to SVB Securities LLC and other issuance expenses were immaterial.

The remaining capacity under the ATM facility was approximately $18.8 million in shares of common stock as of March 31, 2023.

The remaining capacity under the ATM facility was approximately $18.8 million in shares of common stock as of June 30, 2023.

In May 2023, we completed a public offering in which we sold an aggregate of 7,906,250 shares of common stock which included the full exercise of the underwriters’

option to purchase an additional 1,031,250 shares of common stock, at a price of $8.00 per share.

Total net proceeds from this offering, after deducting underwriting discounts and commissions and offering expenses, were approximately $58.2 million.

Total net proceeds from the public offering, after deducting underwriting discounts and commissions and offering expenses, were approximately $58.9 million.

Also, in May 2023, we completed a concurrent private placement in which we sold an aggregate of 625,000 shares of common stock to Abingworth Bioventures 8 L.P.

(Abingworth), a holder of more than 5% of our common stock, at a price of $8.00 per share.

Total net proceeds from this private placement, after deducting advisor fees and other estimated fees and expenses, were approximately $4.7 million.

(Abingworth), a holder of more than 5% of our common stock, at a price of $8.00 per share (the Private Placement).

Total net proceeds from the Private Placement, after deducting advisor fees and other estimated fees and expenses, were approximately $4.7 million.

Operating Capital Requirements

From our inception in 2014, we have incurred significant losses and negative cash flows from operations.

For the three and six months ended June 30, 2023, we had a net loss of $19.5 million and $34.6 million, respectively, and used $25.2 million cash in operating activities during the six months ended June 30, 2023.

Since inception through June 30, 2023, we have an accumulated deficit of $171.3 million.

We have incurred operating losses since inception and we expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we continue product development for mavodelpar.

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under Part II, Item 1A below.

As of March 31, 2023, we had cash, cash equivalents and short-term investments of $93.8 million and an accumulated deficit of $151.8 million.

We had a net loss of $15.1 million and used cash of $9.0 million for operating activities for the three months ended March 31, 2023.

Since inception through March 31, 2023, we have funded our operations primarily with the net proceeds from the issuance of convertible preferred stock and common stock.

We expect our existing balance of cash, cash equivalents and short-term investments as of March 31, 2023, together with the net proceeds from our May 2023 public offering and May 2023 private placement, are sufficient to fund operations through our planned near-term clinical milestones, but not for more than one year after the date of the filing of this Quarterly Report on Form 10-Q and therefore management has concluded that substantial doubt exists about our ability to continue as a going concern.

As of June 30, 2023, we have cash, cash equivalents and short-term investments of $142.7 million, which we expect will be sufficient to fund operations beyond the potential submission of a new drug application for mavodelpar for treatment of PMM in the United States anticipated in first half of 2024.

However, based on the anticipated increase in sales and marketing expenses for mavodelpar, management has concluded that substantial doubt exists about our ability to continue as a going concern for more than one year from the date of the filing of this Quarterly Report on Form 10-Q.

In addition, we have the ability to defer certain commercial activities until additional capital is received.

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

Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies.

If adequate funds are not available to us, it could have a material adverse effect on our business, results of operations, and financial condition.

In April 2023, we entered into a non-binding term sheet (Term Sheet), with an investor that holds more than 5% of our common stock and is affiliated with one of our directors, and its affiliated development company for a structured royalty financing of up to $100 million in conditional tranched funding, currently contemplated to include $30 million funded in connection with entering into the definitive agreement and the remaining amount in multiple tranches based on the achievement of development and regulatory milestones.

If mavodelpar is approved in the United States or the European Union, we would pay to the investor (1) fixed payments and (2) variable royalty payments based on net sales of mavodelpar, subject to specified caps.

Pursuant to the Term Sheet, we will also enter into a collaboration agreement with the development company with respect to mavodelpar and establish a joint steering committee.

The Term Sheet does not represent a definitive funding agreement and there is no guarantee that we will enter into a definitive funding agreement and close the proposed structured financing with the investor.

If consummated, the closing is expected to occur in the second quarter of 2023.

There can be no assurance that we will be successful in obtaining additional funding, that our projections of our future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

If we are not able to secure adequate additional funding, we may be forced to make

reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs.

Any of these actions could negatively impact our business, results of operations, and future prospects.

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions, disruptions to, and volatility in, financial markets in the United States and worldwide, including those resulting from infectious diseases, bank failures, actual or perceived changes in interest rates and economic inflation.

We may not be able to secure additional financing in a timely manner or on favorable terms, if at all.

In addition, successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support our cost structure.

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2023 was $9.0 million, consisting primarily of our net loss of $15.1 million adjusted for non-cash items of $0.8 million primarily due to $1.2 million of stock-based compensation expense offset by $0.8 million of amortization/accretion on short term investments and a $5.2 million net change in operating assets and liabilities.

Net cash used in operating activities for the six months ended June 30, 2023 was $25.2 million, consisting primarily of our net loss of $34.6 million adjusted for non-cash items of $1.5 million primarily due to $2.4 million of stock-based compensation expense and $0.8 million in fair value of a performance award, offset by $2.0 million of amortization/accretion on short term investments and a $7.9 million net change in operating assets and liabilities.

The change in our net operating assets and liabilities was primarily due to a decrease in prepaid and other current assets of $1.3 million and an increase in accounts payable and accrued expenses of $6.8 million due to timing of receipt of invoices and payments.

Net cash used in operating activities for the three months ended March 31, 2022 was $9.0 million, consisting primarily of our net loss of $13.0 million adjusted for non-cash items of $0.9 million primarily due to stock-based compensation expense and $3.2 million related to net change in operating assets and liabilities.

The change in our net operating assets and liabilities was primarily due to a decrease in prepaid and other current assets of $2.0 million as a result of prepayments made for clinical trial activities and an increase in accrued expense of $1.3 million due to timing of receipt of invoices and payments.

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 a $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.

Investing Activities

Net cash provided in investing activities for the three months ended March 31, 2023 and 2022 was $18.5 million and $5.4 million, respectively, consisting primarily of the net sales of available-for-sale short-term investments.

Net cash used in investing activities for the six months ended June 30, 2023 was $50.5 million consisting primarily of the net purchase of available-for-sale short-term investments.

Net cash provided by investing activities for the six months ended June 30, 2022 was $14.5 million, consisting primarily of the net sales of available-for-sale short-term investments.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2023 was $1.0 million consisting primarily of net proceeds from the sale of common stock under our ATM facility.

Net cash provided by financing activities for the three months ended March 31, 2022 was immaterial.

Net cash provided by financing activities for the six months ended June 30, 2023 was $64.8 million consisting primarily of the net proceeds of $58.9 million, $4.7 million, and $1.0 million from the sale of common stock in our May 2023 public offering, the Private Placement, and the ATM facility, respectively.

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

Material Cash Requirements

The discussion below summarizes our significant contractual obligations and commitments as of March 31, 2023.

The discussion below summarizes our significant contractual obligations and commitments as of June 30, 2023.

See Note 7 of Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding our leases, including the future operating lease minimum payments.

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in our Annual Report on Form 10-K for the year ended December 31, 2022, and the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2023, 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, 2022.

During the six months ended June 30, 2023, 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, 2022.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 1. Financial Statements