What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-28 compared with 2023-03-27 · 202 added, 234 removed, 370 unchanged (54% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm (Ernst & Young LLP;

San Diego, California;

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’

Equity (Deficit)

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Reneo Pharmaceuticals, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in convertible preferred stock and stockholders’

equity (deficit), and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

The Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Adoption of ASU No.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2022 due to the adoption of ASU No.

2016-02, Leases (Topic 842) and related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

San Diego, California

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Other non-current assets

Liabilities and stockholders’

Liabilities and stockholders’ equity

Current liabilities:

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Operating lease liabilities, less current portion

Other long-term liabilities

Performance award

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Commitments and contingencies

Stockholders’

Stockholders’ equity:

Common stock, $ 0.0001 par value;

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December 31, 2023 and December 31, 2022;

24,699,553 shares

issued and outstanding at December 31, 2022;

and 24,457,838 and

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

and 24,699,553 shares issued and outstanding at December 31, 2023

and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive (loss) income

Total stockholders’

Total liabilities and stockholders’

Accumulated other comprehensive income (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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Loss from operations

Unrealized (loss) gain on short-term investments

Unrealized gain (loss) on short-term investments

Comprehensive loss

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RENEO PHARMACEUTICALS, INC.

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’

Equity ( Deficit)

Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share data)

Preferred Stock

Comprehensive

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Income (Loss)

Equity (Deficit)

Balances, December 31, 2021

Issuance of series B

convertible preferred

stock, net of issuance

costs of $ 29

Conversion of

convertible preferred

stock into common

initial public offering

Issuance of common

stock in initial public

offering, net of

offering costs

Issuance of common

stock in connection

with equity plans

Other comprehensive

Stock based compensation

Issuance of common stock in connection

with at-the-market facility, net of

issuance costs

Issuance of common stock in

connection with equity plans

Other comprehensive loss

Balances, December 31, 2022

Issuance of common

stock in connection

with the at-the-market

Issuance of common

stock in connection

with equity plans

Other comprehensive

Stock based compensation

Issuance of common stock in public

offering, net of offering costs

Issuance of common stock in private

placement, net of offering costs

Issuance of common stock in connection

with at-the-market facility, net of

issuance costs

Issuance of common stock in

connection with equity plans

Repurchase and retirement of common

stock in connection with common

stock repurchase agreement

Other comprehensive income

Balances, December 31, 2023

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Non-cash lease expense

Loss on disposal of fixed asset

Right-of-use and leasehold improvement impairment expenses

Changes in operating assets and liabilities:

Prepaid expenses and other assets

Prepaid and other assets

Accounts payable and accrued expenses

Operating lease liabilities

Other current and long-term liabilities

Net cash used in operating activities

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

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

Proceeds from issuance of Series B convertible preferred stock, net

of issuance costs

Proceeds from initial public offering, net of offering costs

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

Repurchase of common stock in connection with common

stock repurchase agreement

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 (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

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

Noncash investing and financing activities:

Vesting of unvested exercised options

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

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Reneo Pharmaceuticals, Inc.

(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

Public Offerings

On April 13, 2021, the Company completed an initial public offering (IPO) of its common stock.

In connection with its IPO, the Company sold and issued 6,250,000 shares of its common stock at a price to the public of $ 15.00 per share.

The gross proceeds from the IPO were approximately $ 93.8 million before deducting underwriting discounts and commissions of $ 6.6 million and offering expenses of approximately $ 2.6 million payable by the Company.

At the closing of the IPO, 71,183,500 shares of outstanding convertible preferred stock were automatically converted into 15,907,629 shares of common stock.

Following the IPO, there were no shares of preferred stock outstanding.

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

For the year ended December 31, 2022 , the Company has sold and issued approximately 100,000 shares of its common stock under the ATM facility.

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.

Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued (step 1).

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 December 31, 2022, the Company had cash, cash equivalents and short-term investments of $ 101.2 million and an accumulated deficit of $ 136.7 million.

The Company had a net loss of $ 52.0 million and used cash of $ 47.4 million for operating activities for the year ended December 31, 2022.

Since inception through December 31, 2022, the Company has funded its operations primarily with the net proceeds from the issuance of convertible preferred stock and common stock.

Management has prepared cash flow forecasts which indicate that based on the Company’s expected operating losses and negative cash flows, there is substantial doubt about the Company’s ability to continue as a going concern for twelve months after the date the consolidated financial statements for the year ended December 31, 2022 are issued.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.

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.

The Company plans to fund its losses from operations and capital funding needs 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.

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

(Reneo or the Company) commenced operations on September 22, 2014 as a pharmaceutical company and has historically 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 (PPARδ) agonist.

Risks and Uncertainties

On December 14, 2023, the Company announced that its pivotal STRIDE study, a global, randomized, double-blind, placebo-controlled Phase 2b trial of mavodelpar in adult patients with primary mitochondria myopathy due to mitochondrial DNA defects, did not meet its primary or secondary efficacy endpoints.

As a result, the Company suspended the development activities of its only product candidate, mavodelpar, and implemented cash preservation activities, including substantial workforce reduction.

In December 2023, the Company implemented a workforce reduction and recognized approximately $ 2.5 million in severance and continuation of benefit expenses for the year ended December 31, 2023.

The Company is subject to a number of risks similar to other pharmaceutical companies including, but not limited to, dependency on the clinical and commercial success of the Company’s potential product candidates, ability to obtain regulatory approval of any such potential product candidates, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians, consumers and third-party payors, significant competition and untested manufacturing capabilities, and dependence on key individuals and sole source suppliers.

From its inception in 2014, the Company has incurred significant losses and negative cash flows from operations and expects to continue to incur net losses into the foreseeable future and may never become profitable.

As of December 31, 2023, the Company had cash, cash equivalents and short-term investments of $ 103.0 million to fund future operations.

Since inception through December 31, 2023, the Company has funded its operations primarily through the issuance and sale of equity securities.

Management has prepared cash flow forecasts which indicate that, based on the Company’s current cash resources available and working capital, the Company will have sufficient resources to fund its operations for at least one year after the date the consolidated financial statements are issued.

Future capital requirements will depend on many factors, including the timing and extent of spending on its operations and there can be no assurance that the Company will be successful in obtaining additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

If the Company is not able to secure adequate additional funding, the Company 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 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 ongoing COVID-19 pandemic, 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.

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

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

Public Offerings

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

On November 13, 2023,

concurrent with entering into the 2023 ATM Facility (defined below), the Company and Leerink terminated the 2022 ATM Facility.

The Company had sold an aggregate of $ 1.2 million under the 2022 ATM Facility as of the termination date.

In May 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.

Also, in May 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.

On November 13, 2023, the Company entered into an at-the-market equity offering sales agreement (Sales Agreement) with Leerink under which it may offer and sell, from time to time, at its sole discretion, up to $ 100.0 million in shares of its common stock (2023 ATM Facility).

As of December 31, 2023 , the Company had no t sold any shares of its common stock under the 2023 ATM Facility and on March 25, 2024, the Company provided notice to Leerink of its election to terminate the Sales Agreement, effective as of April 8, 2024 .

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP) and reflect the operation of the Company and its wholly owned subsidiary.

All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure in the Company’s consolidated financial statements and accompanying notes.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

Risks and Uncertainties

Any product candidates developed by the Company will require approvals from the U.S.

Food and Drug Administration or foreign regulatory agencies prior to commercial sales.

There can be no assurance that the Company’s current product candidates will meet desired efficacy and safety requirements to obtain the necessary approvals.

If approval is denied or delayed, it may have a material adverse impact on the Company’s business and its financial statements.

The Company is subject to a number of risks similar to other clinical-stage pharmaceutical companies including, but not limited to, dependency on the clinical and commercial success of the Company’s product candidate, mavodelpar, ability to obtain regulatory approval of mavodelpar, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians, consumers and third-party payors, significant competition and untested manufacturing capabilities, and dependence on key individuals and sole source suppliers.

By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

Cash and Cash Equivalents

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Short-term Investments

The Company accounts for short-term investments in accordance with ASC Topic 320, Investments –

Debt and Equity Securities .

The Company accounts for short-term investments in accordance with Accounting Standard Codification (ASC) Topic 320, Investments – Debt and Equity Securities .

Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each reporting period.

At December 31, 2022, the Company’s investments comprised of U.S.

At December 31, 2023, the Company’s investments comprised of U.S.

treasury securities and commercial paper classified as available-for-sale securities.

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss) in stockholders’

equity (deficit).

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss) in stockholders’ equity.

Realized gains and losses on sales of investments are included in interest income and are derived using the specific identification method for determining the cost of securities.

The Company recognizes an impairment charge when a decline in the fair value of its investments in debt securities below the amortized cost basis of such securities is judged to be other-than temporary impaired.

Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and if the entity has the intent to sell the security, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.

The Company did no t recognize any other-than-temporary impairment charges on its short-term investments during the years ended December 31, 2022 and 2021.

When the fair value of an available-for-sale debt security falls below the amortized cost basis it is evaluated to determine if any of the decline in value is attributable to credit loss.

Decreases in fair value attributable to credit loss are recorded directly to earnings with a corresponding allowance for credit losses, limited to the amount that the fair value is less than the amortized cost basis.

If the credit quality subsequently improves the allowance is reversed up to a maximum of the previously recorded credit losses.

When the Company intends to sell an impaired available-for-sale debt security, or if it is more likely than not that the Company will be required to sell the security prior to recovering the amortized cost basis, the entire fair value adjustment will immediately be recognized in earnings with no corresponding allowance for credit losses.

The Company did not recognize any credit losses on its short-term investments during the years ended December 31, 2023 and 2022.

Money market account balances are included as cash and cash equivalents on the consolidated balance sheets, which are also disclosed in Note 4, Fair Value Measurements .

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Maintenance and repairs are expensed as incurred.

The following estimated useful lives were used to depreciate or amortize the Company’s assets:

Estimated Useful Life

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If the carrying value exceeds the estimated future undiscounted cash flows, an impairment loss is recognized based on the amount that the carrying value exceeds the fair value of the asset or asset group.

The Company did no t recognize impairment losses during the years ended December 31, 2022 and 2021 .

As a result of suspending development activities of the Company’s only product candidate, mavodelpar, the Company recognized $ 0.3 million and $ 0.4 million in impairment losses of right-of-use assets and leasehold improvements, respectively, for the year ended December 31, 2023.

The Company recognized an immaterial amount in impairment related to its leases for the year ended December 31, 2022.

The Company determines if an arrangement includes a lease at inception.

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To date, the Company has not experienced significant changes in its estimates of accrued research and development expenses after a reporting period.

The Company expenses 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

Acquisitions of technology licenses are charged to expense or capitalized based upon management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use.

The Company has determined that technological feasibility for its product candidate would be reached when the requisite regulatory approvals are obtained to make the product available for sale.

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In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations.

If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount,

management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.

To date, there have been no interest or penalties charged in relation to unrecognized tax benefits.

The Company is subject to taxation in the United States and the United Kingdom (UK).

As of December 31, 2022 , the Company’s tax years since inception are subject to examination by taxing authorities in the United States, and the UK tax returns from 2018 forward are subject to examination.

As of December 31, 2023 , the Company’s tax years since inception are subject to examination by taxing authorities in the United States, and the UK tax returns from 2018 forward are subject to examination.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for grants under its 2014 and 2021 Equity Incentive Plans and employee stock purchase plan (ESPP).

The Company accounts for all stock-based awards granted to employees and directors at their fair value and recognizes compensation expense over the award’s vesting period.

Determining the amount of stock-based compensation to be recorded requires the Company to develop estimates of fair values of stock options as of the grant date.

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The Company granted restricted stock awards with performance conditions that are based upon the achievement of pre-specified clinical development or regulatory performance events.

achievement of each performance condition is deemed probable, a determination that requires significant judgment by management.

As the outcome of each event has inherent risks and uncertainties, and a positive outcome may not be known until the event is achieved, the Company will begin to recognize the value of the performance-based restricted stock awards when the achievement of each performance condition is deemed probable, a determination that requires significant judgment by management.

Compensation cost is recognized under the accelerated method and is adjusted in future periods for subsequent changes in the expected outcome of the performance-related conditions.

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Foreign Currency Transactions

The functional currency of Reneo Pharma Ltd, the Company’s wholly owned subsidiary in the UK, is the U.S.

All foreign exchange transactional and remeasurement gains and losses are recognized in the consolidated statements of operations and comprehensive loss.

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Comprehensive income or loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources.

Net Loss Per Share

The Company computes basic loss per share by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.

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 periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company has reported net losses for the years ended December 31, 2022 and 2021.

As a result, the Company has, excluded all outstanding common stock equivalents including the Company’s stock options, performance-based and market-based RSUs, and employee stock purchase plan, from the diluted net loss per share calculation for the years ended December 31, 2022 and 2021 because such shares are anti-dilutive.

The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect :

As of December 31,

Common stock options outstanding

Unvested restricted stock units

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (ASC 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheets for those leases classified as operating leases under previous GAAP.

ASU 2016-02 requires a lessee to recognize a liability for lease payments (lease liability) and a ROU asset (representing its right to use the underlying asset for the lease term) on the balance sheet.

In July 2018, the FASB issued ASU 2018-11, Leases (ASC 842):

Targeted Improvements , which provides entities an optional transition method to apply the new guidance as of the adoption date, rather than as of the earliest period presented.

In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the effective date, unless the lease was modified, to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which effectively allows entities to carryforward accounting conclusions under previous GAAP.

The Company adopted this standard on January 1, 2022 , using the optional transitional method and elected the package of practical expedients in transition for leases that commenced prior to January 1, 2022.

As a result of implementing ASC 842, the Company recognized operating lease ROU assets of $ 1.5 million and lease liabilities of $ 1.7 million on January 1, 2022, with no impact on its beginning retained earnings, consolidated statements of operations and comprehensive loss, or cash flows.

See Note 6, Leases , for further details.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes .

The standard simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

The new guidance was effective for the Company as of January 1, 2022.

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

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 (Topic 326), Measurement of Credit Losses on Financial Instruments .

In June 2016, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (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 are not measured at fair value through net income.

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Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized.

This new guidance is effective for the Company as of January 1, 2023.

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.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2022 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

This new guidance was effective for the Company as of January 1, 2023.

The Company adopted the guidance as of January 1, 2023 , with no material impact on its consolidated financial statements and related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (ASC 740), Improvements to Income Tax Disclosures.

The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements.

The standard is effective for years beginning after December 15, 2025 and early adoption is permitted.

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

Net Loss Per Share

The Company computes basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.

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 vesting of restricted stock units were excluded from the diluted net loss per share calculation for the years ended December 31, 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 December 31,

Common stock options outstanding

Unvested restricted stock units

Fair Value Measurements

ASC Topic 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.

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.

ASC Topic 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 Topic 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, which 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.

• 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, which 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 categorizes its money market funds as Level 1, using the quoted prices in active markets.

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treasury securities are categorized as Level 2, using significant other observable inputs.

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.

Investments are reviewed periodically to identify possible other-than-temporary impairments.

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No assets or liabilities were transferred into or out of their classifications during the years ended December 31, 2023 and 2022.

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

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at December 31, 2023 consisted of the following (in thousands):

Quoted Prices in

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Money market investments

Commercial paper

treasury securities

Short-term investments:

treasury securities

Commercial paper

Performance award

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):

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

Quoted Prices in

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Money market investments

Commercial paper

Short-term investments:

treasury securities

Commercial paper

Performance award

The following table sets forth a summary of changes in the fair value of the Company’s performance award liability (in thousands):

The following table sets forth a summary of changes in the fair value measurements of the Performance Award liability (in thousands):

Balance as of January 1, 2023

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Balance as of December 31, 2023

The following tables summarize the gross unrealized gains and losses of the Company’s available-for-sale securities as of December 31, 2022 and 2021 (in thousands):

Marketable Debt Securities

The Company’s investments in debt securities are carried at fair value and classified as current assets available-for-sale 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 December 31, 2023

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treasury securities

Commercial paper

As of December 31, 2022

Available-for-sale securities:

treasury securities

Commercial paper

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Total property and equipment, net

*All leasehold improvements were fully impaired and written off.

For further information see Note 13.

Accrued Expenses

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Accrued compensation*

Accrued research and development-other

Accrued other

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 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.

On October 20, 2022, the Company entered into a lease agreement for of office space located in Sandwich, United Kingdom, with a term of 5 years and a termination option after three years , which commenced in December 2022.

In connection with the lease, the Company recorded $ 0.2 million in ROU and lease liabilities at commencement date.

*Accrued compensation includes severance costs.

For further information see Note 13.

The Company’s headquarters are located in Irvine, California, where it leases office space under a lease agreement that expires in November 2026.

The Company leases additional office space located in Sandwich, UK under a lease agreement that expires in October 2027 (UK lease), with an option to early terminate in October 2025 with no termination fee.

In January 2024, the Company exercised its early termination option .

The Company concluded that its current leases are impaired and recognized approximately $ 0.3 million of ROU assets impairment expense for the year ended December 31, 2023.

For further information, see Note 13.

At December 31, 2023, the weighted average incremental borrowing rate was 5 % and the weighted average remaining lease term was 3.8 years for the operating leases held by the Company.

For the year ended December 31, 2022, cash paid for amounts included for the measurement of lease liabilities was $ 0.5 million.

For the year ended December 31, 2022, the Company recorded operating lease expense of $ 0.5 million.

For the years ended December 31, 2023 and 2022, cash paid for amounts included for the measurement of lease liabilities was $ 0.5 million.

For the years ended December 31, 2023 and 2022, operating lease expense was $ 0.4 million and $ 0.5 million, respectively.

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

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Present value of lease liabilities

Convertible Preferred Stock

Preferred Stock

The Company has authorized up to 10,000,000 shares of preferred stock, $ 0.0001 par value per share, for issuance.

The Company’s preferred stock will have such rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, which will be determined by its board of directors upon its issuance.

As of December 31, 2022 , there were no shares of preferred stock outstanding.

In connection with the IPO in April 2021, all outstanding shares of Series A convertible preferred and Series B convertible preferred stock were converted into 5,430,957 and 10,476,672 shares of common stock, respectively.

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).

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.

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.

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

As of December 31, 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

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Stock Options

A summary of the Company’s stock option activity and related information for the year ended December 31, 2022 is as follows:

A summary of the Company’s stock option activity and related information for the year ended December 31, 2023 is as follows:

Contractual Term (in years)

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Unrecognized stock-based compensation expense at December 31, 2023 was $ 5.9 million, which is expected to be recognized over a weighted-average vesting term of 2.0 years.

The Company estimates stock awards fair value on the date of grant using the Black-Scholes valuation, with the vesting being subject to service requirements.

The Company accounts for forfeitures when they occur.

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:

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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.

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.

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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The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Fair value of common stock .

For periods prior to the Company's IPO in April 2021, 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.

Restricted Stock Units (RSUs)

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

The following table summarizes RSU activities as of December 31, 2022:

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

The following table summarizes RSU activities during the year ended December 31, 2023:

Weighted-Average

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Unvested at December 31, 2023

Time-Based Units

TSUs typically vest over four years , with 25 % vesting on the one-year anniversary of the employee’s hire date and the remainder vesting monthly or quarterly over the following three years subject to the employee’s continued employment with the Company through the vesting dates.

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 is recognized on a straight-line basis.

The Company had 57,000 unvested shares underlying TSUs as of December 31, 2023.

The stock-based compensation expense related to such TSUs for the year ended December 31, 2023 was immaterial.

Unrecognized stock-based compensation expense at December 31, 2023 was $ 0.3 million, which is expected to be recognized over a weighted-average vesting term of 1.3 years.

Performance-Based Units

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.

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

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

The Company has 209,500 unvested shares underlying PSUs as of December 31, 2022.

The Company had 149,500 unvested shares underlying PSUs as of December 31, 2023.

The Company concluded that achievement of the performance conditions was not probable as of December 31, 2023 and 2022 , and therefore no stock-based compensation expense was recognized for the years ended December 31, 2023 and 2022 in connection with the PSUs.

As of December 31, 2022, unrecognized stock-based compensation expense related to the PSUs that were deemed not probable was $ 1.4 million.

As of December 31, 2023 , there was $ 1.1 million of unrecognized stock-based compensation expense related to PSUs that were deemed not probable of vesting.

Market-Based Units

The MSUs 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 MSUs was $ 2.78 per share.

The vesting of the MSUs is 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 MSUs was $ 2.78 per share.

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

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 December 31, 2022.

Stock-based compensation expense related to the

MSUs during the years ended December 31, 2022 and 2021 was immaterial.

As of December 31, 2022, there was $ 0.3 million of unrecognized stock-based compensation expense related to this MSU.

The Company had 120,000 unvested shares underlying MSUs as of December 31, 2023.

Stock-based compensation expense related to the MSUs during the years ended December 31, 2023 and 2022 was immaterial.

As of December 31, 2023, unrecognized stock-based compensation expense related to the MSUs was immaterial.

Performance Award

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.

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 $ 750.0 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 $ 750.0 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 Company’s initial public offering (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 stock-based compensation expense over the derived service period.

For the year ended December 31, 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.

For the years ended December 31, 2023 and 2022 , the Company reversed approximately $ 22,000 and $ 0.4 million in stock-based compensation expenses, respectively, as a direct result of the decreased value of the Performance Award caused by a decline in the Company’s common stock price.

2021 Employee Stock Purchase Plan

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.

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 December 31, 2023 , 288,466 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 September 2021, the compensation committee of 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 December 31, 2023.

The stock-based compensation expense related to the ESPP and the SAYE for the year ended December 31, 2022 , was $ 0.2 million and was immaterial for the year ended December 31, 2021.

The stock-based compensation expense related to the ESPP and the SAYE for the years ended December 31, 2023 and 2022 , was $ 0.4 million and $ 0.2 million, respectively.

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):

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

Year Ended December 31,

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General and administrative

In December 2022, the Company's Compensation Committee approved an extension of the post-termination exercise period applicable to each outstanding stock option, approximately 613,000 shares, held by the Company's non-employee directors, such that upon the termination of service, each option will remain exercisable through

the lessor of i) three years or ii) end of the term of such option from the date of grant.

The Company recognized $ 0.2 million in stock-based compensation expense related to this modification in December 2022.

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 peroxisome proliferator-activated receptor delta (PPARδ) agonists and products containing such PPARδ

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

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

In December 2017, the Company entered into a license agreement (the vTv License Agreement) with vTv Therapeutics LLC (vTv Therapeutics), 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 mavodelpar, for any therapeutic, prophylactic or diagnostic application in humans.

Since the Company has suspended all development activity related to mavodelpar, it is not currently performing any development efforts under the vTv License Agreement.

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

On October 30, 2023, the Company repurchased from vTv Therapeutics all 576,443 shares of its common stock previously issued to vTv Therapeutics under the vTv License Agreement for an aggregate purchase price of approximately $ 4.4 million in a private, non-underwritten transaction.

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.

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 December 31, 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.

A milestone payment of $ 2.0 million was achieved and recorded for the year ended December 31, 2021.

There were no milestone payments achieved or recorded for the year ended December 31, 2022.

The Company’s net loss was generated in the following jurisdictions (in thousands):

There were no milestone payments achieved or recorded for the years ended December 31, 2023 and 2022.

The Company’s net loss was generated in the following jurisdictions (in thousands):

Year Ended December 31,

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Operating lease liabilities

Other accruals and reserves

Gross deferred tax assets

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GILTI inclusion

Foreign Rate Differential

Valuation allowance

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The federal credits will begin to expire in 2034 , if unused, and the state credits carry forward indefinitely.

The future utilization of the Company’s NOL and tax credit carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of changes in ownership by stockholders that hold 5 % or more of the Company’s common stock.

An assessment of such ownership changes under Section 382 was not completed through December 31, 2023.

To the extent that an assessment is completed in the future, the Company’s ability to utilize tax attributes could be restricted on a year-by-year basis and certain attributes could expire before they are utilized.

The Company will examine the impact of any potential ownership changes in the future.

The Company has elected to record the inclusion related to the Global Intangible Low-Taxed Income (GILTI) in the period incurred.

The estimated GILTI inclusion generated by the Company’s wholly-owned controlled foreign corporation in the United Kingdom for the year ended December 31, 2022 was $ 0.8 million.

The estimated GILTI inclusion generated by the Company’s wholly-owned controlled foreign corporation in the UK for the year ended December 31, 2023 was $ 1.5 million.

This amount is included in the income tax provision, however, has zero impact to the provision due to the full valuation allowance.

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A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023.

Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections for future growth.

Based on this evaluation, as of December 31, 2022, a full valuation allowance of $ 32.2 million has been recorded against the Company net deferred tax assets, as the Company has determined that none of the Company’s balance of deferred tax assets is more likely than not to be realized.

subjective evidence, such as estimates of future taxable income during carryforward periods and the Company’s projections for growth.

Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections for future growth.

Based on this evaluation, as of December 31, 2023, a full valuation allowance of $ 49.9 million has been recorded against the Company net deferred tax assets, as the Company has determined that none of the Company’s balance of deferred tax assets is more likely than not to be realized.

The amount of the deferred tax assets considered realizable, however, could be adjusted in the future if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence, such as estimates of future taxable income during carryforward periods and the Company’s projections for growth.

The following table summarizes the changes to unrecognized tax benefits (in thousands):

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The Company is subject to taxation in the United States and the UK.

The Company’s federal and state returns since inception are subject to examination due to the carryover of net operating losses.

The Company has not been, nor is it currently, under examination by any tax authorities.

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The Company is currently not a party to any legal proceedings, nor is the Company aware of any threatened or pending litigation .

However, from time-to-time in the future, the Company could be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of business, which may have a material adverse effect on the Company’s consolidated results of operations or financial position.

The Company maintains a defined contribution 401(k) plan available to eligible employees.

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Matching contributions to the 401(k) plan are made for certain eligible employees to meet non-discrimination provisions of the plan.

During the years ended December 31, 2022 and 2021 , the expense recorded by the Company was immaterial.

During the years ended December 31, 2023 and 2022 , the expense recorded by the Company was $ 0.2 million and immaterial, respectively.

Financial Impact of Suspension of Mavodelpar Development Activities

On December 14, 2023, the Company announced that its pivotal STRIDE study did not meet its primary or secondary efficacy endpoints.

As a result, the Company suspended the development activities of its only product candidate, mavodelpar, and implemented cash preservation activities, including substantial workforce reductions.

In December 2023, the Company implemented a workforce reduction and recognized approximately $ 2.5 million in severance and continuation of benefit expenses for the year ended December 31, 2023.

In addition, the Company assessed the impairment of its ROU and fixed assets due to the suspension of mavodelpar’s development activities and concluded that its current leases and leasehold improvements were impaired.

The Company recognized approximately $ 0.3 million and $ 0.4 million of impairment expenses for ROU and leasehold improvements for the year ended December 31, 2023, respectively.

Subsequent Events

Subsequent to December 31, 2022 through the date of this report, the Company has sold and issued approximately 400,000 shares of common stock under the ATM facility.

In February 2024, the Company implemented a second workforce reduction.

As a result of this workforce reduction, the Company will recognize approximately $ 1.6 million in severance and continuation of benefit expenses in first quarter of 2024.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data