Item 1. Financial Statements
Item 1. Financial Statements
RENEO PHARMACEUTICALS, INC.
Consolidated Balance Sheets
(In thousands, except share and par value data)
June 30,
2024
December 31,
2023
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
35,970
$
27,632
Short-term investments
40,704
75,331
Prepaid expenses and other current assets
1,316
3,659
Total current assets
77,990
106,622
Property and equipment, net
81
134
Right-of-use assets
493
599
Other non-current assets
153
81
Total assets
$
78,717
$
107,436
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
64
$
8,717
Accrued expenses
953
9,129
Operating lease liabilities, current portion
331
331
Total current liabilities
1,348
18,177
Operating lease liabilities, less current portion
492
642
Performance award
8
7
Total liabilities
1,848
18,826
Commitments and contingencies
Stockholders’ equity:
Common stock, $ 0.0001 par value; 200,000,000 shares authorized at
June 30, 2024 and December 31, 2023; 33,420,808 shares
issued and outstanding at June 30, 2024 and December 31, 2023
3
3
Additional paid-in capital
309,140
307,073
Accumulated deficit
( 232,261
)
( 218,474
)
Accumulated other comprehensive (loss) income
( 13
)
8
Total stockholders’ equity
76,869
88,610
Total liabilities and stockholders’ equity
$
78,717
$
107,436
The accompanying notes are an integral part of these consolidated financial statements.
3
RENEO PHARMACEUTICALS, INC.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Operating expenses:
Research and development
$
590
$
14,400
$
5,533
$
25,389
General and administrative
5,774
6,639
10,396
11,771
Total operating expenses
6,364
21,039
15,929
37,160
Loss from operations
( 6,364
)
( 21,039
)
( 15,929
)
( 37,160
)
Other income
1,003
1,508
2,142
2,522
Net loss
( 5,361
)
( 19,531
)
( 13,787
)
( 34,638
)
Unrealized (loss) gain on short-term investments
( 1
)
( 43
)
( 21
)
12
Comprehensive loss
$
( 5,362
)
$
( 19,574
)
$
( 13,808
)
$
( 34,626
)
Net loss per share attributable to common stockholders,
basic and diluted
$
( 0.16
)
$
( 0.65
)
$
( 0.41
)
$
( 1.25
)
Weighted-average shares used in computing net
loss per share, basic and diluted
33,420,808
30,215,321
33,420,808
27,640,172
The accompanying notes are an integral part of these consolidated financial statements.
4
RENEO PHARMACEUTICALS, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
Additional
Accumulated
Other
Total
Common Stock
Paid-In
Comprehensive
Accumulated
Stockholders’
Shares
Amount
Capital
Income (Loss)
Deficit
Equity
Balances, December 31, 2023
33,420,808
$
3
$
307,073
$
8
$
( 218,474
)
$
88,610
Stock based compensation
—
—
1,078
—
—
1,078
Other comprehensive loss
—
—
—
( 20
)
—
( 20
)
Net loss
—
—
—
—
( 8,426
)
( 8,426
)
Balances, March 31, 2024
33,420,808
$
3
$
308,151
$
( 12
)
$
( 226,900
)
$
81,242
Stock based compensation
—
—
989
—
—
989
Other comprehensive loss
—
—
—
( 1
)
( 1
)
Net loss
—
—
—
—
( 5,361
)
( 5,361
)
Balances, June 30, 2024
33,420,808
$
3
$
309,140
$
( 13
)
$
( 232,261
)
$
76,869
5
RENEO PHARMACEUTICALS, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
Additional
Accumulated
Other
Total
Common Stock
Paid-In
Comprehensive
Accumulated
Stockholders’
Shares
Amount
Capital
(Loss) Income
Deficit
Equity
Balances, December 31, 2022
24,699,553
$
3
$
236,693
$
( 43
)
$
( 136,683
)
$
99,970
Stock based compensation
—
—
1,157
—
—
1,157
Issuance of common stock in connection
with at-the-market facility, net of
issuance costs
407,877
—
1,009
—
—
1,009
Other comprehensive income
—
—
—
55
—
55
Net loss
—
—
—
—
( 15,107
)
( 15,107
)
Balances, March 31, 2023
25,107,430
$
3
$
238,859
$
12
$
( 151,790
)
$
87,084
Issuance of common stock in public
offering, net of offering costs
7,906,250
—
58,862
—
—
58,862
Issuance of common stock in private
placement, net of offering costs
625,000
4,667
4,667
Stock based compensation
—
—
1,207
—
—
1,207
Issuance of common stock in
connection with equity plans
162,108
282
282
Other comprehensive loss
—
—
—
( 43
)
—
( 43
)
Net loss
—
—
—
—
( 19,531
)
( 19,531
)
Balances, June 30, 2023
33,800,788
$
3
$
303,877
$
( 31
)
$
( 171,321
)
$
132,528
The accompanying notes are an integral part of these consolidated financial statements.
6
RENEO PHARMACEUTICALS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2024
2023
Cash flows from operating activities
Net loss
$
( 13,787
)
$
( 34,638
)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation
2,067
2,364
Depreciation and amortization
28
83
Amortization/accretion on short-term investments
( 1,644
)
( 2,011
)
Changes in the fair value of performance award
1
847
Non-cash lease expense
129
241
Loss on disposal of fixed asset
27
3
Changes in operating assets and liabilities:
Prepaid and other assets
2,360
1,542
Accounts payable and accrued expenses
( 16,829
)
6,690
Operating lease liabilities
( 173
)
( 283
)
Net cash used in operating activities
( 27,821
)
( 25,162
)
Cash flows from investing activities
Purchases of property and equipment
( 2
)
( 177
)
Purchase of available-for-sale short-term investments
( 67,750
)
( 132,327
)
Proceeds from maturities of available-for-sale short-term investments
104,000
82,000
Net cash provided by (used in) investing activities
36,248
( 50,504
)
Cash flows from financing activities
Payments of deferred costs in connection with private placement
transaction
( 89
)
—
Proceeds from public offering of common stock, net of offering costs
—
58,862
Proceeds from private placement of common stock, net of offering costs
—
4,667
Proceeds from issuance of common stock under the at-the-market
facility, net of offering costs
—
1,009
Proceeds from issuance of common stock in connection with equity
plans
—
282
Net cash (used in) provided by financing activities
( 89
)
64,820
Net increase (decrease) in cash and cash equivalents
8,338
( 10,846
)
Cash and cash equivalents, beginning of period
27,632
19,927
Cash and cash equivalents, end of period
$
35,970
$
9,081
Noncash investing and financing activities:
Property and equipment in accounts payable
$
—
$
10
The accompanying notes are an integral part of these consolidated financial statements.
7
RENEO PHARMACEUTICALS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Business
Organization
Reneo Pharmaceuticals, Inc. (Reneo or the Company) is a pharmaceutical company historically focused on the development and commercialization of therapies for patients with rare genetic mitochondrial diseases, which are often associated with the inability of mitochondria to produce adenosine triphosphate. The Company’s only product candidate, mavodelpar, is a potent and selective agonist of the peroxisome proliferator-activated receptor delta (PPARδ). Mavodelpar has been shown to increase transcription of genes involved in mitochondrial function and increase fatty acid oxidation , and may increase production of new mitochondria.
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 for mavodelpar and implemented cash preservation activities, including a substantial workforce reduction. The Company implemented a reduction in workforce in December 2023 and February 2024, and currently has eight full-time employees remaining.
In January 2024, the Company’s Board of Directors retained an independent financial advisor to initiate a formal process to evaluate potential strategic alternatives focused on maximizing stockholder value, including, but not limited to, a merger, sale, other business combination, a strategic partnership with one or more parties, or the licensing, sale or divestiture of its assets. The Company is no longer pursuing further clinical development of mavodelpar at this time.
On May 10, 2024, the Company entered into an Agreement and Plan of Merger (Merger Agreement and the transactions contemplated thereby, Proposed Transactions) with Radiate Merger Sub I, Inc., a Delaware corporation and its direct, wholly owned subsidiary (Merger Sub I), Radiate Merger Sub II, LLC, a Delaware limited liability company and its direct, wholly owned subsidiary (Merger Sub II), and OnKure, Inc., a Delaware corporation (OnKure), pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, (a) Merger Sub I will merge with and into OnKure (the First Merger), with Merger Sub I ceasing to exist and OnKure surviving the First Merger as its wholly owned subsidiary (Reneo following the First Merger, NewCo), and (b) as promptly as practicable following the First Merger, OnKure, as the surviving corporation of the First Merger, will merge with and into Merger Sub II, with OnKure ceasing to exist and Merger Sub II surviving the Second Merger as a wholly owned subsidiary of NewCo (the Second Merger, and together with the First Merger, the Mergers). At the effective time of the First Merger (the First Effective Time) and upon filing of an amendment to the Company’s amended and restated certificate of incorporation to reclassify its common stock, each share of the Company’s common stock existing and outstanding immediately prior thereto will be recapitalized and remain outstanding as a share of NewCo Class A common stock without any conversion or exchange thereof, subject to a proposed reverse stock split of all of the shares of the Company’s common stock outstanding at the time of effectiveness thereof by a ratio to be determined by OnKure subject to the Company’s approval (the Reverse Stock Split). Upon the First Effective Time, all shares of OnKure capital stock outstanding immediately prior to the First Effective Time, after giving effect to an assumed common stock exchange ratio of 0.24482 and an assumed preferred stock exchange ratio of 1.50062 , will be converted into the right to receive approximately 76,958,781 shares of NewCo common stock in the aggregate, which is subject to adjustment as set forth in the Merger Agreement.
In connection with the Mergers, on May 10, 2024, the Company concurrently entered into a Subscription Agreement with certain existing OnKure stockholders and new investors (collectively, PIPE Investors) pursuant to which, among other things, the Company agreed to issue to the PIPE Investors shares of NewCo Class A common stock concurrently with the Mergers in a private placement transaction for an aggregate purchase price of $ 65.0 million, which amount may be increased to up to $ 85.0 million through additional subscriptions from additional
8
PIPE Investors (the Concurrent PIPE Investments). The closing of the Concurrent PIPE Investments is conditioned upon the satisfaction or waiver of the conditions to the closing of the Mergers and the substantially concurrent closing of the Mergers, as well as certain other conditions.
Immediately after the Mergers, pre-Mergers OnKure stockholders are expected to own approximately 69.4 % of NewCo on a fully-diluted basis and pre-Mergers Reneo stockholders are expected to own approximately 30.6 % of NewCo on a fully-diluted basis. Following the completion of the Concurrent PIPE Investments, assuming a subscription amount of (a) $ 65.0 million, pre-Mergers OnKure stockholders are expected to own approximately 54.8 % of NewCo on a fully-diluted basis, pre-Mergers Reneo stockholders are expected to own approximately 24.2 % of NewCo on a fully-diluted basis, and the PIPE Investors are expected to own approximately 21.0 % of NewCo on a fully-diluted basis, and (b) $ 85.0 million, pre-Mergers OnKure stockholders are expected to own approximately 51.5 % of NewCo on a fully-diluted basis, pre-Mergers Reneo stockholders are expected to own approximately 22.7 % of NewCo on a fully-diluted basis, and the PIPE Investors are expected to own approximately 25.8 % of NewCo on a fully-diluted basis. The exchange ratios, and related pro forma ownership, will be adjusted (i) to account for the effect of the proposed Reverse Stock Split and (ii) to the extent that Reneo’s net cash as of the close of business on the business day immediately preceding the closing date of the Mergers is less than $ 59.0 million or greater than $ 61.0 million (resulting in pre-Mergers Reneo stockholders owning less or more of NewCo, respectively). The expected relative ownership percentages of pre-Mergers OnKure stockholders and pre-Mergers Reneo stockholders of NewCo are calculated using the treasury stock method, as described in the Merger Agreement.
The Mergers, which have been approved by the Company’s Board of Directors and the board of directors of OnKure, are expected to close in the second half of 2024, subject to the satisfaction or waiver of certain closing conditions, including the approval of the Company’s stockholders. Certain stockholders of Reneo holding approximately 28.2 % of the outstanding shares of its common stock entered into support agreements with Reneo and OnKure to vote all of their shares of the Company’s common stock in favor of the Mergers, subject to the terms of the support agreements. Although the Company has entered into the Merger Agreement and intends to consummate the proposed Mergers, there is no assurance that the Company will be able to successfully consummate the proposed Mergers on a timely basis, or at all. If, for any reason, the proposed Mergers are not completed, the Company will reconsider its strategic alternatives and could pursue another strategic transaction similar to the proposed Mergers, potential collaborative, partnering or other strategic arrangements for the Company’s assets, including a license, sale or divestiture of its assets, or liquidate and distribute available cash.
Liquidity
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 June 30, 2024, the Company had cash, cash equivalents and short-term investments of $ 76.7 million , which the Company believes will be sufficient to fund the Company’s current operating plan for at least the next 12 months from the date of issuance of these unaudited condensed financial statements.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company recommends that the unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
9
In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements, have been included in the accompanying unaudited financial statements. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.
The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of these consolidated financial statements for the six months ended June 30, 2024 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, 2023.
New Accounting Pronouncements
There were various accounting standards and interpretations issued recently, none of which are expected to have a material impact on the Company’s financial position, operations or cash flows.
3. 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 three and six months ended June 30, 2024 and 2023 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 June 30,
2024
2023
Common stock options outstanding
4,671,290
6,001,185
Unvested restricted stock units
311,500
364,500
Total
4,982,790
6,365,685
4. 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.
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:
10
• 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. Commercial paper and U.S. 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.
In connection with the Company’s chief executive officer’s (CEO) employment agreement, he is entitled to receive a special performance bonus in the amount of $ 7.5 million (Performance Award), payable in cash, common stock or a combination of cash and common stock, at the election of the Company, based on achievement of certain conditions as described in more detail in Note 8. The Company estimated the fair value of the Performance Award using a Monte Carlo simulation, which incorporates the stock price at the date of the valuation and utilizes Level 3 inputs such as volatility, probabilities of success, and other inputs that are not observable in active markets. The Performance Award is required to be measured at fair value on a recurring basis each reporting period, with changes in the fair value recognized in general and administrative expense in the consolidated statements of operations and comprehensive loss over the derived service period of the award.
No assets or liabilities were transferred into or out of their classifications during the six months ended June 30, 2024.
The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at June 30, 2024 consisted of the following (in thousands):
Quoted Prices in
Active Markets
For Identical
Items
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Cash and cash equivalents:
Money market investments
$
21,717
$
—
$
—
$
21,717
U.S. treasury securities
—
12,934
—
12,934
Short-term investments:
U.S. treasury securities
—
40,611
—
40,611
Total
$
21,717
$
53,545
$
—
$
75,262
Liabilities
Performance award
$
—
$
—
$
8
$
8
Total
$
—
$
—
$
8
$
8
11
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
Active Markets
For Identical
Items
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Cash and cash equivalents:
Money market investments
$
10,983
$
—
$
—
$
10,983
U.S. treasury securities
—
9,928
—
9,928
Short-term investments:
U.S. treasury securities
—
75,331
—
75,331
Total
$
10,983
$
85,259
$
—
$
96,242
Liabilities
Performance award
$
—
$
—
$
7
$
7
Total
$
—
$
—
$
7
$
7
The following table sets forth a summary of changes in the fair value measurements of the Performance Award liability (in thousands):
Performance
Award
Balance as of January 1, 2024
$
7
Change in fair value
1
Balance as of June 30, 2024
$
8
5. 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. Accretion of bond discount and interest income on marketable securities is included in other income as a separate component of other income (expense) on the statement of operations and comprehensive loss. 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, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Market
Value
Available-for-sale securities:
U.S. treasury securities
$
53,558
$
—
$
( 13
)
$
53,545
Total
$
53,558
$
—
$
( 13
)
$
53,545
As of December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Market
Value
12
Available-for-sale securities:
U.S. treasury securities
$
75,324
$
8
$
( 1
)
$
75,331
Total
$
75,324
$
8
$
( 1
)
$
75,331
As of June 30, 2024 , the Company considered the unrealized losses in its investment portfolio to be temporary in nature and not due to credit losses. The Company has the intent and ability to hold such investments until their recovery at fair value. The Company did no t have any realized gains or losses in its available for sale securities during the three and six months ended June 30, 2024 and 2023 .
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
As of June 30, 2024
As of December 31, 2023
Accrued clinical and regulatory
$
—
$
3,661
Accrued contract manufacturing cost
—
1,100
Accrued compensation
386
3,948
Accrued other
567
420
Total accrued expenses
$
953
$
9,129
7. Leases
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, United Kingdom under a lease agreement that expires in October 2027, with an option to early terminate in October 2025 with no termination fee. In January 2024, the Company exercised its early termination option and made the final termination lease payment of $ 0.2 million in July 2024 .
Other information related to the Company ’s operating leases as of the balance sheet dates presented are as follows:
As of June 30,
2024
2023
Weighted incremental borrowing rate
5
%
5
%
Weighted average remaining lease term (in years)
2.3
3.7
Cash paid for amounts included in the measurement of lease liabilities (in thousands)
$
194
$
142
Lease expense (in thousands)
$
148
$
241
13
Maturities of lease liabilities by fiscal year for the Company ’s operating leases are as follows (in thousands):
As of June 30, 2024
2024 (remaining six months)
$
195
2025
371
2026
285
Total lease payments
851
Less: Imputed interest
( 28
)
Present value of lease liabilities
$
823
8. 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. 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.
Under the 2014 Plan, certain employees were granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. As of June 30, 2024 , 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 June 30, 2024, the Company had reserved shares of its common stock for future issuance as follows:
Shares
Reserved
Common stock options outstanding
4,671,290
Unvested restricted stock units
311,500
Available for future grants under the 2021 Equity Incentive Plan
4,423,667
Available for future grants under the 2021 Employee Stock Purchase Plan
780,098
Total shares of common stock reserved
10,186,555
14
Stock Options
A summary of the Company’s stock option activity and related information for the six months ended June 30, 2024 is as follows:
Options
Outstanding
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Term (in years)
Aggregate
Intrinsic
Value (in thousands)
Outstanding at December 31, 2023
5,301,254
$
4.76
6.9
$
—
Forfeited/Expired
( 629,964
)
$
4.90
Outstanding at June 30, 2024
4,671,290
$
4.74
6.9
$
—
Vested at June 30, 2024
3,348,616
$
5.04
6.5
$
—
Exercisable at June 30, 2024
3,516,983
$
5.03
6.5
$
—
Options exercisable at June 30, 2024 include vested options and options eligible for early exercise. All outstanding options as of June 30, 2024 are expected to vest.
Unrecognized stock-based compensation expense as of June 30, 2024 was $ 4.4 million, which is expected to be recognized over a weighted-average vesting term of 1.8 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 Company did no t grant any stock options during the six months ended June 30, 2024.
Restricted Stock Units (RSUs)
RSUs consist of time-based units (TSUs), performance-based units (PSUs) and market-based units (MSUs). The following table summarizes RSU activities during the six months ended June 30, 2024:
Number of
RSUs
Weighted-Average
Grant Date
Fair Value
Unvested at December 31, 2023
326,500
$
5.90
Cancelled
( 15,000
)
$
6.98
Unvested at June 30, 2024
311,500
$
5.85
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 June 30, 2024. The stock-based compensation expense related to such TSUs for the three and six months ended June 30, 2024 was immaterial. No stock-based compensation expense related to such TSUs was recognized for the three and six months ended June 30, 2023. Unrecognized stock-based compensation expense as of June 30, 2024 was $ 0.3 million, which is expected to be recognized over a weighted-average vesting term of 3.1 years.
Performance-Based Units
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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. The fair value of the awards was based on the value of the Company’s common stock at the grant date of the award and expense recognition is based on the probability of achieving the performance conditions. Stock-based compensation expense is adjusted in future periods for subsequent changes in the expected outcome of the performance conditions. The Company had 134,500 unvested shares underlying PSUs as of June 30, 2024. The Company concluded that achievement of the performance conditions was not probable as of June 30, 2024 and 2023, and therefore no stock-based compensation expense was recognized for the three and six months ended June 30, 2024 and 2023 in connection with the PSUs. As of June 30, 2024, 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 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 had 120,000 unvested shares underlying MSUs as of June 30, 2024. Stock-based compensation expense related to the MSUs during the three and six months ended June 30, 2024 and 2023 was immaterial. As of June 30, 2024, 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 $ 750.0 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 three and six months ended June 30, 2024, stock-based compensation expense was immaterial. For the three and six months ended June 30, 2023 , the Company recognized approximately $ 0.6 million and $ 0.8 million, respectively, 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.
2021 Employee Stock Purchase Plan
In March 2021, the Company’s Board of Directors adopted the Company’s 2021 Employee Stock Purchase Plan (ESPP), which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO. As of June 30, 2024 , 288,466 shares have been issued under the ESPP.
In September 2021, the compensation committee of the Company’s Board of Directors (Compensation Committee) 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. The Compensation Committee terminated the SAYE in January 2024 and the reserved shares were returned to the ESPP reserve pool. No shares were issued under the SAYE prior to its termination.
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The Company did no t recognize stock-based compensation expense related to the ESPP and the SAYE f or the three and six months ended June 30, 2024. The stock-based compensation expense related to the ESPP and the SAYE for the three and six months ended June 30, 2023, was immaterial.
Stock-Based Compensation Expense
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):
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Research and development
$
244
$
494
$
497
$
967
General and administrative
745
713
1,570
1,397
Total
$
989
$
1,207
$
2,067
$
2,364
9. License Agreement
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.
Under the terms of the vTv License Agreement, the Company has paid vTv Therapeutics an initial upfront license fee of $ 3.0 million and $ 2.0 million of milestone payments and issued an aggregate of 576,443 shares of 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 June 30, 2024 , the Company has paid an aggregate of $ 2.0 million in development and regulatory milestone payments. In addition, the Company is obligated to make tiered royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions. There were no milestone payments achieved or recorded for the three and six months ended June 30, 2024 and 2023.
Although the Company has suspended development activities related to mavodelpar, it will continue to maintain and prosecute mavodelpar intellectual property.
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