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Item 7. Management’s Discussion and Analysis

2025-03-10 compared with 2024-03-28 · 146 added, 152 removed, 38 unchanged (89% of the section changed)

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included in Item 8 “Financial Statements and Supplementary Data” and included elsewhere in this Annual Report.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report.

This discussion and analysis contains forward-looking statements based upon our current beliefs, estimates, plans and expectations that involve risks, uncertainties and assumptions.

Our actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Annual Report.

Reneo 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 ATP.

Our only product candidate, mavodelpar, is a potent and selective agonist of PPARδ.

Mavodelpar has been shown to increase transcription of genes involved in mitochondrial function and increase FAO, and may increase production of new mitochondria.

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

As a result, we suspended the development activities for mavodelpar and implemented cash preservation activities, including a substantial workforce reduction.

We implemented a reduction in workforce in December 2023 and February 2024, and currently have eight full-time employees remaining.

In January 2024, our 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 our assets.

Our Board of Directors, in consultation with our independent financial and legal advisors, is evaluating a number of indications of interest we have received.

If we do not successfully consummate a strategic alternative, our Board of Directors may decide to pursue a dissolution and liquidation of our company.

We are no longer pursuing further clinical development of mavodelpar at this time.

The disclosures throughout this Annual Report include discussion regarding our historical operations along with potential risks that could arise if we or a third party pursue further research, development or clinical trials in the future.

Our evaluation of potential strategic alternatives entails numerous significant risks and uncertainties, including those set forth in Part I, Item 1A under the heading “Risk Factors” of this Annual Report.

We are a clinical-stage biopharmaceutical company focused on the discovery and development of precision medicines that target biologically validated drivers of cancers underserved by available therapies.

Using a structure- and computational chemistry-driven drug design platform, we are committed to improving clinical outcomes for patients by building a robust pipeline of small molecule drugs designed to selectively target specific mutations thought to be key drivers of cancer.

By improving selectivity for the oncogenic and mutated form of these cancer-driver proteins, we aim to discover and develop drugs with improved safety and efficacy by sparing toxicity that arises from non-selective inhibition of the non-mutated (or wild-type) version of the protein.

We work under the belief that inhibiting target proteins with specific mutations instead of wild-type variants should enable precise patient selection that will, in turn, improve the probability of clinical success.

We designed our current product candidates utilizing disciplined medicinal chemistry, x-ray crystallography and computational chemistry to inhibit specified mutated versions of PI3K α , a key mediator in cancer growth signaling.

Our lead product candidate, OKI-219, is a highly selective inhibitor of PI3K α H1047R that has a much smaller impact on PI3K α WT .

We plan to initially focus on the development of OKI-219 in patients with advanced breast cancer of genetic subtypes that are (a) both HR+ and HER2-;

and (b) HER2+.

We believe we can potentially expand the application of OKI-219 by conducting appropriate clinical trials in earlier lines of treatment within breast cancer, other subtypes of breast cancer, and potentially in other solid tumors.

OKI-219 is currently in a first-in-human Phase 1a/1b clinical trial.

On the Closing Date, Reneo consummated the previously announced Merger pursuant to the terms of the Merger Agreement, by and among Reneo, Merger Sub I, Merger Sub II, and Legacy OnKure.

Pursuant to the Merger Agreement, on the Closing Date, (i) Reneo effected a reverse stock split of Reneo’s issued common stock at a ratio of 1:10, (ii) Reneo changed its name to “OnKure Therapeutics, Inc.”, (iii) Reneo reclassified all of its common stock as “Class A Common Stock” or “Class B Common Stock”, and (iv) Radiate Merger Sub I merged with and into Legacy OnKure, with Legacy OnKure as the surviving company in the Merger and, after giving effect to such Merger, Legacy OnKure becoming a wholly-owned subsidiary of OnKure Therapeutics, Inc..

Concurrently with the closing of the Merger, Reneo completed a private placement with certain investors (the "Concurrent Investors") to purchase 2,839,005 shares of Common Stock at a price per share of approximately $22.895 per share for an aggregate purchase price of approximately $65.0 million, including the conversion of outstanding convertible notes and accrued but unpaid interest thereon held by certain Legacy OnKure investors (the "Concurrent Financing").

In connection with the Concurrent Financing, Reneo entered into a registration rights agreement with certain investors, pursuant to which Reneo agreed to use commercially reasonably efforts to prepare and file a registration statement with the SEC within 45 calendar days after the Closing Date, registering the resale of the shares of Common Stock issued pursuant to the Concurrent Financing, which was filed in October 2024.

Immediately after the effective time of the Merger, following the consummation of the Concurrent Financing, shares received by Legacy OnKure stockholders represented approximately 53.6%, pre-Merger Reneo shares outstanding represented approximately 25.1%, and the shares purchased in the Concurrent Financing represented approximately 21.3% of our outstanding Common Stock.

As of the open of trading on October 7, 2024, our Common Stock began trading on Nasdaq under the symbol “OKUR.”

Financial Overview

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

Since our inception, our operations have primarily focused on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical

and clinical development of and manufacturing development for our product candidates.

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

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Our net losses were $52.7 million and $35.3 million for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2023, we had an accumulated deficit of $218.5 million, and cash, cash equivalents and short-term investments of $103.0 million.

We anticipate having approximately $82.0 million in cash, cash equivalents, and short-term investments as of March 31, 2024.

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

License Agreement

In December 2017, we entered into the vTv License Agreement, under which we obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and

commercialize PPARδ agonists and products containing such PPARδ agonists, including mavodelpar, for any therapeutic, prophylactic or diagnostic application in humans.

Since we have suspended all development activity related to mavodelpar, we are not currently performing any development efforts under the vTv License Agreement.

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

On October 30, 2023, we repurchased from vTv Therapeutics all 576,443 shares of our 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, we are also required to pay vTv Therapeutics milestone payments totaling up to $64.5 million.

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

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

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

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

In January 2024, consistent with our implementation of cash preservation activities, including suspension of development activities of our only product candidate, mavodelpar, we returned to vTv Therapeutics prosecution and maintenance responsibility of the vTv Therapeutics intellectual property relating to vTv Therapeutics’ PPARδ agonist program, including mavodelpar.

We continue to maintain and prosecute Reneo owned intellectual property related to mavodelpar.

As of December 31, 2024, we had an accumulated deficit of $154.7 million, and cash and cash equivalents of $110.8 million.

We have funded our operations primarily through private placements of our common stock, preferred stock and issuance of convertible debt.

As of December 31, 2024, we believe our cash resources are sufficient to fund our planned operations for at least the next 12 months from the date of issuance of these financial statements.

Components of Our Results of Operations

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Research and Development Expenses

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

Research and development expenses primarily relate to expenses incurred in connection with the discovery and development of our product candidates.

Research and development expenses include:

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

• external expenses incurred under agreements with CROs, investigative sites and consultants to conduct and support our preclinical studies and clinical trials;

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

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

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

• depreciation and maintenance expenses;

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

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

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

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

The following table summarizes our research and development expenses for the years ended December 31, 2023 and 2022 (in thousands):

Year Ended December 31,

Clinical and regulatory

Contract manufacturing cost

Medical affairs

Research and development-other expense

As a result of implementing our cash preservation activities, including suspension of development activities for mavodelpar, we expect our research and development expenses to decrease for the foreseeable future.

If we pursue further development of mavodelpar or any other product candidates in the future, we cannot determine with certainty the timing of initiation, the duration or the completion costs of such clinical trials due to the inherently unpredictable nature of preclinical and clinical development.

Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations.

We may need to raise substantial additional capital in the future.

In addition, we cannot forecast whether any future product candidate may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

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

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

• per patient trial costs;

• the number of trials required for approval;

• the number of sites included in the trials;

• the countries in which the trials are conducted;

• the number of patients that participate in the trials;

• uncertainties in patient enrollment or drop out or discontinuation rates;

• potential additional safety monitoring requested by regulatory agencies;

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

• the safety and efficacy of our product candidate;

• the cost and timing of manufacturing our product candidates;

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

General and Administrative Expenses

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

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

We expect our general and administrative expenses to decrease for the foreseeable future as a result of our cash preservation activities.

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

• employee-related expenses, including salaries, severance, retention, benefits, insurance, and share-based compensation expense;

• expenses incurred under agreements with CROs, which are investigative sites that conduct our clinical trials, other clinical trial-related vendors and clinical consultants;

• the costs of acquiring, developing, and manufacturing and testing clinical and preclinical materials, including costs incurred under agreements with CMOs;

• costs associated with non-clinical activities and regulatory operations;

• facilities, depreciation, market research, and other expenses, which include allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment, and laboratory supplies.

We make non-refundable advance payments for goods and services that will be used in future research and development activities.

These payments are recorded as expenses in the period in which we receive or take ownership of the goods or when the services are performed.

At any one time, we are working on multiple research or drug discovery programs and internal resources.

Employees and infrastructure are not directly tied to any one program and are typically deployed across multiple programs;

therefore, we do not track our research and development expenses on a program-specific basis.

Conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming.

As we initiate new clinical trials, our research and development expenses may increase.

Product candidates in later stages of development generally have higher development costs than those in earlier stages.

As a result, we expect that our research and development expenses will increase substantially over the next several years as we advance product candidates through preclinical studies into and through clinical trials, continue to discover and develop additional product candidates, undertake activities to expand, maintain, protect and enforce our intellectual property portfolio, and hire additional research and development personnel.

Successful development of product candidates is highly uncertain and may not result in approved products.

The probability of success for each product candidate may be affected by numerous factors, including clinical data, preclinical data, competition, manufacturability, and commercial viability.

Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict.

We anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to our ability to enter strategic alliances with respect to each program or product candidate, the scientific and clinical success of each product candidate, and ongoing assessments as to each product candidate’s commercial potential.

We will need to raise additional capital and may seek strategic alliances in the future to advance our various programs.

General and Administrative

General and administrative expenses consist primarily of salaries, bonuses and related benefits, share-based compensation, and severance and retention benefits related to our executive, finance and administrative functions, professional fees for auditing, tax, consulting and legal services, as well as insurance, board of director compensation, consulting and other administrative expenses.

We recognize general and administrative expenses in the periods in which they are incurred.

We expect that our general and administrative expenses will increase over the next several years as we hire additional personnel to support the growth of our business.

In addition, we will incur significant additional expenses associated with being a public company, including expenses related to accounting, audit, legal, regulatory, public company reporting and compliance, director and officer insurance, investor and public relations, and other administrative and professional services.

Interest Income

Interest income primarily consists of interest income generated from our cash equivalents in interest-bearing money market accounts.

Interest and Other Expense

Interest expense consists primarily of interest expense generated from our convertible notes payable, which were converted at the time of the Merger.

Results of Operations

Comparison of Year Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

Year Ended December 31,

Comparison of the Year Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the periods indicated (in thousands):

(in thousands)

Operating expenses:

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Loss from operations

Operating Expenses

Other income and (expense):

Interest income

Interest and other expense

Total other income and (expense)

Net loss and comprehensive loss

Research and Development Expenses

Research and development expenses increased by $18.9 million during 2023 compared to 2022.

This increase was primarily due to an increase of $13.3 million related to clinical and manufacturing costs in our STRIDE and STRIDE AHEAD studies, which have now been completed and discontinued, respectively, an increase of $2.6 million in medical affairs, an increase of $1.7 million in personnel-related costs due to additional headcount and an increase of $1.7 million in severance payments related to our workforce reduction in December 2023, offset by decrease of $0.6 million in other research and development expenses.

Research and development expenses were $43.8 million for the year ended December 31, 2024 compared to $32.1 million for the year ended December 31, 2023, an increase of $11.7 million.

This increase was primarily due to an increase in research and development costs, consisting of a $6.3 million increase in clinical trial and manufacturing expenses and a $6.2 million increase in personnel-related costs due to an increase in headcount, and higher severance, and share-based compensation charges.

These increases were partially offset by a decrease in outsourced research of $0.9 million.

We expect research and development expenses in 2025 to be higher than 2024 due to the continued efforts to advance of our clinical and preclinical programs.

General and Administrative Expenses

General and administrative expenses increased by $10.3 million during 2023 compared to 2022.

This increase was primarily due to an increase of $5.7 million in commercial development activities, an increase of $1.7 million in facility and personnel-related costs due to additional headcount, an increase of $0.8 million in severance expense related to our workforce reduction in December 2023 and an increase of $0.6 million in impairment charges as a result of the suspension of our mavodelpar development program.

Other income increased by $3.8 million during 2023 compared to 2022.

This increase primarily relates to higher interest income attributable to increasing interest rates during 2023.

General and administrative expenses were $10.6 million for the year ended December 31, 2024 and $4.8 million for the year ended December 31, 2023, an increase of $5.8 million.

The increase was primarily related to increased personnel-related and consulting costs of $3.0 million, increased professional service costs, which includes legal, audit and tax services, of $2.1 million, and a $0.4 million increase related to insurance and outside director compensation during 2024.

We expect general and administrative expenses in 2025 to be higher than 2024 as we operate as a public company for the full year in 2025.

Other Income (Expense)

Other income (expense) was $1.7 million for the year ended December 31, 2024 compared to $1.6 million for the year ended December 31, 2023.

The change was primarily due to an increase in interest income due to an increase in cash and cash equivalents available to invest during the year ended December 31, 2024 and increased interest expense related to convertible notes payable issued in 2024.

We expect other income (expense) in 2025 to be higher than 2024 with higher average available cash available to invest during 2025.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through the sale of equity securities.

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

As of December 31, 2023, we had available cash, cash equivalents and short-term investments of approximately $103.0 million.

We anticipate having approximately $82.0 million in cash, cash equivalents, and short-term investments as of March 31, 2024.

In May 2022, we entered into an at-the-market equity offering sales agreement (2022 ATM Facility) with Leerink (previously SVB Securities LLC) under which we could offer and sell, from time to time, at our sole

discretion, up to $20.0 million in shares of our common stock.

On November 13, 2023, concurrent with entering into the 2023 ATM Facility, we and Leerink terminated the 2022 ATM Facility.

We had sold approximately 500,000 shares of our common stock pursuant to the 2022 ATM Facility at a weighted-average price of $2.48 per share, resulting in aggregate gross proceeds to us of $1.2 million, as of the termination date.

Sales commissions to Leerink and other issuance expenses were immaterial.

In May 2023, we completed a public offering in which we sold an aggregate of 7,906,250 shares of common stock which included the full exercise of the underwriters’ option to purchase an additional 1,031,250 shares of common stock, at a price of $8.00 per share.

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

Also, in May 2023, we completed a concurrent private placement in which we sold an aggregate of 625,000 shares of common stock to Abingworth Bioventures 8 L.P., a holder of more than 5% of our common stock, at a price of $8.00 per share (the Private Placement).

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

On October 30, 2023, pursuant to a Common Stock Repurchase Agreement with vTv Therapeutics, we repurchased from vTv Therapeutics 576,443 shares of our common stock at price of $7.64 per share for an aggregate purchase price of approximately $4.4 million in a private, non-underwritten transaction.

Subsequently, we retired the repurchased shares.

On November 13, 2023, we entered into the 2023 ATM Facility with Leerink under which we may offer and sell, from time to time, at our sole discretion, up to $100.0 million in shares of our common stock.

As of December 31, 2023, we had not sold any shares of our common stock under the 2023 ATM Facility and on March 25, 2024, we provided notice to Leerink of our election to terminate the Sales Agreement, effective as of April 8, 2024.

Since inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates.

We expect that our research and development and general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials and manufacturing our product candidates to support commercialization and providing general and administrative support for our operations, including the costs associated with operating as a public company following the Closing.

As a result, we will need additional capital to fund our operations, which we may seek to obtain from equity or debt financings, collaborations, licensing arrangements or other sources.

We have funded our operations primarily through private placements of equity and convertible debt.

Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations for at least the next 12 months from the date of filing this Annual Report.

Funding Requirements

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

For the year ended December 31, 2023, we had a net loss of $77.4 million and used $63.7 million of cash in operating activities.

As of December 31, 2023, we have an accumulated deficit of $218.5 million.

We may incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, pursuing and evaluating potential strategic alternatives for the Company.

We believe that our existing cash, cash equivalents, and short-term investments will be sufficient to meet our cash requirements through at least the next 12 months.

We are subject to all the risks related to the development and commercialization of any future product candidates, including those discussed in the section titled “Risk Factors” under Part I, Item 1A above.

Our primary uses of cash to date have been to fund our research and development activities, including with respect to our PI3Kα and other programs, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital and providing general and administrative support for these activities.

We have never generated any revenue from product sales and do not expect to generate any meaningful product revenue unless and until we obtain regulatory approval for our product candidates, and management does not know when, or if, that will occur.

Until we can generate significant revenue from product sales, if ever, we will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future.

We are subject to all the risks inherent in the development of new biopharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business.

In order to complete the development of our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize product candidates, if approved, we will require substantial additional capital.

Accordingly, until such time that we can generate a sufficient amount of revenue from product sales or other sources, we expect to seek to raise any necessary additional capital through equity financings, debt financings or other capital sources, which could include income from collaborations, partnerships, licensing or other strategic arrangements with third parties.

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

Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting

our ability to incur liens, issue additional debt, pay dividends, repurchase our own Common Stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions.

If we raise capital through collaborations, partnerships and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We may be unable to raise additional capital from these sources on favorable terms, or at all.

Our ability to secure capital is dependent upon a number of factors, including our success in developing our product candidates.

The failure to obtain sufficient capital on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to delay, reduce or curtail our research, product development or future commercialization efforts.

We may also be required to license rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose.

We cannot provide assurance that we will ever generate positive cash flow from operating activities.

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

• the scope, timing, progress, results and costs of researching and developing OKI-219, and conducting preclinical studies and clinical trials;

• the scope, timing, progress, results and costs of researching and developing other product candidates that we may pursue;

• the costs, timing and outcome of regulatory review of our product candidates;

• the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution for our product candidates for which we receive marketing approval;

• the costs of manufacturing commercial-grade products and producing sufficient inventory to support commercial launch;

• the revenue, if any, received from commercial sales of our products, should our product candidates receive marketing approval;

• the cost and timing of attracting, hiring and retaining skilled personnel to support our operations and continued growth;

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

• our ability to establish, maintain and derive value from collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties on favorable terms, if at all;

• the extent to which we acquire or in-licenses other product candidates and technologies, if any;

• the costs associated with operating as a public company.

A change in the outcome of any of these or other factors with respect to the development of OKI-219 or any of our future product candidates could significantly change the costs and timing associated with the development of that product candidate.

Furthermore, our operating plans may change in the future, and we may need additional capital to meet the capital requirements associated with such operating plans.

The following table summarizes our cash flows for the years ended December 31, 2024 and 2023 (in thousands):

Year Ended December 31,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Years Ended December 31,

(in thousands)

Net cash provided by (used in):

Operating activities

Net cash used in operating activities for the year ended December 31, 2023 was $63.7 million, consisting primarily of our net loss of $77.4 million adjusted for non-cash items of $1.5 million primarily due to $5.1 million of

stock-based compensation expense, $0.7 million in right-of-use and leasehold improvement impairment expense and $0.4 million in lease expense, offset by $4.8 million of amortization/accretion on short term investments and $12.2 million related to net change in operating assets and liabilities.

The change in net operating assets and liabilities was primarily due to a decrease in prepaid and other assets of $1.5 million as a result of a decrease in prepayments made for non-clinical activities and an increase in accounts payable and accrued expenses of $11.1 million due to timing of receipt of invoices and payments, increase in clinical study accruals and accrued severance liability.

Net cash used in operating activities for the year ended December 31, 2022 was $47.4 million, consisting primarily of our net loss of $52.0 million adjusted for non-cash items of $3.6 million primarily due to stock-based compensation expense and $1.0 million net change in operating assets and liabilities.

The change in net operating assets and liabilities was primarily due to a decrease in prepaid and other current assets of $0.9 million as a result of a decrease in prepayments made for clinical trial activities and an increase in accrued expenses of $0.5 million due to timing of receipt of invoices and payments, offset by a decrease in operating lease liabilities of $0.4 million as a result of lease payments.

Investing activities

Net cash provided by investing activities for the year ended December 31, 2023 was $10.5 million, consisting of the net proceeds from maturities of available-for-sale short-term investments.

Net cash used in investing activities for the year ended December 31, 2022 was $57.8 million, consisting of the net purchase of available-for-sale short-term investments.

Financing activities

Net cash provided by financing activities for the year ended December 31, 2023 was $60.9 million, consisting primarily of the net proceeds of $58.9 million, $4.7 million, and $1.0 million from the sale of common stock in our May 2023 public offering, the Private Placement, and the 2022 ATM Facility, respectively, and $0.7 million of proceeds from the exercise of stock options and purchases under our employee stock purchase plan (ESPP), offset by $4.4 million in connection with our repurchase of shares of common stock from vTv Therapeutics.

Net cash provided by financing activities for the year ended December 31, 2022 was $0.5 million, consisting primarily of $0.3 million of proceeds from the exercise of stock options and ESPP purchases and net proceeds of $0.2 million from the sale of common stock under our 2022 ATM Facility.

Net increase in cash and cash equivalents

Cash Flows from Operating Activities

Net cash used in operating activities during the year ended December 31, 2024 was $51.1 million.

This consisted primarily of a net loss of $52.7 million, a net decrease in operating assets and liabilities of $4.0 million, and an increase in non-cash share-based compensation of $4.3 million.

Net cash used in operating activities during the year ended December 31, 2023 was $34.5 million.

This consisted primarily of a net loss of $35.3 million, reduced by non-cash charges for share-based compensation, depreciation and amortization.

Cash Flows from Investing Activities

Net cash provided by investing activities for the year ended December 31, 2024 was $15.9 million and consisted primarily of $15.9 million of proceeds from the sale of available-for-sale securities.

Net cash used in investing activities for the year ended December 31, 2023 was $0.2 million for the purchase of property and equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $116.1 million during the year ended December 31, 2024 and primarily consisted of $54.6 million of net proceeds from the Concurrent Financing, $57.7 million of cash acquired in connection with the Merger, and $5.9 million of net proceeds from the issuance of convertible notes payable.

These amounts were partially offset by payment of $2.0 million of reverse recapitalization transaction costs in connection with the Merger.

Net cash provided by financing activities during the year ended December 31, 2023 was $53.1 million.

This consisted primarily of proceeds of $53.8 million from the sale of shares of Legacy OnKure's preferred stock, partially offset by the payment of $0.7 million of issuance costs.

Material Cash Requirements

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See Note 5 of Notes to Consolidated Financial Statements included in this Annual Report for information regarding our leases, including the future operating lease minimum payments.

Performance Award.

See Note 9 of Notes to Consolidated Financial Statements included in this Annual Report for information regarding a special performance award that our chief executive officer may be entitled to receive, including the maximum payout.

vTv License Agreement .

See Note 10 of Notes to Consolidated Financial Statements included in this Annual Report for information regarding the vTv License Agreement, including potential milestone and royalty payments.

Severance Obligation .

See Note 13 of Notes to Consolidated Financial Statements included in this Annual Report for information regarding our severance payment obligations.

In addition to the contractual obligations above, we also expect to have near term future material cash requirements associated with pursuing and evaluating potential strategic alternatives for the Company.

Critical Accounting Policies and Estimates

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

We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

liabilities that are not readily apparent from other sources.

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

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Accrued Research and Development Expenses

All research and development costs are expensed as incurred.

Research and development costs consist primarily of costs associated with manufacturing drug substance and drug product, costs associated with preclinical studies, clinical trials managed through CROs and other third parties, license fees, salaries and employee benefits.

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date.

This process involves the following:

• communicating with appropriate internal and external personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost;

• estimating and accruing expenses in our consolidated financial statements as of each balance sheet date based on facts and circumstances known to us at the time;

• periodically confirming the accuracy of our estimates with service providers and making adjustments, if necessary.

We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

The financial terms of these agreements vary from contract to contract and may result in uneven payment flows.

Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.

In accruing costs, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed, or services are performed.

To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period.

However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

Stock-Based Compensation

We recognize stock-based compensation expense for grants under our 2014 and 2021 Equity Incentive Plans and ESPP.

We account for all stock-based awards granted to employees and directors at their fair value and recognize compensation expense over the award’s vesting period.

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

We calculate the grant date fair values of stock options using the Black-Scholes valuation model, which requires the input of subjective assumptions, including but not limited to expected stock price volatility over the term of the awards and the expected term of stock options.

The fair value of restricted stock awards granted to employees is based on the quoted closing market price per share on grant date.

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

As the outcome of each event has inherent risks and uncertainties, and a positive outcome may not be known until the event is achieved, we 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.

We also granted restricted stock awards with market conditions.

We measure the fair value of stock-based awards with market-based vesting conditions on the date of grant using a Monte Carlo simulation model.

In accordance with accounting guidance for awards with market conditions, the stock-based compensation expense will be recognized over the derived service period regardless of whether the award achieves the market condition and will only be adjusted to the extent the service condition is not met.

We record research and development expenses in the period in which we receive or take ownership of the applicable goods or when the applicable services are performed.

We are required to estimate our expenses resulting from our obligations under contracts with vendors, consultants, and contract research organizations, in connection with conducting research and development activities.

The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts.

We reflect research and development expenses in our financial statements by matching those expenses with the period in which services and efforts are expended.

We account for these expenses according to the progress of the preclinical studies or clinical trials, as measured by the timing of various aspects of the study or related activities.

We determine accrual estimates through a review of the underlying contracts along with the preparation of financial models considering discussions with research and other key personnel as to the progress of studies, trials, or other services being conducted.

During a study or trial, we adjust our rate of expense recognition if actual results differ from our estimate.

Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as an expense in the period that the related goods are consumed, or services are performed.

Share-Based Compensation

We maintain an equity incentive compensation plan under which incentive stock options and nonqualified stock options to purchase Common Stock, and restricted stock units for Common Stock, are granted to employees, board of directors, and non-employee consultants.

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service or performance period.

The fair value of stock options granted to employees is estimated using the Black-Scholes option pricing model.

The Black-Scholes valuation method requires certain assumptions be used as inputs, such as the fair value of the underlying Common Stock, expected term of the option before exercise, expected volatility of our Common Stock, risk-free interest rate and expected dividend.

Options granted have a maximum contractual term of 10 years.

We have limited historical stock option activity and therefore estimate the expected term of stock options granted using the simplified method, which represents the arithmetic average of the original contractual term of the stock option and its weighted-average vesting term.

The expected volatility of stock options is based on the historical volatility of several publicly traded companies in similar stages of clinical development.

We will continue to apply this process until enough historical information regarding the volatility of our stock price becomes available.

The risk-free interest rates used are based on the U.S.

Treasury yield in effect at the time of grant for zero-coupon U.S.

treasury notes with maturities approximately equal to the expected term of the stock options.

We have historically not declared or paid any dividends and do not currently expect to do so in the foreseeable future, and therefore have estimated the dividend yield to be zero.

Stock-based compensation expenses year-over-year have increased due to more equity grants awarded in 2024 to attract and retain key scientific or management personnel.

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Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

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What changed 10-K

Item 7. Management’s Discussion and Analysis