OnKure Therapeutics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data 94 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (KPMG LLP; Denver, Colorado; PCAOB ID: 185) 96 Consolidated Balance Sheets 97 Consolidated Statements of Operations and Comprehensive Loss 98 Consolidated Statements of Changes in Stockholders’ Equity 99 Consolidated Statements of Cash Flows 100 Notes to Consolidated Financial Statements 101 95 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of OnKure Therapeutics, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of OnKure Therapeutics, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2021. Denver, Colorado March 10, 2025 96 ONKURE THERAPEUTICS, INC. Consolidated Balance Sheets (In thousands, except par value and share data) December 31, December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 110,761 $ 29,876 Prepaid expenses and other current assets 2,242 3,890 Total current assets 113,003 33,766 Property and equipment, net 1,025 1,432 Operating lease right-of-use asset 770 478 Other assets 109 58 Total assets $ 114,907 $ 35,734 LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 2,968 $ 3,417 Accrued expenses 7,026 3,660 Operating lease liabilities, current portion 536 208 Total current liabilities 10,530 7,285 Long-term operating lease liabilities 549 466 Total liabilities 11,079 7,751 Commitments and contingencies (Note 14) Convertible preferred stock, Series C, $ 0.0001 par value; no shares and 7,404,919 shares authorized; no shares and 6,840,620 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively; liquidation preference of $ 195,823 as of December 31, 2023 — 129,825 Stockholders’ equity (deficit): Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding at December 31, 2024 — — Common stock, Class A, $ 0.0001 par value; 200,000,000 and 943,840 shares authorized; 12,660,590 and 313,747 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 1 — Common stock, Class B, $ 0.0001 par value; 10,000,000 and 226,285 shares authorized; 686,527 and no shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively — — Additional paid-in capital 258,551 209 Accumulated deficit ( 154,724 ) ( 102,051 ) Total stockholders’ equity (deficit) 103,828 ( 101,842 ) Total liabilities, convertible preferred stock, and stockholders’ equity (deficit) $ 114,907 $ 35,734 The accompanying notes are an integral part of these consolidated financial statements. 97 ONKURE THERAPEUTICS, INC. Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share data) Years Ended December 31, 2024 2023 (in thousands, except share and per share amounts) Operating expenses: Research and development $ 43,795 $ 32,115 General and administrative 10,591 4,819 Total operating expenses 54,386 36,934 Loss from operations ( 54,386 ) ( 36,934 ) Other income and (expense): Interest income 2,013 1,623 Interest and other expense ( 300 ) — Total other income and (expense) 1,713 1,623 Net loss and comprehensive loss $ ( 52,673 ) $ ( 35,311 ) Net loss per share attributable to common stockholders: Basic and diluted $ ( 15.28 ) $ ( 124.41 ) Weighted average shares outstanding: Basic and diluted 3,447,071 283,817 The accompanying notes are an integral part of these consolidated financial statements. 98 ONKURE THERAPEUTICS, INC. Consolidated Statements of Changes in Stockholders’ Equity (In thousands, except share data) Additional Total Convertible Preferred Stock Class A Common stock Class B Common stock Paid-In Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Capital Deficit Deficit Balance, December 31, 2022 3,738,936 $ 64,389 182,769 $ — — $ — $ 2,656 $ ( 57,074 ) $ ( 54,418 ) Issuance of Series C Preferred Stock under a stock purchase agreement, net of issuance costs of $ 0.7 million 2,818,192 53,059 — — — — — — — Issuance of Class A Common Stock and Series C Preferred Stock in exchange for Series A, A-1, and Series B Preferred Stock under a stock purchase agreement 283,492 12,377 127,476 — — — ( 2,711 ) ( 9,666 ) ( 12,377 ) Issuance of Class A Common Stock for cash upon the exercise of stock options — — 3,502 — — — 65 — 65 Share-based compensation expense — — — — — — 199 — 199 Net loss — — — — — — — ( 35,311 ) ( 35,311 ) Balance, December 31, 2023 6,840,620 129,825 313,747 $ — — $ — $ 209 $ ( 102,051 ) $ ( 101,842 ) Conversion of Convertible Preferred Stock for Class A and B Common Stock in connection with the Merger ( 6,840,620 ) ( 129,825 ) 6,154,093 1 686,527 — 129,824 — 129,825 Issuance of Class A Common Stock in the Concurrent Financing, less issuance costs — — 2,571,736 — — — 54,428 — 54,428 Issuance of common stock to former stockholders of Reneo Pharmaceuticals, Inc. in the reverse recapitalization — — 3,343,604 — — — 65,499 — 65,499 Reverse recapitalization transaction costs of OnKure — — — — — — ( 2,085 ) — ( 2,085 ) Issuance of Class A Common Stock for the conversion of Convertible Promissory Notes — — 267,269 6,120 6,120 Issuance of Class A common stock for the settlement of restricted stock units — — 7,700 — — — — — — Issuance of Class A Common Stock from the exercise of stock options — — 2,476 — — — 26 — 26 Adjustment for fractional shares in the reverse recapitalization — — ( 35 ) — — — — — — Share-based compensation — — — — — — 4,530 — 4,530 Net loss — — — — — — — ( 52,673 ) ( 52,673 ) Balance, December 31, 2024 — $ — 12,660,590 $ 1 686,527 $ — $ 258,551 $ ( 154,724 ) $ 103,828 The accompanying notes are an integral part of these consolidated financial statements. 99 ONKURE THERAPEUTICS, INC. Consolidated Statements of Cash Flows (In thousands) Years Ended December 31, 2024 2023 (in thousands) Cash flows from operating activities: Net loss $ ( 52,673 ) $ ( 35,311 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation expense 4,530 199 Depreciation and amortization 459 417 Amortization of right-of-use asset - operating 203 143 Amortization of debt issuance costs 142 — Non-cash interest expense 120 — Loss on sales of available-for-sale securities 54 — Change in operating assets and liabilities: Prepaid and other assets 2,256 ( 1,497 ) Accounts payable, accrued and other liabilities ( 5,927 ) 1,713 Lease liabilities ( 281 ) ( 210 ) Net cash used in operating activities ( 51,117 ) ( 34,546 ) Cash flows from investing activities: Proceeds from sales of marketable securities 15,925 — Purchases of property and equipment ( 52 ) ( 246 ) Net cash provided by (used in) investing activities 15,873 ( 246 ) Cash flows from financing activities: Proceeds from the issuance of common stock in Concurrent Financing 58,881 — Payment of issuance costs associated with the Concurrent Financing ( 4,327 ) — Cash acquired in connection with the reverse recapitalization 57,736 — Payment of reverse recapitalization transaction costs ( 2,045 ) — Proceeds from the issuance of Convertible Preferred Stock — 53,783 Payment of issuance costs associated with the issuance of Convertible Preferred Stock — ( 723 ) Proceeds from issuance of convertible notes payable 6,000 — Payment of issuance costs associated with the issuance of convertible notes payable ( 142 ) — Proceeds from the issuance of common stock in connection with equity plans 26 65 Net cash provided by financing activities 116,129 53,125 Net increase in cash and cash equivalents 80,885 18,333 Cash and cash equivalents, beginning of period 29,876 11,543 Cash and cash equivalents, end of period $ 110,761 $ 29,876 Supplemental cash flow information: Interest paid $ — $ — Supplemental disclosure of noncash financing activities: Right-of-use asset obtained in exchange for new operating lease liability $ — $ 219 Issuance of Series C Preferred Stock conversion $ — $ 23,313 Conversion of Series C Preferred Stock $ 129,825 $ — Conversion of convertible note payable $ 6,120 $ — Assets acquired in connection with the reverse recapitalization $ 17,222 $ — Other liabilities assumed in connection with the reverse recapitalization $ 9,459 $ — Reverse recapitalization transaction costs included in accounts payable $ 40 $ — Concurrent Financing issuance costs included in accounts payable $ 37 $ — Concurrent Financing issuance costs paid by Reneo prior to Merger $ 89 $ — The accompanying notes are an integral part of these consolidated financial statements. 100 ONKURE THERAPEUTICS, INC. Notes to Consolidated Financial Statements 1. Organization and Business OnKure Therapeutics, Inc., ("OnKure" or the "Company") is a clinical-stage biopharmaceutical company focused on the discovery and development of precision medicines that target biologically validated drivers of cancers that are underserved by available therapies. Using a structure- and computational chemistry-driven drug design platform, OnKure is committed to improving clinical outcomes for patients by building a pipeline of small molecule drugs designed to selectively target specific mutations thought to be key drivers of cancer. The Company was formed in 2014 as Reneo Pharmaceuticals, Inc. (“Reneo”) under the laws of the State of Delaware. On October 4, 2024, the Company changed its name to OnKure Therapeutics, Inc. Merger with Reneo On October 4, 2024, Radiate Merger Sub I, Inc. ("Merger Sub I") a wholly-owned subsidiary of Reneo completed its merger with and into OnKure, Inc. (referred to herein as “Legacy OnKure”), with Legacy OnKure continuing as the surviving entity as a wholly-owned subsidiary of Reneo. This transaction is referred to as the “Merger.” Following the Merger, Reneo changed its name to OnKure Therapeutics, Inc. Legacy OnKure remains as a wholly-owned subsidiary of the Company. The Merger was effected pursuant to an Agreement and Plan of Merger, dated as of May 10, 2024 (the "Merger Agreement"), by and among Reneo, Radiate Merger Sub I, Inc., a Delaware corporation Radiate Merger Sub II, LLC, a Delaware limited liability company ("Merger Sub II"), and Legacy OnKure. In connection with the Merger Agreement, certain parties entered into a subscription agreement with the Company to purchase shares of Reneo’s common stock for an aggregate purchase price of $ 65.0 million contingent upon the concurrent consummation of the Merger (the “Concurrent Financing”). On October 4, 2024 (the “Closing Date”), the Merger and the Concurrent Financing closed. The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”). For accounting purposes, Legacy OnKure is considered the accounting acquirer and Reneo is the acquired company based on the terms of the Merger Agreement and other factors, such as relative voting rights and the composition of the combined company’s board of directors and senior management. Accordingly, the Merger was treated as the equivalent of Legacy OnKure issuing stock to acquire the net assets of Reneo. As a result of the Merger, the net assets of Reneo were recorded at their acquisition-date fair value in the financial statements of the combined company and the reported operating results prior to the Merger are those of Legacy OnKure. Legacy OnKure’s historical financial statements became the historical consolidated financial statements of the combined company. All issued and outstanding Legacy OnKure common stock, convertible preferred stock, restricted stock units, and options to purchase common stock prior to the effective date of the Merger have been retroactively adjusted to reflect the exchange ratio for all periods presented . See Note 3 for further discussion. Risks and Uncertainties The board of directors of the Company discusses with management macroeconomic and geopolitical developments, including inflation, instability in the banking and financial services sector, tightening of the credit markets, international conflicts, cybersecurity, and sanctions so that the Company can be prepared to react to new developments as they arise. The board of directors and the management of the Company are carefully monitoring these developments and the resulting economic impact on its financial condition and results of operations. Liquidity and Capital Resources The Company had recurring losses from operations, an accumulated deficit of $ 154.7 million and cash and cash equivalents of $ 110.8 million as of December 31, 2024. The Company’s ability to fund its ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities, issuing debt or other financing vehicles. As of December 31, 2023, the Company had determined that substantial doubt about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of the issuance of those financial 101 statements did exist. However, following the completion of the Merger and Concurrent Financing, as described in more detail in Note 3, management believes the Company’s cash and cash equivalents will be sufficient to fund its current operating plan for at least the next 12 months from the date of issuance of these consolidated financial statements and as such substantial doubt has been alleviated. The Company’s ability to secure capital is dependent upon success in discovering and developing its drug candidates. The Company cannot provide assurance that additional capital will be available on acceptable terms, if at all. The issuance of additional equity or debt securities will likely result in substantial dilution to the Company’s stockholders. Should additional capital not be available to the Company in the near term, or not be available on acceptable terms, the Company may be unable to realize value from the Company’s assets or discharge liabilities in the normal course of business, which may, among other alternatives, cause the Company to delay, substantially reduce, or discontinue operational activities to conserve cash, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on the Company’s financial condition and its ability to discover and develop its product candidates. Changing circumstances may cause the Company to consume capital significantly faster or slower than currently anticipated. If the Company is unable to acquire additional capital or resources, it will be required to modify its operational plans. The estimates included herein are based on assumptions that may prove to be wrong, and the Company could exhaust its available financial resources sooner than currently anticipated. 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The Company’s consolidated financial statements are prepared in accordance with GAAP and reflect the operation of the Company and its wholly owned subsidiaries, OnKure, Inc. and Merger Sub II. All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation. Segment Information The Company operates in one operating segment: clinical research. All equipment and other property and equipment are physically located within the United States . Use of Estimates The preparation of the Company’s consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Although these estimates are based on the Company’s knowledge of current events and actions it may take in the future, actual results may ultimately differ from these estimates. The most significant estimates relate to external research and development expenses, and the fair value of stock options and restricted stock awards and units . Comprehensive Loss Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss was the same as its reported net loss for all periods presented. Research and Development Expenses Research and development (“R&D”) costs are expensed as incurred in performing research and development activities. The costs include employee-related expense, including salaries, severance, benefits, 102 share-based compensation, fees for acquiring and maintaining licenses under third-party license agreements, consulting fees, costs of research and development activities conducted by third parties on the Company’s behalf, costs to manufacture or have manufactured clinical trial materials, depreciation, and facilities and overhead costs. Accrued Research and Development Expenses The Company records research and development expenses in the period in which the Company receives or takes ownership of the applicable goods or when the applicable services are performed. The Company is required to estimate its expenses resulting from its 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. The Company reflects research and development expenses in its financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts 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. The Company determines 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, the Company adjusts its rate of expense recognition if actual results differ from its 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. Patent Costs The Company expenses all costs as incurred in connection with patent applications (including direct application fees and the legal and consulting expenses related to making such applications) and such costs are included in general and administrative expenses in the statements of operations and comprehensive loss. Share-Based Compensation The Company maintains 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 the Company’s common stock, risk-free interest rate and expected dividend. Options granted have a maximum contractual term of 10 years. The Company has limited historical stock option activity and therefore estimates 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. The Company will continue to apply this process until enough historical information regarding the volatility of its 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. The Company has historically not declared or paid any dividends and does not currently expect to do so in the foreseeable future, and therefore has estimated the dividend yield to be zero. (See Note 12). The Company recognizes stock-based compensation expense for grants under its various 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. The Company calculates 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 103 value of restricted stock awards granted to employees is based on the quoted closing market price per share on grant date. Common Stock Valuation Due to the lack of marketability for the Company’s common stock prior to the Merger, the Company utilized methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants’ Audit and Accounting Practice Guide: Valuation of Privately-Held Company Equity Securities Issued as Compensation to estimate the fair value of its common stock. In determining the exercise prices for options granted prior to the Merger, the Company had considered the fair value of the common stock as of the grant date. The fair value of the common stock has been determined based upon a variety of factors, including the prices at which the Company sold shares of its convertible preferred stock to outside investors in arms-length transactions, and the superior rights, preferences and privileges of the preferred stock relative to the common stock at the time of each grant; the progress of the Company’s research and development programs, including their stages of development, and the Company’s business strategy; external market and other conditions affecting the biotechnology industry, and trends within the biotechnology industry; the Company’s financial position, including cash on hand, and its historical and forecasted performance and operating results; the lack of an active public market for the Company’s common stock; and the market performance of peer companies in the biopharmaceutical industry. Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date. Fair Value of Financial Instruments The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The carrying amounts of the Company’s financial assets and liabilities, such as cash, receivables, prepaid and other current assets, accounts payable, and accrued expenses approximate their fair values because of the short maturity of these instruments. Cash and Cash Equivalents All highly liquid investments with maturities of 90 days or less, at the time of purchase, are classified as cash equivalents. Cash equivalents are reported at cost, which approximates fair value. The Company’s cash and cash equivalents consist of money held in demand depository accounts and money market funds. The carrying amount of cash and cash equivalents was $ 110.8 million and $ 29.9 million as of December 31, 2024, and 2023, respectively, which approximates fair value and was determined based upon Level 1 inputs. The money market account is valued using quoted market prices with no valuation adjustments applied and is categorized as Level 1 . Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains accounts in federally insured financial institutions above federally insured limits of $ 250,000 as of December 31, 2024 and 2023. Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which these deposits are held and of the money market funds in which these investments are made . Property and Equipment, Net The Company carries its property and equipment at cost, less accumulated depreciation, amortization and impairment, if any. Expenditures for renewals or betterments that materially extend the useful life of an asset or increase its productivity, such as leasehold improvements, are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between three to seven years . Leasehold improvements are amortized over the shorter of the life of the lease (including any renewal periods that are deemed to be reasonably assured) or the estimated useful life of the assets . Repair and maintenance costs are expensed as incurred and expenditures for major improvements are capitalized . 104 Impairment of Long-Lived Assets The Company assesses the carrying amount of its property and equipment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. No impairment charges were recorded during the years ended December 31, 2024 and 2023 . Leasing – Lessee Accounting The Company determines if an arrangement is a lease at inception. The Company’s operating lease agreements are primarily for office space and research labs. For operating leases with a term greater than one year, the Company recognizes the right-of-use (“ROU”) assets and lease liabilities related to the lease payments on its balance sheet. The lease liabilities are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. The ROU assets represent the Company’s right to use the underlying assets for the term of the lease and the lease liabilities represent the Company’s obligation to make lease payments arising for the agreements. ROU assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. The ROU asset is periodically reviewed for impairment unless a triggering event occurs. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease payments, except for the ones that depend on index or rate, are excluded from the calculation of the ROU assets and lease liabilities and are recognized as variable lease expense in the statements of operations and comprehensive loss in the period in which they are incurred. As the interest rate implicit in the Company’s leases is not readily determinable, the Company uses its estimated incremental borrowing rate in its present value calculations. One of the Company’s lessee agreements include an option to extend the lease, which the Company does not include in its minimum lease term unless it is reasonably certain to exercise such option. Operating leases with a term of less than one year are recognized as a lease expense over the term of the lease, with no asset or liability recognized on the balance sheet. Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently payable and deferred taxes. The Company accounts for income taxes using the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and operating losses and tax credit carryforwards. A valuation allowance is recorded to the extent it is more likely than not that some portion of a deferred tax asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. The Company’s significant deferred tax assets are net operating loss carryforwards, tax credits, and accruals. The Company has provided a valuation allowance equal to its net deferred tax assets since inception as, due to its history of operating losses, the Company has concluded that it is more likely than not that most of its deferred tax assets will not be realized. Accounting for uncertain tax positions requires a more likely than not threshold for recognition in the financial statements. The Company recognizes a tax benefit based on whether it is more likely than not that a tax position will be sustained. The Company records a liability to the extent that a tax position taken or expected to be taken on a tax return exceeds the amount recognized in the financial statements. The Company has no unrecognized tax benefits as of December 31, 2024 and 2023. The Company classifies interest and penalties arising from the underpayment of income taxes in the statements of operations as general and administrative expenses. No such expenses have been recognized during the years ended December 31, 2024 and 2023. The Company is subject to taxation in the United States and the United Kingdom ("UK"). As of December 31, 2024 , 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. 105 Recently Issued Accounting Pronouncemen ts In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective beginning with the Company’s 2024 fiscal year annual reporting period, with early adoption permitted. The disclosure related to this ASU are in Note 4 below. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this pronouncement. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . This ASU requires more detailed disclosures, on an annual and interim basis, about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. This ASU may be applied either prospectively or retrospectively. The Company is currently evaluating the impact of this pronouncement. The Company continues to monitor new accounting pronouncements issued by the FASB and does not believe any accounting pronouncements issued through the date of this report will have a material impact on its financial statements. 3. Merger Agreement and Concurrent Financing As described in Note 1, Merger Sub I merged with and into Legacy OnKure, with Legacy OnKure surviving as a wholly-owned subsidiary of the Company on October 4, 2024. At the Closing, each then-outstanding share of Legacy OnKure common stock was converted into the right to receive 0.023596 shares of common stock of Reneo based on the Common Exchange Ratio, which was reclassified as Class A Common Stock in connection with the Merger, and each then-outstanding share of Legacy OnKure preferred stock was converted into the right to receive 0.144794 shares of Class A Common Stock based on the Preferred Exchange Ratio; provided that one holder of Legacy OnKure preferred stock elected to receive 686,527 shares that it would otherwise have received in the form of Class A Common Stock in an equal number of shares of Class B Common Stock. Upon the closing of the Merger, (i) an aggregate of 6,470,281 shares of Class A Common Stock and 686,527 shares of Class B Common Stock of the combined company were issued in exchange for the shares of Legacy OnKure capital stock outstanding as of immediately prior to the Closing and (ii) outstanding shares of Reneo common stock were reclassified into an aggregate of approximately 3,343,604 shares of Class A Common Stock. In addition, each then-outstanding option to purchase shares of Legacy OnKure common stock was assumed and converted into an option to purchase Class A Common Stock based on the Common Exchange Ratio, and each then-outstanding RSU of Legacy OnKure corresponding to shares of Legacy OnKure preferred stock was assumed and converted into RSUs covering 213,254 shares of Class A Common Stock based on the Preferred Exchange Ratio. Each share of Reneo common stock, each option to purchase shares of Reneo common stock and each RSU award covering shares of Reneo common stock that was issued and outstanding as of immediately prior to the Closing remained issued and outstanding in accordance with its terms and such shares, options and RSUs, subject to the Reverse Stock Split, were reclassified as Class A Common Stock but were otherwise unaffected by the Merger; provided that, to the extent not previously vested, all such options and RSUs held by Reneo’s directors and executive officers vested at Closing. 106 In connection with the Merger Agreement, Reneo entered into a subscription agreement with certain investors, pursuant to which the investors subscribed for and purchased, concurrent with the closing of the Merger, an aggregate of 2,839,005 shares of Class A Common Stock at a price of approximately $ 22.895 per share for aggregate gross proceeds of approximately $ 65.0 million , including the conversion of previously funded Convertible Promissory Notes principal of $ 6.0 million and accrued interest there on of $ 120 thousand, on October 4, 2024. At the effective time of the Merger, the authorized shares of Class A Common Stock of the Company are 200,000,000 with par value of $ 0.0001 and Class B Common Stock of the Company are 10,000,000 with par value of $ 0.0001 . In addition, in October 2024 the Company adopted the 2024 Equity Incentive Plan (the "2024 Plan") and 2024 Employee Stock Purchase Plan (the "2024 ESPP"). Under the 2024 Plan a total of 2,480,000 shares of Class A Common Stock were initially reserved for issuance. In addition, shares reserved for issuance under the 2024 Plan will include shares of Class A Common Stock equity awards granted under the Reneo 2021 Plan and any shares of Class A Common Stock equity awards that were assumed in the Merger. Under the 2024 ESPP, an aggregate of 137,500 shares of Class A Common Stock are currently reserved and available for issuance. The Merger was accounted for as a reverse recapitalization in accordance with GAAP, with Legacy OnKure as the accounting acquirer of Reneo. Legacy OnKure was determined to be the accounting acquirer based on the terms of the Merger Agreement and other factors, such as relative voting rights and the composition of the combined company’s board of directors and senior management. As a result, Legacy OnKure’s historical financial statements became the historical consolidated financial statements of the combined company for accounting purposes together with a deemed issuance of shares, equivalent to the shares held by the former stockholders Reneo, the legal acquirer, and a recapitalization of the equity of Legacy OnKure, the accounting acquirer. The final transaction amounts have been recorded as a reduction of proceeds in stockholders' equity. At the effective time of the Merger, the net assets of Reneo were recorded at their acquisition-date fair value in the financial statements of the combined company, which approximated book value due to the short-term nature. Reneo’s development programs had ceased prior to the Merger and were deemed to be de minimis in value at the transaction date. No goodwill or intangible assets were recognized. As part of the recapitalization, excluding the Concurrent Financing, the Company acquired the assets and liabilities listed below (in thousands): Amount Cash and cash equivalents $ 57,736 Short-term investments 15,979 Other current assets 690 Other assets 553 Accrued expenses ( 9,072 ) Long-term operating lease liability ( 387 ) Net assets acquired $ 65,499 4. Segment The Company is a publicly listed company with a single reportable segment: clinical research. Because the Company has one reportable segment, before adopting the ASU, it provided only the entity-wide disclosures required by ASC 280. The clinical research segment has no revenues. The accounting policies of the clinical research segment are the same as those described in the summary of significant accounting policies. The Chief Operating Decision Maker ("CODM") assesses the performance for the clinical research segment and decides how to allocate resources based on operating expenses as reported on the income statement. 107 The measure of segment assets is reported on the balance sheets as total consolidated assets. The CODM considers a variety of factors, including actual and projected expenses in deciding whether to invest funds in the clinical research segment or into other parts of the entity, such as for acquisitions or to pay dividends. The Company does not have intra-entity sales or transfers. The Company's CODM is the senior executive committee that is comprised of the Chief Financial Officer and the Chief Executive Officer . Clinical Research Segment Operating expenses: Direct program expense $ 27,398 Indirect program expense 2,157 Workforce salaries and benefits 15,102 Stock-based compensation expense 4,530 General corporate expenses 5,199 Interest and other expense 300 Segment net loss 54,686 Reconciliation of loss: Interest income ( 2,013 ) Adjustments and reconciling items ( 2,013 ) Net loss $ 52,673 5. Leases The Company’s headquarters are located in Boulder, Colorado, where it leases 14,790 square feet of office and lab facilities under operating leases that expire in December 2026 , with rights to extend for a 5 year period . In the Merger with Reneo, the Company assumed the lease in Irvine, California, where it leases office space under a lease agreement that expires in November 2026 ("Irvine lease"). In January 2025, the Company entered into a sublease agreement on the Irvine lease. See Note 16 for further discussion. Right-of-use assets and lease liabilities for operating leases as included in the Company’s financial statements are as follows (in thousands): December 31, 2024 December 31, 2023 Operating lease right-of-use assets $ 770 $ 478 Current operating lease liabilities 536 208 Noncurrent operating lease liabilities 549 466 Total lease liabilities $ 1,085 $ 674 Lease expense for operating leases as included in the Company’s financial statements are as follows (in thousands): December 31, 2024 2023 Operating lease cost $ 236 $ 173 Variable lease expense 187 201 108 Lease term, discount rates, and additional information for operating leases are as follows (in thousands): As of December 31, 2024 2023 Weighted-average remaining lease term - operating leases (years) 1.87 2.92 Weighted-average discount rate - operating leases 4.5 % 4.5 % Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 315 $ 210 The aggregate maturities of the Company’s operating lease liabilities were as follows as of December 31, 2024 (in thousands): 2025 $ 571 2026 560 Total future minimum lease payments 1,131 Less: imputed interest ( 46 ) Less: Current portion ( 536 ) Operating lease liability, net of current portion $ 549 6. 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 if-converted method for the convertible Series C Preferred Stock, if-converted method for the convertible promissory note, exercise of all outstanding stock options and restricted stock units were excluded from the diluted net loss per share calculation for the twelve months ended December 31, 2024 and 2023 because such shares are anti-dilutive. Anti-dilutive securities outstanding during the period not included in the diluted net loss per share calculation include the following : December 31, 2024 2023 Convertible Series C Preferred Stock 5,191,375 6,135,306 Convertible Promissory Notes 149,650 — Outstanding stock options 2,393,824 178,232 Unvested restricted stock units 213,254 214,436 Unreleased restricted stock units assumed in the Merger 17,000 — 7,965,103 6,527,974 7 . 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. 109 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. 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. 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. No assets or liabilities were transferred into or out of their classifications during the years ended December 31, 2024 and 2023. As part of the Merger, the Company acquired certain short-term investments in debt securities that were carried at fair value and classified as current assets available-for-sale and represented the investment of funds available for current operations. During the year ended December 31, 2024, the Company sold these short-term investments for proceeds of $ 15.9 million which resulted in a realized loss of approximately $ 54,000 . The Company had no available-for-sale securities as of December 31, 2024 or 2023. 8. Prepaid expenses and other current assets Prepaid expenses and other current assets consisted of the following (in thousands): December 31, 2024 December 31, 2023 Prepaid clinical trial expenses $ 152 $ 3,192 Prepaid insurance expense 537 68 Other prepaid expenses 1,553 630 Total prepaid expenses $ 2,242 $ 3,890 9 . Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands): December 31, 2024 December 31, 2023 Lab equipment $ 705 $ 706 Leasehold improvements 1,090 1,090 Computer hardware and software 189 141 Furniture and fixtures 160 160 Property and equipment, gross 2,144 2,097 Less: Accumulated depreciation and amortization ( 1,119 ) ( 665 ) Property and equipment, net $ 1,025 $ 1,432 Depreciation and amortization expense for the years ended December 31, 2024 and 2023 was $ 459,000 and $ 417,000 , respectively . 110 10. Accrued Expenses Accrued expenses consisted of the following (in thousands): December 31, 2024 December 31, 2023 Accrued compensation $ 3,173 $ 1,663 Accrued contract manufacturing costs 1,565 1,627 Accrued clinical trial costs 1,302 — Accrued other 986 370 Total accrued expenses $ 7,026 $ 3,660 Accrued compensation includes severance costs. For further information see Note 14. 11. Equity Common Stock The Company is authorized to issue 210,000,000 shares of common stock, of which 200,000,000 shares have been designated as Class A Common Stock and 10,000,000 shares have been designated as Class B Common Stock, both with a par value of $ 0.0001 per share. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of a majority of the Company’s stock who are entitled to vote. Each share of Class A Common Stock is entitled to one vote. Class B Common Stock is not entitled to vote on any matter on which the holders of Class A Common Stock or Preferred Stock are entitled to vote. All holders of common stock are entitled to receive dividends when and as declared or paid by the Company’s board of directors, subject to the preferential rights of the holders of preferred stock. Class B Common Stock is convertible into a corresponding number of shares of Class A Common Stock upon written notice of the holder, subject to defined beneficial ownership limitations. Preferred Stock The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $ 0.0001 per share. As of December 31, 2024, no ne of these shares of preferred stock have been designated or issued. Convertible Preferred Stock As of December 31, 2023, the Company’s Preferred Stock was classified as temporary equity in the accompanying consolidated balance sheets given that the holders of the convertible preferred stock could cause certain events to occur that were outside of the Company’s control whereby the Company could be obligated to redeem the convertible preferred stock. The carrying value of the convertible preferred stock is not adjusted to the redemption value until the contingent redemption events are considered probable to occur. Series C Preferred Stock In March 2023, the Company entered into a Series C Purchase Agreement pursuant to which the Company issued 2,818,192 shares of Series C Preferred Stock at a purchase price of $ 19.06 per share, which resulted in gross proceeds of approximately $ 53.8 million, as well as the conversion of all Series A Preferred Stock, Series A-1 Preferred Stock, and Series B Preferred Stock. In conjunction with the Merger, immediately following the Closing, each then-outstanding share of Legacy OnKure preferred stock converted into Class A or Class B Common Stock. No Convertible Preferred Shares are authorized, issued or outstanding at December 31, 2024. The Company’s convertible preferred stock had the following characteristics as of December 31, 2023:  Conversion of Preferred Stock into Common Stock Each share of preferred stock, at the option of the holder, was convertible into a number of shares of common stock as determined by multiplying the number of shares of preferred stock being converted by the conversion rate. The conversion rate in effect at any time for conversion of preferred stock is determined by dividing the Original Issue Price by the Conversion Price. The Original Issue Price for the Series C Preferred Stock was 111 $ 19.06 per share. The Conversion Price was subject to certain adjustments as provided in the Company’s restated certificate of incorporation. The preferred stock would have automatically converted to common stock upon the closing of an initial public offering of the Company’s common stock in which the per-share price is at least $ 38.19 and gross proceeds of not less than $ 75 million, or the date and time specified by vote or the written consent of the holders of at least a majority of the then outstanding shares of Series C Preferred Stock voting or consenting as a separate class on an as-converted basis. Voting Rights Each preferred stockholder was entitled to the number of votes equal to the number of shares of Class A Common Stock into which such holder’s shares are convertible. At any time when a defined number of shares of Series C Preferred Stock are outstanding, the Company was restricted from certain actions described in the Company’s restated certificate of incorporation without the vote or written consent of the holders of a majority of the then outstanding shares of Series C Preferred Stock voting or consenting as a separate class on an as-converted basis. Dividends The Company could not have declared, paid or set aside any dividends on any shares of any other class or series of capital stock unless each holder of the preferred stock first received a dividend based upon a formula in the Company’s restated certificate of incorporation. No dividends were declared during the years ended December 31, 2024 or 2023. Liquidation Preference Upon any liquidation, dissolution or winding up of the Company, certain qualifying mergers, sales or transactions with a special purpose acquisition companies, and other deemed liquidation events as defined in the Company’s restated certificate of incorporation, unless the holders of a majority of the then outstanding shares of Series C Preferred Stock, voting as a separate class on an as-converted basis, elected otherwise, prior to and in preference to any distribution to the holders of common stock, holders of Series C Preferred Stock were entitled to be paid out of the assets of the Company legally available for distribution, or the consideration received in such transaction, an amount per share of Series C Preferred Stock equal to the greater of: i) 1.50 times the Series C Original Issuance Price plus all declared and unpaid dividends on Series C Preferred Stock or ii) such amount per share that would have been payable had all shares of Series C Preferred Stock been converted into common stock immediately prior to such event. If upon liquidation, dissolution, or winding up of the Company, the assets and funds of the Company are insufficient to permit the payment of the full preferential amounts to the holders of preferred stock, then the holders shall share ratably in any distribution of the assets available for distribution, in proportion to the respective amounts which would otherwise be payable in respect of the shares held by the preferred stockholders. After the payment of all preferential amounts required to be paid to the holder of shares of preferred stock, the remaining assets available for distribution to its stockholders would have been distributed to the holders of shares of common stock, pro rata based on the number of shares held by each holder. The liquidation preference as of December 31, 2023 was $ 195.8 million. 12. Share-Based Compensation The Company's share-based compensation plans are described below: 2024 Equity Incentive Plan In October 2024, the Company established an equity incentive plan (the “2024 Plan”). The 2024 Equity Incentive Plan became effective upon the closing of the Merger, and will continue in effect for a period of ten years from its effectiveness, unless terminated earlier by the administrator. The 2024 Plan provides for the grant of stock options, RSUs and RSAs to employees, non-employee directors, advisors, and consultants. Under the 2024 Plan a total of 2,480,000 shares of Class A Common Stock were initially reserved for issuance. In addition, shares reserved for issuance under the 2024 Plan will include shares of Class A Common Stock equity awards granted under the Reneo 2021 Plan and any shares of Class A Common Stock equity awards that were assumed in the Merger. As of the effective date of the 2024 Plan, awards granted under the 2011, 2021 and 2023 Plans that are forfeited or otherwise become available will be included and available for issuance under the 2024 Plan. Under the 2024 Plan, 112 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. The Company issues new shares in settlement of equity awards under the 2024 Plan. See Note 16 for discussion of the increase to the available for issuance as of January 1, 2025. 2023 RSU Equity Incentive Plan In September 2023, the Company established an equity incentive plan (the “2023 Plan”). The 2023 Plan provided for the grant of restricted stock units (“RSU”) to employees, directors, and consultants. Upon the close of the Merger, all shares available for issuance under the 2023 Plan were cancelled. 2021 Equity Incentive Plan In February 2021, the Company established an equity incentive plan (the “2021 Plan”). The 2021 Plan provided for the grant of stock options and RSA to employees, non-employee directors, advisors, and consultants. Upon the close of the Merger, all shares available for issuance under the 2021 Plan were cancelled.  2011 Equity Incentive Plan In October 2011, the Company established an equity incentive plan (the “2011 Plan”). The 2011 Plan provided for the grant of stock options and restricted stock awards (“RSA”) to employees, non-employee directors, advisors, and consultants. Shares are no longer available for issuance under the 2011 Plan, which was subsequently terminated in March 2023. Upon the close of the Merger, all shares available for issuance under the 2011 Plan were cancelled. In addition, as part of the Merger with Reneo discussed in Note 1, the Company assumed outstanding awards under the following Reneo Equity Incentive Plans and certain awards not issued pursuant to a Reneo Equity Plan: Reneo 2021 and 2014 Equity Incentive Plans In March 2021, the Reneo Board of Directors adopted the Reneo 2021 Equity Incentive Plan ("Reneo 2021 Plan"), which is the successor to Reneo’s 2014 Equity Incentive Plan and UK Sub-Plan ("2014 Plan"). 2024 ESPP In October 2024, the Company established the 2024 ESPP. Under the 2024 ESPP, an aggregate of 137,500 shares of Class A Common Stock are currently reserved and available for issuance. As of December 31, 2024, no offering periods have been established under the 2024 ESPP. See Note 16 for discussion of the increase to the available for issuance as of January 1, 2025. Shares Reserved for Future Issuance As of December 31, 2024, the Company had reserved shares of its common stock for future issuance as follows: Shares Reserved Common stock options outstanding 2,393,824 Unvested restricted stock units under the 2023 Plan 213,254 Unreleased restricted stock units assumed in the Merger 17,000 Available for future grants under the 2024 Equity Incentive Plan 747,867 Available for future grants under the 2024 Employee Stock Purchase Plan 137,500 Total shares of common stock reserved for future issuance 3,509,445 Stock Options Options granted under the Company’s equity incentive plans have an exercise price equal to or in excess of the market value of the Class A Common Stock at the date of grant and expire no more than 10 years from the date of grant. Generally, options become exercisable ratably over a period of three to four years from the date of grant. Stock options granted to non-employees generally vest quarterly over two to three years . 113 A summary of the Company’s stock option activity and related information for the year ended December 31, 2024 is as follows: Options Outstanding Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Options outstanding - December 31, 2023 178,232 $ 16.74 8.88 $ 16 Assumed in reverse recapitalization 467,100 47.39 Granted 1,775,318 18.13 Exercised ( 2,476 ) 10.19 Expired ( 740 ) 21.62 Forfeited ( 23,610 ) 38.34 Options outstanding - December 31, 2024 2,393,824 $ 23.54 7.90 $ 1 Options exercisable - December 31, 2024 654,636 $ 38.08 3.07 $ 1 All outstanding options as of December 31, 2024 are expected to vest. As of December 31, 2024, the Company had unrecognized compensation cost for unvested stock options of $ 26.5 million, expected to be recognized over a weighted-average period of approximately 2.8 years. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company’s common stock as of December 31, 2024. The weighted-average grant-date fair value of options granted for the years ended December 31, 2024, and 2023 was $ 16.05 and $ 5.51 , respectively. The Company has granted performance-based stock options. During the year ended December 31, 2023, the Company granted 8,449 performance-based shares, which are included in the table above. The company recognized $ 30,000 and $ 13,000 in performance-based compensation expense for the years ended December 31, 2024 and 2023, respectively. 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: Year Ended December 31, 2024 2023 Expected term (years) 5.77 5.73 Expected volatility 126.2 % 32.0 % Risk-free interest rate 3.80 % 4.31 % Expected dividend yield 0 % 0 % Risk-free interest rate. 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. 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. 114 Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period. Expected dividend yield. 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. Restricted Stock Awards (RSAs) and Restricted Stock Units (RSUs) RSA typically vests 25 % on the first anniversary of the issuance date and incrementally vest monthly for the three-year period thereafter. In the event of a termination of services, all unvested shares are forfeited, and the Company has the option to purchase all outstanding vested shares at their fair market value. RSU vests based on a service-based requirement and a liquidity event plus service requirement. No RSU had vested as of December 31, 2023. The following table summarizes RSU and RSA activities during the year ended December 31, 2024: Number of Shares Weighted Average Grant Date Fair Value Unvested balance as of December 31, 2023 214,436 $ 22.88 Granted — — Vested (RSA) ( 638 ) 0.83 Forfeited ( 544 ) 22.88 RSUs outstanding - December 31, 2024 213,254 $ 22.88 Unvested balance as of December 31, 2024 213,254 $ 22.88 As of December 31, 2024, the Company had unrecognized compensation cost for unvested RSU awards of $ 2.8 million, expected to be recognized over a weighted-average period of approximately 2.0 years. In addition to the RSUs in the table above, in connection with the Merger, the Company assumed 24,700 RSUs which were fully vested at the time of the Merger. The RSUs were releasable upon set time frames after completion of the Merger. From the Merger through December 31, 2024, 7,700 RSUs were released. The remaining 17,000 RSUs were released in January 2025. There was no unamortized compensation cost related to these RSUs as of the Merger or December 31, 2024. 2024 Employee Stock Purchase Plan In October 2024, the Company’s Board of Directors adopted the ESPP, which became effective immediately upon completion of the Merger with Reneo. As of December 31, 2024, no shares have been issued under the ESPP. Share-Based Compensation Expense The following table shows the allocation of share-based compensation expense related to the company’s share-based awards (in thousands) : December 31, 2024 2023 Research and development $ 2,896 $ 98 General and administrative 1,634 101 Total $ 4,530 $ 199 The Company recorded accelerated share-based compensation expenses related to modifications of RSUs under certain separation agreements of $ 1.7 million during the year ended December 31, 2024, which is reflected in the above table. See Note 14 for further discussion on severance. There were no such modifications during the year ended December 31, 2023. 115 13. Income Taxes Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The components of the income tax benefit are as follows: Years ended December 31, 2024 2023 Federal tax at statutory rate 21.0 % 21.0 % State taxes, net of federal deduction 3.2 % 3.6 % R&D credits 0.1 % 0.2 % Other ( 2.3 )% ( 0.1 )% Change in valuation allowance ( 22.0 )% ( 24.7 )% Income tax benefit 0.0 % 0.0 % Significant components of deferred income taxes are as follows (in thousands): As of December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 53,984 $ 9,027 R&D tax credit 837 837 Deferred R&D expenses 32,729 11,123 Accrued expenses 1,903 783 Share-based compensation 978 104 Other 424 337 Total deferred tax assets 90,855 22,211 Valuation allowance ( 90,855 ) ( 22,211 ) Deferred tax assets, net of valuation allowance — — As of December 31, 2024, the Company had approximately $ 3.1 million of net operating loss carryforwards (“NOLs”) and $ 0.8 million of research and experimental credits which expire through 2037 , and approximately $ 216.5 million of federal and state net operating loss carryforwards which have an indefinite life . At December 31, 2024, the Company had federal and state tax credit carry forwards of approximately $ 6.9 million . The Company has not performed a formal research and development credit study with respect to these credits. The federal credits will begin to expire in 2034 , if unused. Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, the Company’s ability to use NOLs and research tax credit carry forwards to offset future taxable income may be limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period. The Company has not completed an ownership change analysis pursuant to IRC Section 382. If ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of NOLs and research tax carryforwards available to offset future taxable income and income tax liabilities in future years may be significantly restricted or eliminated. Further, deferred tax assets associated with such NOLs and research tax credits could be significantly reduced upon realization of an ownership change within the meaning of IRC Section 382. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. At December 31, 2024 and 2023 , the Company has no t accrued any interest or penalties related to uncertain tax positions. The Company does not anticipate that there will be a significant change in the amount of unrecognized 116 tax benefits over the next 12 months. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company is subject to taxation in the United States and the UK. The UK subsidiary operations ceased in 2024. The Company’s federal and state income tax returns for all years will remain open to examination by federal and state tax authorities for three years from the date of utilization of any net operating loss carryforwards. 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. The UK tax returns from 2018 through 2024, are subject to examination by the UK tax authorities. 14. Commitments and Contingencies Legal Proceedings Merger Proceedings In connection with the Merger, two complaints were filed in the Supreme Court of the State of New York, County of New York, captioned Thomas v. Reneo Pharmaceuticals, Inc., et al. , Index No. 654628/2024 (filed September 5, 2024) and Kent v. Reneo Pharmaceuticals, Inc., et al. , Index No. 654642/2024 (filed September 6, 2024) (together, the “Complaints”). The Complaints generally allege that the Proxy Statement/Prospectus filed by Reneo with the SEC misrepresented and/or omitted certain purportedly material information relating to Reneo management’s financial projections for Reneo and OnKure, the data and inputs underlying the financial valuation analyses that support the fairness opinion provided by Leerink Partners, Reneo’s financial advisor, and potential conflicts of interest with Leerink Partners LLC, Evercore Group L.L.C., and LifeSci Capital LLC, which were the placements agents for the Concurrent Financing that closed concurrently with the Merger. The Complaints assert violations of negligent misrepresentation and concealment in violation of New York common law and negligence in violation of New York common law. The Complaints sought orders enjoining the proposed Merger, or in the event that the Merger was consummated, orders rescinding the Merger or awarding actual and punitive damages, as well as all of the plaintiffs’ fees and expenses in connection with the litigation, including reasonable attorneys’ and experts’ fees and expenses. We cannot predict the outcome of the Complaints or any other litigation that might be filed arising out of the Merger or the Concurrent Financing. The Company and the individual defendants intend to vigorously defend against the Complaints and any subsequently filed, similar actions. It is possible additional lawsuits may be filed arising out of the Merger or the Concurrent Financing. Absent new or significantly different allegations, the Company will not necessarily disclose such additional filings. 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. Clinical Trial Collaboration and Supply Agreement with Pfizer In August 2020, as amended in December 2024, the Company entered into a clinical trial collaboration and supply agreement under which Pfizer Inc. (“Pfizer”) agreed to supply drug product in connection with a clinical trial. The agreement continues until the earlier of the completion of all obligations of the parties or the termination of the contract by either party as defined in the agreement. The Company may terminate the agreement if the clinical trial is deemed to be unsafe, regulatory authorities raise concerns, or if Pfizer does not uphold its obligations outlined in the agreement. Indemnification In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs because of such indemnifications. The Company is not aware of any claims under 117 indemnification arrangements, and it has not accrued any liabilities related to such obligations in its financial statements as of December 31, 2024. Severance A former officer of the Company terminated his employment with the Company on May 24, 2024 and entered into a separation agreement and release on that date. The separation agreement and release provides for payments and benefits including continuing payments of base salary for a period of 14 months following termination of employment, payment for or reimbursement for COBRA premiums for up to 14 months following termination of employment, a full accelerated vesting of his equity awards and extension of the post-termination exercise period applicable to his Options through the earlier of 12 months following termination of service or the applicable option expiration date. During the year ended December 31, 2024, the Company recorded an expense of $ 622,000 for these severance benefits in research and development expense, of which $ 326,000 remains unpaid and is included in accrued compensation. See Note 12 for discussion of stock-based compensation recorded for the modifications of equity awards discussed above. The related RSU shares were released in January 2025. Certain Reneo employees became employees of the Company to assist with the Merger transition through the end of the year December 31, 2024 at which time they were terminated and received severance benefits in accordance with the Reneo severance agreements. The Company recorded expense of $ 225,000 for severance benefits for these employees for the year ended December 31, 2024, which is included in General and Administrative expenses and of which, approximately $ 154,000 remains unpaid as of December 31, 2024 and is included in accrued compensation. Employee Benefit Plan The Company established a qualified 401(k) plan in June 2021 which covers all employees who meet eligibility requirements. The Company matches its employee contributions up to a maximum amount of 4 % of the participant’s compensation. During the years ended December 31, 2024, and 2023, the Company made matching contributions of approximately $ 360,000 and $ 294,000 , respectively. See Note 16. 15. Convertible Promissory Notes In June 2024, the Company entered into convertible promissory note agreements with certain of its existing investors for up to $ 12.0 million. At closing, the Company received total proceeds of $ 6.0 million and had the ability to draw up to an additional $ 6.0 million in the event the Merger with Reneo had not closed by September 30, 2024, but no additional draw was made. The notes bore interest at rates from 6 % per annum. All unpaid principal and accrued interest were due in December 2025, unless earlier converted. In October 2024, the unpaid notes and accrued unpaid interest automatically converted into shares issued in the Concurrent Financing at the price per share paid by investors in the Concurrent Financing. See Note 3 for further discussion. The Company incurred $ 142,000 of debt issuance costs related to the convertible promissory notes during the year ended December 31, 2024. Debt issuance costs are amortized as a component of interest expense over the term of the related debt using the straight-line method, which approximates the interest method. The Company recognized $ 148,000 in interest expense related to the amortization of the debt issuance costs for the year ended December 31, 2024 and a $ 114,000 loss on the conversion for the year ended December 31, 2024, both of which are recorded in interest and other expense in the Statement of Operations. As of December 31, 2024, the Company had no accrued interest related to the convertible promissory notes. 16. Subsequent Events Sublease In January 2025, the Company entered into a sublease on the Irvine lease for all of the leased square footage. The sublease rent payments will be approximately $ 450,000 over the term of the lease, which expires in November 2026 . Available for Issuance Increase The Company's 2024 Plan provides that on the first day of each fiscal year, the number of shares of our Class A common stock available for issuance thereunder is automatically increased by a number equal to the least of (i) 2,407,100 shares, (ii) 5 % of the outstanding shares of all classes of common stock as of the last day of the 118 immediately preceding fiscal year, or (iii) such other amount as the Company’s board of directors may determine. The Company's ESPP provides that on the first day of each fiscal year, the number of shares of Class A common stock available for issuance thereunder is automatically increased by a number equal to the least of (i) 481,500 shares, (ii) 1 % of the outstanding shares of all classes of common stock as of the last day of the immediately preceding fiscal year, or (iii) such other amount as the board of directors may determine. On January 1, 2025, the number of shares of Class A common stock available for issuance under the 2024 Plan and the ESPP increased by 667,355 and 133,471 shares, respectively, pursuant to these provisions. 119 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.