OnKure Therapeutics, Inc. 10-Q

Item 2. 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 condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Legacy OnKure’s audited financial statements and the related notes for the years ended December 31, 2024 and 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent filings. Unless otherwise indicated, all references in this Quarterly Report on Form 10-Q to “OnKure,” the “Company,” “we,” “our,” “us,” or similar terms refer to OnKure Therapeutics, Inc. and its subsidiaries after completion of the Merger. In addition, references to “Reneo” refer to the Company prior to the completion of the Merger. Forward-Looking Statements In addition to historical financial information, 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 in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “project,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” or the negative of these terms or other similar expressions. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. Overview 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. Merger 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 22 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.” Macroeconomic and Geopolitical Considerations Our business and operations may be negatively affected by macroeconomic, geopolitical, and regulatory developments, including inflation, instability in the banking and financial services sector, tightening of the credit markets, international conflicts, cybersecurity, tariffs, sanctions, export controls, government policy positions, and changes in regulatory agencies with oversight of our operations. These developments could affect our supply chain, manufacturing processes, regulatory compliance costs, regulatory approval timelines, and cross-border operations. Further, it is possible that U.S. and non-U.S. government policy changes and related uncertainty about policy changes could increase market volatility and our operating expenses. The extent, severity, and duration of the impacts of these events and conditions on our business cannot be predicted and may not be fully reflected in our results of operations until future periods. If economic uncertainty continues or increases, or if the global economy worsens, our business, financial condition, and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events and conditions on our business, financial condition, and operating results, see the section titled “Risk Factors” included in this Quarterly Report. Financial Overview 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. Since inception, we have incurred significant operating losses. Our net losses were $31.3 million and $52.7 million for the six months ended June 30, 2025 and the year ended December 31, 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $186.0 million and cash and cash equivalents of $83.4 million. We have funded our operations primarily through private placements of our common stock and preferred stock and issuance of convertible debt. As of June 30, 2025, 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 Operating Expenses Research and Development Expenses Research and development expenses primarily relate to expenses incurred in connection with the discovery and development of our product candidates. 23 Research and development expenses include: • 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; and • 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. 24 Other Income Interest Income Interest income primarily consists of interest income generated from our cash equivalents in interest-bearing money market accounts. Interest Expense Interest expense consists primarily of interest expense generated from our convertible notes payable, which were issued in 2024 and converted at the time of the Merger in 2024. Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 The following table summarizes our results of operations for the periods indicated: Three Months Ended June 30, 2025 2024 $ Change (in thousands) Operating expenses: Research and development $ 12,613 $ 10,752 $ 1,861 General and administrative 3,711 3,591 120 Total operating expenses 16,324 14,343 1,981 Loss from operations (16,324 ) (14,343 ) (1,981 ) Other income: Interest income 934 230 704 Interest and other expense — (26 ) 26 Total other income and (expense) 934 204 730 Net loss and comprehensive loss $ (15,390 ) $ (14,139 ) $ (1,251 ) Research and Development Expenses Research and development expenses were $12.6 million for the three months ended June 30, 2025 compared to $10.8 million for the three months ended June 30, 2024. The increase of approximately $1.9 million was primarily due to a $1.4 million increase in clinical trial and outsourced manufacturing expenses, and a $0.3 million increase in outsourced research expenses which is a result of an increase in clinical trials. General and Administrative Expenses General and administrative expenses were $3.7 million for the three months ended June 30, 2025 compared to $3.6 million for the three months ended June 30, 2024. The increase of approximately $0.1 million was primarily due to $1.3 million in increased personnel-related costs, including $1.0 million of increased share-based compensation charges. In addition, director compensation, consulting, filing fees and franchise taxes and other professional service fees, including audit fees and insurance, increased by $0.3 million. These increases were partially offset by a $1.6 million decrease in legal expenses in 2025 as compared to the same period in 2024 due to non-recurring costs related to the Merger completed in 2024. Other Income (Expense) Other income (expense), net was $0.9 million for the three months ended June 30, 2025 compared to $0.2 million for the three months ended June 30, 2024. 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 quarter ended June 30, 2025 as compared to the quarter ended June 30, 2024. 25 Comparison of the Six Months Ended June 30, 2025 and 2024 The following table summarizes our results of operations for the periods indicated: Six Months Ended June 30, 2025 2024 $ Change (in thousands) Operating expenses: Research and development $ 25,625 $ 19,318 $ 6,307 General and administrative 7,699 4,857 2,842 Total operating expenses 33,324 24,175 9,149 Loss from operations (33,324 ) (24,175 ) (9,149 ) Other income and (expense): Interest income 2,009 526 1,483 Interest and other expense — (26 ) 26 Total other income and (expense) 2,009 500 1,509 Net loss and comprehensive loss $ (31,315 ) $ (23,675 ) $ (7,640 ) Research and Development Expenses Research and development expenses were $25.6 million for the six months ended June 30, 2025 compared to $19.3 million for the six months ended June 30, 2024. The increase of approximately $6.3 million was primarily due to a $1.9 million increase in personnel-related costs, including $1.0 million of increased share-based compensation charges. The increase was also the result of a $3.1 million increase in clinical trial and outsourced manufacturing expenses, and a $1.1 million increase in outsourced research expenses. We expect research and development expenses in 2025 to be higher than 2024 due to continued efforts to advance our clinical and preclinical programs. General and Administrative Expenses General and administrative expenses were $7.7 million for the six months ended June 30, 2025 compared to $4.9 million for the six months ended June 30, 2024. The increase of approximately $2.8 million was primarily due to $2.9 million in increased personnel-related costs, including $2.2 million of increased share-based compensation charges. In addition, director compensation, consulting, filing fees and franchise taxes and other professional service fees, including audit fees and insurance, increased by $1.1 million. These increases were partially offset by a $1.3 million decrease in legal expenses in 2025 as compared to the same period in 2024 due to non-recurring costs related to the Merger completed in 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 $2.0 million for the six months ended June 30, 2025 compared to $0.5 million for the six months ended June 30, 2024. 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 six months ended June 30, 2025 as compared to the six months ended June 30, 2024. We expect other income 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 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. 26 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 and cash equivalents will be sufficient to fund our planned operations for at least the next 12 months from the date of issuance of our unaudited condensed consolidated financial statements for the quarter ended June 30, 2025. Funding Requirements 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, or 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 and our ability to access the capital markets. 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; 27 • 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; and • 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. Cash Flows The following table summarizes our cash flows for the periods indicated, in thousands: Six Months Ended June 30, 2025 2024 (in thousands) Net cash provided by (used in): Operating activities $ (27,279 ) $ (17,102 ) Investing activities (31 ) (19 ) Financing activities (77 ) 5,878 Net decrease in cash and cash equivalents $ (27,387 ) $ (11,243 ) Cash Flows from Operating Activities Cash used in operating activities during the six months ended June 30, 2025 was $27.3 million. This consisted primarily of a net loss of $31.3 million, a net decrease in operating assets and liabilities of $2.0 million, and non-cash share-based compensation of $5.7 million. Cash used in operating activities during the six months ended June 30, 2024 was $17.1 million. This consisted primarily of a net loss of $23.7 million, and a net decrease in our operating assets and liabilities of $4.4 million, partially offset for share-based compensation and depreciation and amortization. Cash Flows from Investing Activities Cash used in investing activities was $31 thousand and $19 thousand for the six months ended June 30, 2025 and 2024, respectively, and related to purchase of property and equipment. 28 Cash Flows from Financing Activities Cash used in financing activities during the six months ended June 30, 2025 was $77 thousand and related to payment of issuance costs from the Concurrent Financing and reverse recapitalization transaction costs in connection with the Merger. Cash provided by financing activities during the six months ended June 30, 2024 was $5.9 million and primarily related to proceeds from the issuance of convertible notes payable. Material Cash Requirements The discussion below summarizes our significant contractual obligations and commitments as of June 30, 2025. Leases . See Note 5 of Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding our leases, including the future operating lease minimum payments. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed 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 condensed 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. Actual results may differ materially from these estimates under different assumptions or conditions. Our critical accounting policies are described in our audited financial statements and the related notes for the years ended December 31, 2024 and 2023 included in our Annual Report on Form 10-K for the year ended December 31, 2024, and the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the three months ended June 30, 2025, there were no material changes to our critical accounting policies from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2024. Recent Accounting Pronouncements See Note 2 of Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our condensed consolidated financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk 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.