OnKure Therapeutics, Inc. 10-Q

Item 1. Financial Statements RENEO PHARMACEUTICALS, INC. Condensed Consolidated Balance Sheets (In thousands, except share and par value data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ MARCH 31, DECEMBER 31, ​ ​ ​ 2021 ​ 2020 ​ Assets ​ (unaudited) ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 91,221 ​ $ 53,613 ​ Prepaid expenses and other current assets ​ 2,339 ​ 1,412 ​ Total current assets ​ 93,560 ​ 55,025 ​ Property and equipment, net ​ 81 ​ 69 ​ Other non-current assets ​ 1,680 ​ 127 ​ Total assets ​ $ 95,321 ​ $ 55,221 ​ Liabilities, convertible preferred stock and stockholders’ deficit ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ Accounts payable ​ $ 556 ​ $ 908 ​ Accrued expenses ​ 3,374 ​ 3,672 ​ Total current liabilities ​ 3,930 ​ 4,580 ​ Deferred rent ​ 32 ​ 36 ​ Total liabilities ​ 3,962 ​ 4,616 ​ Commitments and contingencies (Note 9) ​ ​ ​ Series A convertible preferred stock, $ 0.0001 par value; 24,302,472 shares authorized at March 31, 2021 and December 31, 2020; 24,302,472 shares issued and outstanding at March 31, 2021 and December 31, 2020, liquidation preference of $ 49,127 at March 31, 2021 and December 31, 2020 ​ 45,652 ​ 45,652 ​ Series B convertible preferred stock, $ 0.0001 par value; 46,881,028 shares authorized at March 31, 2021 and December 31, 2020; 46,881,028 and 23,440,514 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively; liquidation preference of $ 94,770 and $ 47,385 as of March 31, 2021 and December 31, 2020, respectively ​ 94,424 ​ 47,068 ​ Stockholders’ deficit: ​ ​ ​ Common stock, $ 0.0001 par value; 105,000,000 shares authorized at March 31, 2021 and December 31, 2020, 2,148,193 and 2,123,733 shares issued and outstanding at March 31, 2021, respectively, and 2,053,070 shares issued and outstanding at December 31, 2020 ​ — ​ — ​ Additional paid-in capital ​ 3,453 ​ 2,843 ​ Accumulated deficit ​ ( 52,170 ) ​ ( 44,958 ) ​ Total stockholders’ deficit ​ ( 48,717 ) ​ ( 42,115 ) ​ Total liabilities, convertible preferred stock and stockholders’ deficit ​ $ 95,321 ​ $ 55,221 ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 3 Table of Contents ​ RENEO PHARMACEUTICALS, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ THREE MONTHS ENDED MARCH 31, ​ ​ 2021 2020 Operating expenses: ​ ​ ​ ​ ​ ​ ​ Research and development ​ $ 5,472 ​ $ 3,578 ​ General and administrative ​ 1,742 ​ 924 ​ Total operating expenses ​ 7,214 ​ 4,502 ​ Loss from operations ​ ( 7,214 ) ​ ( 4,502 ) ​ Other income ​ 2 ​ 71 ​ Net loss ​ ( 7,212 ) ​ ( 4,431 ) ​ Unrealized gain on short-term investments ​ — ​ 6 ​ Comprehensive loss ​ $ ( 7,212 ) ​ $ ( 4,425 ) ​ Net loss per share attributable to common stockholders, basic and diluted ​ $ ( 3.48 ) ​ $ ( 2.20 ) ​ Weighted-average shares used in computing net loss per share, basic and diluted ​ 2,070,935 ​ 2,015,029 ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 4 Table of Contents ​ RENEO PHARMACEUTICALS, INC. Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit (In thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CONVERTIBLE ​ ​ ​ ​ ​ ​ ​ ​ ACCUMULATED ​ ​ ​ ​ ​ ​ ​ ​ PREFERRED STOCK ​ ​ ​ ​ ​ ​ ADDITIONAL ​ OTHER ​ ​ ​ ​ ​ TOTAL ​ ​ Series A ​ Series B ​ Common Stock ​ PAID-IN ​ COMPREHENSIVE ​ ​ ACCUMULATED ​ ​ STOCKHOLDERS' ​ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME ​ DEFICIT ​ DEFICIT Balances, December 31, 2020 ​ 24,302,472 ​ $ 45,652 ​ 23,440,514 ​ $ 47,068 ​ 2,053,070 ​ $ — ​ $ 2,843 ​ $ — ​ $ ( 44,958 ) ​ $ ( 42,115 ) Issuance of series B convertible preferred stock, net of issuance costs of $ 29 — ​ ​ — ​ 23,440,514 ​ ​ 47,356 ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 471 ​ ​ — ​ ​ — ​ ​ 471 Stock option exercise — ​ ​ — ​ — ​ ​ — ​ 70,663 ​ ​ — ​ ​ 139 ​ ​ — ​ ​ — ​ ​ 139 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 7,212 ) ​ ​ ( 7,212 ) Balances, March 31, 2021 24,302,472 ​ $ 45,652 ​ 46,881,028 ​ $ 94,424 ​ 2,123,733 ​ $ — ​ $ 3,453 ​ $ — ​ $ ( 52,170 ) ​ $ ( 48,717 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CONVERTIBLE ​ ​ ​ ​ ​ ​ ​ ​ ACCUMULATED ​ ​ ​ ​ ​ ​ ​ ​ PREFERRED STOCK ​ ​ ​ ​ ​ ​ ADDITIONAL ​ OTHER ​ ​ ​ ​ ​ TOTAL ​ ​ Series A ​ Series B ​ Common Stock ​ PAID-IN ​ COMPREHENSIVE ​ ​ ACCUMULATED ​ ​ STOCKHOLDERS' ​ SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME ​ DEFICIT ​ DEFICIT Balances, December 31, 2019 ​ 24,302,472 ​ $ 45,652 ​ — ​ $ — ​ 2,008,905 ​ $ — ​ $ 2,363 ​ $ 3 ​ $ ( 25,493 ) ​ $ ( 23,127 ) Stock-based compensation — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 92 ​ ​ — ​ ​ — ​ ​ 92 Stock option exercise — ​ ​ — ​ — ​ ​ — ​ 13,269 ​ ​ — ​ ​ 26 ​ ​ — ​ ​ — ​ ​ 26 Change in unrealized holding gains and losses on short-term investments ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 6 ​ ​ — ​ ​ 6 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4,431 ) ​ ​ ( 4,431 ) Balances, March 31, 2020 24,302,472 ​ $ 45,652 ​ — ​ $ — ​ 2,022,174 ​ $ — ​ $ 2,481 ​ $ 9 ​ $ ( 29,924 ) ​ $ ( 27,434 ) ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 5 Table of Contents ​ ​ RENEO PHARMACEUTICALS, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ THREE MONTHS ENDED ​ ​ MARCH 31, ​ ​ 2021 2020 Cash flows from operating activities ​ ​ ​ Net loss ​ $ ( 7,212 ) ​ $ ( 4,431 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ Depreciation and amortization ​ 10 ​ 9 Amortization/accretion on short-term investments ​ — ​ ( 15 ) Stock-based compensation ​ 471 ​ 92 Changes in operating assets and liabilities: ​ ​ Accounts payable, accrued expenses and other ​ ( 927 ) ​ 36 Prepaid expenses and other assets ​ ( 929 ) ​ ( 137 ) Deferred rent ​ ( 2 ) ​ ( 1 ) Net cash used in operating activities ​ ( 8,589 ) ​ ( 4,447 ) Cash flows from investing activities ​ ​ ​ ​ ​ ​ Purchase of property and equipment ​ ( 25 ) ​ ( 1 ) Proceeds from maturities of available-for-sale short-term investments ​ — ​ 5,200 Net cash (used in) provided by investing activities ​ ( 25 ) ​ 5,199 Cash flows from financing activities ​ ​ ​ ​ ​ ​ Proceeds from issuance of Series B convertible preferred stock, net of issuance costs ​ 47,258 ​ — Proceeds from exercise of stock options ​ 187 ​ 26 Costs paid in connection with initial public offering ​ ​ ( 1,223 ) ​ ​ — Net cash provided by financing activities ​ 46,222 ​ 26 Net increase in cash and cash equivalents ​ 37,608 ​ 778 Cash and cash equivalents, beginning of period ​ 53,613 ​ 17,501 Cash and cash equivalents, end of period ​ $ 91,221 ​ $ 18,279 Supplemental cash flow information: ​ ​ Property and equipment in accounts payable ​ $ 2 ​ $ — Unpaid Series B convertible preferred stock issuance costs ​ $ 19 ​ $ — Costs incurred in connection with initial public offering included in accrued expenses ​ $ 361 ​ $ — ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 6 Table of Contents ​ RENEO PHARMACEUTICALS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Business Organization Reneo Pharmaceuticals, Inc. (Reneo or the Company) was incorporated in the state of Delaware on September 22, 2014 (Inception). The Company is a clinical-stage pharmaceutical company focused on the development of therapies for patients with rare genetic mitochondrial diseases. In December 2017, the Company in-licensed REN001, a novel oral peroxisome proliferator-activated receptor (PPAR) agonist. Reverse Stock Split On April 5, 2021, the Company effected a 1-for- 4.4748 reverse stock split of its common stock. The par value and the authorized number of shares of the common stock were not adjusted as a result of the reverse stock split. The reverse stock split resulted in an adjustment to the Series A and Series B convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. Initial Public Offering On April 13, 2021, the Company completed an initial public offering (IPO) of its common stock. In connection with its IPO, the Company issued and sold 6,250,000 shares of its common stock at a price to the public of $ 15.00 per share. The gross proceeds from the IPO were approximately $ 93.8 million before deducting underwriting discounts and commissions of $ 6.6 million and offering expenses of approximately $ 2.4 million payable by the Company. At the closing of the IPO, 71,183,500 shares of outstanding convertible preferred stock were automatically converted into 15,907,629 shares of common stock. Following the IPO, there were no shares of preferred stock outstanding. ​ Liquidity The Company has incurred significant losses and negative cash flows from operations. From Inception through March 31, 2021, the Company has raised $ 146.7 million primarily from private financings to support its drug development efforts. As of March 31, 2021, the Company had cash and cash equivalents of $ 91.2 million and an accumulated deficit of $ 52.2 million. The Company had a net loss of $ 7.2 million and used cash of $ 8.6 million for operating activities for the three months ended March 31, 2021. In accordance with Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements - Going Concern , management is required to perform a two-step analysis over the Company’s ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the date the condensed consolidated financial statements are issued. If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt. Due to the Company’s continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future and may never become profitable. As a result, the Company will need to raise capital through public or private equity or debt financings, government or other third-party funding, collaborations, strategic alliances and licensing arrangements or a combination of these. There can be no assurance that the Company will be successful in obtaining additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of 7 Table of Contents ​ operations, and future prospects. The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. The Company may not be able to secure additional financing in a timely manner or on favorable terms, if at all. In addition, successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. As of March 31, 2021, the Company had $ 91.2 million in cash and cash equivalents. Management believes that the Company’s cash and cash equivalents as of March 31, 2021 and net proceeds of approximately $ 84.8 million from the Company’s IPO in April 2021 will be sufficient to fund operations for at least one year from date on which this Quarterly Report on Form 10-Q is issued. ​ 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements at December 31, 2020, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company have been included. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, which are included in the Company’s prospectus, dated April 8, 2021, that forms a part of the Company’s Registration Statement on Form S-1 (File. No. 333-254534) as filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), on April 9, 2021. The condensed consolidated financial statements include the accounts of Reneo Pharmaceuticals, Inc. and its wholly owned subsidiary, Reneo Pharma Ltd located in the United Kingdom (UK). All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation. Use of Estimates The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure in the Company’s condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates. Risks and Uncertainties Any product candidates developed by the Company will require approvals from the U.S. Food and Drug Administration (FDA) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s current product candidates will meet desired efficacy and safety requirements to obtain the necessary approvals. If approval is denied or delayed, it may have a material adverse impact on the Company’s business and its financial statements. The Company is subject to a number of risks similar to other clinical-stage pharmaceutical companies including, but not limited to, dependency on the clinical and commercial success of the Company’s product candidate, REN001, ability to obtain regulatory approval of REN001, the need for substantial additional financing to achieve its goals, uncertainty of 8 Table of Contents ​ broad adoption of its approved products, if any, by physicians, consumers and third-party payors, significant competition and untested manufacturing capabilities, and dependence on key individuals and sole source suppliers. The Company’s business has been and could continue to be adversely affected by the evolving COVID-19 pandemic. For example, the COVID-19 pandemic has resulted in and could result in delays to the Company’s clinical trials for numerous reasons, including additional delays or difficulties in enrolling patients, diversion of healthcare resources away from the conduct of clinical trials, interruption or delays in the operations of the FDA or other regulatory authorities, and delays in clinical sites receiving the supplies and materials to conduct the Company’s clinical trials. At this time, the extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted. Segment Reporting The Company operates and manages its business as one operating segment, which is the business of developing novel therapies for rare genetic mitochondrial diseases. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. As of March 31, 2021 and December 31, 2020, the Company had cash balances deposited at a major financial institution. Cash balances are subject to minimal credit risk as the balances are with high credit quality financial institutions. Cash and cash equivalents include cash in readily available checking and money market accounts. Short-term Investments The Company accounts for short-term investments in accordance with ASC Topic 320, Investments – Debt and Equity Securities . Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date. The Company’s investments are classified as available-for-sale securities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income in stockholders’ deficit. Realized gains and losses on sales of investments are included in interest income and are derived using the specific identification method for determining the cost of securities. The Company recognizes an impairment charge when a decline in the fair value of its investments in debt securities below the amortized cost basis of such securities is judged to be other-than-temporarily impaired. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and if the entity has the intent to sell the security, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. The Company did no t recognize any other-than-temporary impairment charges on its short-term investments during the three months ended March 31, 2021 and 2020. Money market account balances are included as cash and cash equivalents on the condensed consolidated balance sheets, which are also disclosed in Note 3, Fair Value Measurements. Impairment of Long-Lived Assets Long-lived assets consist primarily of property and equipment. Long-lived assets are tested for impairment when events and circumstances indicate the assets might be impaired by first comparing the estimated future undiscounted cash flows of the asset or asset group to the carrying value. If the carrying value exceeds the estimated future undiscounted cash flows, an impairment loss is recognized based on the amount that the carrying value exceeds the fair value of the asset or asset group. The Company did no t recognize impairment losses during the three months ended March 31, 2021 and 2020. 9 Table of Contents ​ Convertible Preferred Stock The Company records convertible preferred stock at fair value on the dates of issuance, net of issuance costs. Prior to the IPO, upon the occurrence of certain potential events that would have been outside the Company’s control, including a “deemed liquidation event” such as a merger, acquisition and sale of all or substantially all of the Company’s assets, holders of the convertible preferred stock could cause redemption for cash. Therefore, convertible preferred stock was classified as temporary equity (mezzanine) on the condensed consolidated balance sheets as events triggering the liquidation preferences are not solely within the Company’s control. The carrying values of the convertible preferred stock will be adjusted to their liquidation preferences if and when it becomes probable that such a liquidation event will occur. Research and Development Costs and Accruals All research and development costs are expensed as incurred. Research and development costs consist primarily of costs associated with manufacturing drug substance and drug product, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services), license fees, salaries and employee benefits. The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites and others. Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones. Payments made in advance of or after the performance are reflected in the condensed consolidated balance sheets as prepaid expenses or accrued liabilities, respectively. Up-front costs, such as costs associated with setting up clinical trial sites for participation in the trials, are expensed immediately once the set-up has occurred as research and development expenses. The Company accrues the costs incurred under agreements with these third parties based on estimates of actual work completed in accordance with the respective agreements. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impact research and development expenses. License Fees The Company expenses amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain, and the technology has no alternative future use when acquired. Acquisitions of technology licenses are charged to expense or capitalized based upon management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use. The Company has determined that technological feasibility for its product candidate would be reached when the requisite regulatory approvals are obtained to make the product available for sale. Contingent milestone payments are recognized when the related contingency is resolved, and the amounts are paid or become payable. These amounts are expensed to research and development if there is no alternative future use associated with the license or capitalized as an intangible asset if alternative future use of the license exists. Patent Costs Costs related to filing and pursuing patent applications are expensed as incurred, as the recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses. Stock-Based Compensation Compensation expense related to stock options granted to employees and non-employees is measured at the grant date based on the estimated fair value of the award and is recognized on a straight-line basis over the requisite service period. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. 10 Table of Contents ​ Foreign Currency Transactions The functional currency of Reneo Pharma Ltd is the U.S. dollar. All foreign exchange transactional and remeasurement gains and losses are recognized in the condensed consolidated statement of operations and comprehensive loss. For the three months ended March 31, 2021 and 2020, total foreign currency gains and losses were not material. Comprehensive Income or Loss Comprehensive income or loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. Net Loss Per Share The Company computes basic loss per share by dividing the net 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 equivalents include the Company’s stock options and convertible preferred stock, which are convertible into shares of the Company’s common stock. No shares related to the convertible preferred stock were included in the diluted net loss per share calculation for the three months ended March 31, 2021 and 2020 because the inclusion of such shares would have had an anti-dilutive effect. The shares to be issued upon exercise of all outstanding stock options were also excluded from the diluted net loss per share calculation for the three months ended March 31, 2021 and 2020 because such shares are anti-dilutive. Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following: ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2021 March 31, 2020 Convertible preferred stock (as converted) ​ 15,907,629 5,430,957 ​ Common stock options ​ 3,113,640 976,130 ​ Total ​ 19,021,269 6,407,087 ​ ​ New Accounting Pronouncements Recent Accounting Pronouncements Not Yet Adopted In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes . The standard simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new guidance will be effective for the Company as of January 1, 2022. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is in the process of evaluating the impact of the application of this accounting standard update on its condensed consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments . The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in the carrying value of the asset. Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized. This new guidance is effective for the Company as of January 1, 2023. The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its condensed consolidated financial statements and related disclosures. 11 Table of Contents ​ In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheets for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires a lessee to recognize a liability for lease payments (the lease liability) and a right-of-use asset (representing its right to use the underlying asset for the lease term) on the balance sheet. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements , which provides entities an optional transition method to apply the new guidance as of the adoption date, rather than as of the earliest period presented. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the effective date, unless the lease was modified, to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP. This ASU is effective for annual reporting periods beginning January 1, 2022 with early adoption permitted. The Company plans to adopt the ASU on January 1, 2022 and is currently in the process of evaluating the impact of the application of this accounting standard update on its condensed consolidated financial statements and related disclosures. ​ 3. Fair Value Measurements ASC Topic 820, Fair Value Measurement , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 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 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, that 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 classifies its money market funds as Level 1 using the quoted prices in active markets. No assets or liabilities were transferred into or out of their classifications during the three months ended March 31, 2021 and 2020. The recurring fair value measurement of the Company’s assets measured at fair value at March 31, 2021 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices in ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ Active Markets ​ Significant Other ​ Unobservable ​ ​ ​ ​ For Identical Items ​ Observable Inputs ​ Inputs ​ ​ ​ ​ (Level 1) (Level 2) (Level 3) Total Cash equivalents ​ ​ ​ ​ Money market investments ​ $ 89,563 ​ $ — ​ $ — ​ $ 89,563 Total ​ $ 89,563 ​ $ — ​ $ — ​ $ 89,563 12 Table of Contents ​ ​ The recurring fair value measurement of the Company’s assets measured at fair value at December 31, 2020 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted Prices in ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ Active Markets ​ Significant Other ​ Unobservable ​ ​ ​ ​ For Identical Items ​ Observable Inputs ​ Inputs ​ ​ ​ ​ (Level 1) (Level 2) (Level 3) Total Cash equivalents ​ ​ ​ ​ Money market investments ​ $ 49,632 ​ $ — ​ $ — ​ $ 49,632 Total ​ $ 49,632 ​ $ — ​ $ — ​ $ 49,632 ​ ​ ​ 4. Property and Equipment, Net Property and equipment, net, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ MARCH 31, 2021 DECEMBER 31, 2020 ​ Computer, software and office equipment ​ $ 144 ​ $ 122 ​ Leasehold improvements ​ 30 ​ 30 ​ Total property and equipment, gross ​ 174 ​ 152 ​ Less: accumulated depreciation and amortization ​ ( 93 ) ​ ( 83 ) ​ Total property and equipment, net ​ $ 81 ​ $ 69 ​ ​ Depreciation and amortization expense related to property and equipment was $ 10,000 and $ 9,000 for the three months ended March 31, 2021 and 2020, respectively. ​ 5. Accrued Expenses Accrued expenses consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ MARCH 31, 2021 DECEMBER 31, 2020 ​ Accrued development expenses ​ $ 1,159 ​ $ 1,443 ​ Accrued clinical expenses ​ 997 ​ 1,019 ​ Accrued compensation ​ 514 ​ 888 ​ Other accrued expenses ​ 704 ​ 322 ​ Total other accrued expenses ​ $ 3,374 ​ $ 3,672 ​ ​ ​ 6. Convertible Preferred Stock and Stockholders’ Deficit Series A Convertible Preferred Stock In December 2017, January 2018, and May 2019, the Company issued a total of 24,302,472 shares of Series A convertible preferred stock to certain investors at $ 2.16 per share. In connection with the IPO (Note 1) in April 2021, all outstanding shares of Series A convertible preferred stock were converted into 5,430,957 shares of common stock. Series B Convertible Preferred Stock In December 2020, the Company and certain investors entered into a Series B preferred stock purchase agreement, whereby the Company issued 23,440,514 shares of Series B convertible preferred stock at $ 2.0215 per share for total gross proceeds of approximately $ 47.4 million before deducting offering costs of $ 0.3 million, which constituted the closing of the first tranche of the Series B convertible preferred stock. In connection with the closing of the first tranche of Series B convertible preferred stock in December 2020, the Company issued rights to the purchasers for the purchase 13 Table of Contents ​ of an additional 23,440,514 shares of Series B convertible preferred stock under the same terms and conditions upon the board of directors’ determination of either (i) that the cash balance of the Company is below $ 10 million, or (ii) approving the Company’s initial public offering of shares of its common stock pursuant to a registration statement under the Securities Act (Series B Tranche Right). The Company evaluated the Series B Tranche Right and concluded that it was not a free-standing instrument that met the definition of a derivative that required separate accounting. In March 2021, the Company completed the Series B Tranche Right at $ 2.0215 per share. A total of 23,440,514 shares of Series B convertible preferred stock were issued for aggregate net proceeds of approximately $ 47.4 million. In connection with the IPO in April 2021, all outstanding shares of Series B convertible preferred stock were converted into 10,476,672 shares of common stock. The following are key features of the convertible preferred stock: Voting Rights Each holder of shares of the Series A and Series B convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of Series A and Series B convertible preferred stock could then be converted. Dividends The holders of Series A and Series B convertible preferred stock are entitled to a non-cumulative dividend of 8 % of the original issue price when, as and if declared by the board of directors, only out of funds that are legally available. Liquidation Preferences Holders of the Series A and Series B convertible preferred stock are entitled to receive liquidation preferences equal to the greater of (a) original issue price plus all declared and unpaid dividends or (b) such amount per share as would have been payable had all shares of such series of preferred stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or deemed liquidation event. Only after payment of the full liquidation preference of Series A and Series B convertible preferred stock, the remaining assets of the Company legally available for distribution shall be distributed ratably to the holders of the common stock. Conversion Rights At the option of the holder, shares of Series A and Series B convertible preferred shares can be converted into fully paid and non-assessable shares of the Company’s common stock. The initial conversion ratio is one -for-one, subject to customary anti-dilution provisions. Upon either (a) the closing of the sale of shares of common stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act resulting in at least $ 75,000,000 of gross proceeds to the Company (Qualified Initial Public Offering) or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the outstanding shares of Series A and Series B convertible preferred stock at the time of such vote or consent, voting together as a single class on an as-converted basis, all outstanding shares of Series A and Series B convertible preferred stock shall automatically be converted into shares of common stock, at the applicable ratio at the time of conversion. Redemption The Series A and Series B convertible preferred stock are not redeemable. However, the Series A and Series B convertible preferred stock include terms such that there are deemed liquidation events that can trigger redemption of the 14 Table of Contents ​ convertible preferred stock that are outside the control of the Company. Accordingly, the Series A and Series B convertible preferred stock are classified outside of permanent equity on the condensed consolidated balance sheets. Shares Reserved for Future Issuance As of March 31, 2021, the Company had reserved shares of its common stock for future issuance as follows: ​ ​ ​ ​ ​ Shares ​ ​ Reserved Series A convertible preferred stock outstanding 5,430,957 Series B convertible preferred stock outstanding 10,476,672 Common stock options outstanding 3,113,640 Available for future grants under the 2014 Equity Incentive Plan 117,602 Total shares of common stock reserved 19,138,871 ​ ​ 7. Stock-Based Compensation In 2014, the Company adopted the 2014 Equity Incentive Plan (the 2014 Plan). The 2014 Plan provides for the issuance of incentive stock options to employees of the Company and non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock awards to directors, employees and consultants of the Company. In March 2021, the Company’s board of directors increased the option pool by 234,158 shares of common stock. As of March 31, 2021, As of March 31, 2021, the 2014 Plan has a total reserve of 3,231,242 shares. As of March 31, 2021, there were 117,602 shares available for future grant under the 2014 Plan. The options granted under the 2014 Plan will expire no more than ten years from the date of grant. The exercise price of each option is determined by the Company’s board of directors, although generally options have an exercise price equal to the estimated fair market value of the Company’s stock on the date of the option grant. In the case of incentive stock options, the exercise price is required to be no less than 100 % of the estimated fair market value of the Company’s common stock at the time the option is granted. For holders of more than 10 % of the Company’s total combined voting power of all classes of stock, incentive stock options may not be granted at less than 110 % of the fair market value of the Company’s common stock at the date of grant and for a term not to exceed five years . Most option grants generally vest 25 % on the first anniversary of the original vesting commencement date, with the balance vesting monthly over the remaining three years . Under the 2014 Plan, certain employees may be granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. As of March 31, 2021, stock options to purchase 24,460 shares of common stock have been early exercised and were subject to vesting. Cash received in exchange for early exercises of stock options has been recorded as a liability for the early exercise of stock options and will be transferred into common stock and additional paid-in capital as the shares vest. As of March 31, 2021, such liability for early exercises of stock options was immaterial. In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (the 2021 Plan) and the Company’s stockholders approved the 2021 Plan in April 2021. The 2021 Plan became effective immediately prior to the execution of the underwriting agreement in connection with the IPO. Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s affiliates. A total of 2,187,524 new shares of common stock were approved to be initially reserved for issuance under the 2021 Plan. In addition, the number of shares of common stock reserved for issuance under the 2021 Plan includes the shares reserved and available for issuance pursuant to the grant of new awards under the 2014 Plan as of the effectiveness of the 2021 Plan and will include any shares subject to stock awards granted under the 2014 Plan that, after the date the 2021 Plan became effective, are forfeited or otherwise become available under the 2014 Plan. The 15 Table of Contents ​ number of shares of common stock reserved for issuance under the 2021 Plan will also automatically increase on January 1 of each calendar year, beginning on January 1, 2022 and continuing through and including January 1, 2031, by 5 % of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year; provided, however, that the Company’s board of directors may act prior to January 1 st of a given year to provide that the increase for such year will be a lesser number of shares of common stock. ​ In March 2021, the Company’s board of directors adopted the Company’s 2021 Employee Stock Purchase Plan (ESPP) and the Company’s stockholders approved the ESPP in April 2021. The ESPP became effective immediately prior to the execution of the underwriting agreement in connection with our IPO. A total of 243,058 shares of common stock were approved to be initially reserved for issuance under the ESPP. A summary of the Company’s stock option activity and related information during the three months ended March 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- Weighted- Average ​ ​ ​ Options ​ ​ Average Exercise ​ Remaining Aggregate ​ ​ Outstanding ​ Price ​ Contractual Term Intrinsic Value Outstanding at December 31, 2020 ​ 935,478 ​ $ 2.56 ​ 7.7 ​ ​ Granted ​ 2,273,285 ​ $ 5.06 ​ ​ ​ ​ Exercised ​ ( 95,123 ) ​ $ 1.97 ​ ​ $ 418,000 Forfeited/cancelled — $ — ​ ​ Outstanding at March 31, 2021 3,113,640 $ 4.41 9.2 $ 6,086,000 Vested at March 31, 2021 615,517 $ 2.49 7.4 $ 2,384,000 Exercisable at March 31, 2021 2,772,210 $ 4.40 9.2 $ 5,441,000 ​ Intrinsic value as of March 31, 2021 was based on the estimated common stock fair value of $ 6.36 per share. Options exercisable at March 31, 2021 include vested options and options eligible for early exercise. All outstanding options as of March 31, 2021 are expected to vest. 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: ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2021 2020 Risk-free interest rate 0.66 % 1.44 % Expected volatility 71.2 % 71.6 % Expected term (in years) 5.9 6.0 ​ Expected dividend yield — % — % ​ The weighted average grant date fair value of options granted during the three months ended March 2021 and 2020 was $ 3.15 and $ 2.40 , respectively. 16 Table of Contents ​ Fair value of common stock. For periods prior to the IPO, the fair value of the shares of common stock underlying the stock options has been determined by the Company’s board of directors, with input from management. Historically, since there has been no public market for the Company’s common stock, the Company’s board of directors determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant. 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 is 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. 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. Unrecognized compensation expense at March 31, 2021 for both employee and non-employee stock-based compensation expense was $ 7.2 million, which is expected to be recognized over a weighted-average vesting term of 3.3 years. Non-cash stock-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ March 31, ​ ​ ​ 2021 2020 ​ General and administrative ​ $ 364 ​ $ 48 ​ Research and development ​ 107 ​ 44 ​ Total ​ $ 471 ​ $ 92 ​ ​ ​ In November 2020, the Company hired a new chief executive officer under which the chief executive officer is entitled to receive a special performance bonus in the amount of $ 7.5 million, payable in cash, common stock or a combination of cash and common stock, in the event that (i) the Company’s market value exceeds $ 750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $ 750 million. The Company has determined that the bonus award is subject to ASC Topic 718 , Compensation – Stock Compensation and includes both market and performance conditions. Because the performance conditions are not considered to be probable until the completion of the Company’s IPO or change in control, no expense was recorded on the award for the three months ended March 31, 2021. In April 2021, the performance condition was achieved in connection with the IPO. Accordingly, the Company expects to start recognizing compensation expense related to the award granted to the chief executive officer beginning in April 2021. 8. License Agreement In December 2017, the Company entered into a License Agreement with vTv Therapeutics LLC (vTv Therapeutics) (the vTv License Agreement), under which the Company obtained an exclusive, worldwide, sublicensable license under 17 Table of Contents ​ certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans. Under the terms of the vTv License Agreement, the Company paid vTv Therapeutics an initial upfront license fee payment of $ 3.0 million and issued to vTv Therapeutics 309,576 shares of its common stock. The vTv License Agreement was accounted for as an asset acquisition and the upfront cash payment of $ 3 million and the fair value of common stock of $ 0.7 million issued to vTv Therapeutics was recorded in research and development expenses, as there was no alternative use for the asset. Upon the achievement of certain pre-specified development and regulatory milestones, the Company is also required to pay vTv Therapeutics milestone payments totaling up to $ 64.5 million. The Company is also required to pay vTv Therapeutics up to $ 30.0 million in total sales-based milestones upon achievement of certain sales thresholds of the licensed product. In addition, the Company is obligated to make royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions. In accordance with the terms of the vTv License Agreement, the Company issued a total of an additional 266,867 shares of its common stock to vTv Therapeutics in 2018 and 2019. The Company accounted for the additional shares of common stock issued to vTv Therapeutics when the shares were obligated to be issued to vTv Therapeutics. The Company is no longer obligated to issue any further shares of common stock under the vTv License Agreement. ​ For the three months ended March 31, 2021 and 2020, the Company did no t record any research and development expenses in connection with the vTv License Agreement. ​ 9. Commitments and contingencies Operating Leases In June 2018, the Company leased certain office space for its U.S. headquarters under a non-cancelable operating lease with terms through July 2023, with an option to extend the terms for the entire premises for a period of five years . The rent expense in the United States for the three months ended March 31, 2021 and 2020 totaled $ 46,000 for both periods. In December 2018, the Company leased certain office space for its UK subsidiary under a non-cancelable operating lease with lease terms through November 2021. The rent expense in the UK for the three months ended March 31, 2021 and 2020 totaled $ 7,000 for both periods. Legal Proceedings The Company is currently not a party to any legal proceedings, nor is the Company aware of any threatened or pending litigations. However, from time-to-time in the future, the Company could be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of business, which may have a material adverse effect on the Company’s consolidated results of operations or financial position. 401(k) Plan The Company maintains a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. Matching contributions to the 401(k) plan are made for certain eligible employees to meet non- discrimination provisions of the plan. During the three months ended March 31, 2021 and December 31, 2020, the expense recorded by the Company was immaterial. ​ 18 Table of Contents ​