OnKure Therapeutics, Inc. 10-Q

Item 1. Financial Statements RENEO PHARMACEUTICALS, INC. Consolidated Balance Sheets (In thousands, except share and par value data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2022 ​ As of December 31, 2021 ​ ​ (Unaudited) ​ ​ ​ Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 121,094 ​ $ 124,660 Short-term investments ​ 17,568 ​ 23,010 Prepaid expenses and other current assets ​ 4,053 ​ 6,064 Total current assets ​ 142,715 ​ 153,734 Property and equipment, net ​ 237 ​ 212 Right-of-use assets ​ ​ 1,382 ​ ​ — Other non-current assets ​ 78 ​ ​ 78 Total assets ​ $ 144,412 ​ $ 154,024 Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 1,566 ​ $ 2,022 Accrued expenses ​ 5,887 ​ 4,180 Operating lease liabilities, current portion ​ ​ 457 ​ ​ — Total current liabilities ​ 7,910 ​ 6,202 Operating lease liabilities, less current portion ​ ​ 1,127 ​ ​ — Other long-term liabilities ​ — ​ 167 Performance award ​ ​ 57 ​ ​ 444 Total liabilities ​ 9,094 ​ 6,813 Commitments and contingencies ​ ​ Stockholders’ equity: ​ ​ Common stock, $ 0.0001 par value; 200,000,000 shares authorized at March 31, 2022 and December 31, 2021; 24,458,550 shares issued and outstanding at March 31, 2022; and 24,457,838 and 24,455,390 shares issued and outstanding at December 31, 2021, respectively ​ 3 ​ 3 Additional paid-in capital ​ 233,015 ​ 231,902 Accumulated deficit ​ ( 97,764 ) ​ ( 84,728 ) Accumulated other comprehensive income ​ 64 ​ 34 Total stockholders’ equity ​ 135,318 ​ 147,211 Total liabilities and stockholders’ equity ​ $ 144,412 ​ $ 154,024 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 3 Table of Contents ​ RENEO PHARMACEUTICALS, INC. Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2022 2021 Operating expenses: ​ ​ ​ ​ ​ Research and development $ 9,278 ​ $ 5,472 General and administrative 3,737 ​ 1,742 Total operating expenses 13,015 ​ 7,214 Loss from operations ( 13,015 ) ​ ( 7,214 ) Other (loss) income ( 21 ) ​ 2 Net loss ( 13,036 ) ​ ( 7,212 ) Unrealized gain on short-term investments 30 ​ — Comprehensive loss $ ( 13,006 ) ​ $ ( 7,212 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.53 ) ​ $ ( 3.48 ) Weighted-average shares used in computing net loss per share, basic and diluted 24,458,290 ​ 2,070,935 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 4 Table of Contents ​ RENEO PHARMACEUTICALS, INC. Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit ) (In thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 ​ ​ 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 ​ Equity Balances, December 31, 2021 ​ — ​ $ — ​ — ​ $ — ​ ​ 24,455,390 ​ $ 3 ​ $ 231,902 ​ $ 34 ​ $ ( 84,728 ) ​ $ 147,211 Stock based compensation — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,107 ​ ​ — ​ ​ — ​ ​ 1,107 Stock option exercise and common shares vested — ​ ​ — ​ — ​ ​ — ​ ​ 3,160 ​ ​ — ​ ​ 6 ​ ​ — ​ ​ — ​ ​ 6 Other comprehensive income ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 30 ​ ​ — ​ ​ 30 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 13,036 ) ​ ​ ( 13,036 ) Balances, March 31, 2022 — ​ $ — ​ — ​ $ — ​ ​ 24,458,550 ​ $ 3 ​ $ 233,015 ​ $ 64 ​ $ ( 97,764 ) ​ $ 135,318 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2021 ​ ​ 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 ) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 5 Table of Contents ​ ​ RENEO PHARMACEUTICALS, INC. Consolidated Statements of Cash Flows (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2022 2021 Cash flows from operating activities ​ ​ ​ Net loss ​ $ ( 13,036 ) ​ $ ( 7,212 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ Stock-based compensation ​ 1,107 ​ ​ 471 Depreciation and amortization ​ 19 ​ ​ 10 Amortization/accretion on short-term investments ​ 1 ​ ​ — Changes in the fair value of performance award ​ ( 387 ) ​ ​ — Non-cash lease expense ​ ​ 143 ​ ​ — Changes in operating assets and liabilities: ​ ​ ​ ​ ​ Accounts payable and accrued expenses ​ 1,251 ​ ​ ( 927 ) Prepaid expenses and other assets ​ 2,011 ​ ​ ( 929 ) Operating lease liabilities ​ ​ ( 108 ) ​ ​ — Other current and long-term liabilities ​ — ​ ​ ( 2 ) Net cash used in operating activities ​ ( 8,999 ) ​ ( 8,589 ) Cash flows from investing activities ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ( 44 ) ​ ​ ( 25 ) Purchase of available-for-sale short-term investments ​ ( 16,029 ) ​ ​ — Proceeds from maturities of available-for-sale short-term investments ​ 21,500 ​ ​ — Net cash provided by (used in) investing activities ​ 5,427 ​ ( 25 ) Cash flows from financing activities ​ ​ ​ ​ ​ ​ Proceeds from issuance of Series B convertible preferred stock, net of issuance costs ​ — ​ ​ 47,258 Proceeds from issuance of common stock pursuant to equity award plans ​ 6 ​ ​ 187 Costs paid in connection with initial public offering ​ ​ — ​ ​ ( 1,223 ) Net cash provided by financing activities ​ 6 ​ 46,222 Net (decrease) increase in cash and cash equivalents ​ ( 3,566 ) ​ 37,608 Cash and cash equivalents, beginning of period ​ 124,660 ​ ​ 53,613 Cash and cash equivalents, end of period ​ $ 121,094 ​ $ 91,221 Noncash operating activities: ​ ​ Right-of-use assets obtained in exchange for lease obligations ​ $ 1,524 ​ $ — Noncash investing and financing activities: ​ ​ ​ ​ ​ ​ Property and equipment in accounts payable ​ $ — ​ $ 2 Unpaid Series B convertible preferred stock issuance costs ​ $ — ​ $ 19 Accrued deferred initial public offering costs ​ $ — ​ $ 361 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 6 Table of Contents ​ RENEO PHARMACEUTICALS, INC. Notes to Consolidated Financial Statements (Unaudited) 1. Organization and Business Organization Reneo Pharmaceuticals, Inc. (Reneo or the Company) commenced operations on September 22, 2014 as 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 consolidated financial statements and notes to the 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 $ 2.6 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 Since inception in 2014, the Company has incurred significant losses and negative cash flows from operations. As of March 31, 2022, the Company had cash, cash equivalents and short-term investments of $ 138.7 million and an accumulated deficit of $ 97.8 million. 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. ​ 2. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in 7 Table of Contents ​ the United States of America (GAAP) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company recommends that the unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements, have been included in the accompanying unaudited financial statements. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year. The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of March 31, 2021; all intercompany transactions and balances have been eliminated. Summary of Significant Accounting Policies The significant accounting policies used in the preparation of these consolidated financial statements for the three months ended March 31,2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. New Accounting Pronouncements Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (ASC 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 (lease liability) and a right-of-use (ROU)assets (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 (ASC 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 GAAP. The Company early adopted this standard on January 1, 2022, using the optional transitional method and elected the package of practical expedients in transition for leases that commenced prior to January 1, 2022. As a result of implementing ASC 842, the Company recognized operating lease ROU assets of $ 1.5 million and lease liabilities of $ 1.7 million on January 1, 2022, with no impact on its beginning retained earnings, consolidated statements of operations and comprehensive loss, or cash flows. See Note 6, Leases, for further details. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes . The standard simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification (ASC) 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new guidance was 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 adopted this standard on January 1, 2022. Adoption of this standard had no material impact on the Company’s consolidated financial position, results of operations or cash flows. 8 Table of Contents ​ Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (ASC 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 consolidated financial statements and related disclosures. 3. Net Loss Per Share The Company computes basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive. For purposes of this calculation, common stock equivalents include the Company’s stock options and convertible preferred stock, which are convertible into shares of the Company’s common stock. As of March 31, 2022, no shares of convertible preferred stock were outstanding. 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 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 and restricted stock units were also excluded from the diluted net loss per share calculation for the three months ended March 31, 2022 and 2021 because such shares are anti-dilutive. Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following: ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, ​ 2022 2021 Convertible preferred stock (as converted) ​ — 15,907,629 Common stock options outstanding ​ 4,262,702 3,113,640 Unvested restricted stock units ​ 279,500 ​ — Total ​ 4,542,202 19,021,269 ​ ​ 4. Fair Value Measurements ASC 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 9 Table of Contents ​ 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 categorized its money market funds as Level 1, using the quoted prices in active markets. Commercial paper is valued using Level 2 significant other observable inputs. The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets. In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a special performance award in the amount of $ 7.5 million (Performance Award), payable in cash, common stock or a combination of cash and common stock, at the election of the Company, based on achievement of certain conditions as described in more detail in Note 8. The Company estimated the fair value of the Performance Award using a Monte Carlo simulation, which incorporates the stock price at the date of the valuation and utilizes Level 3 inputs such as volatility, probabilities of success, and other inputs that are not observable in active markets. The Performance Award is required to be measured at fair value on a recurring basis each reporting period, with changes in the fair value recognized in general and administrative expense in the consolidated statements of operations and comprehensive loss over the derived service period of the award. No assets or liabilities were transferred into or out of their classifications during the three months ended March 31, 2022. The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at March 31, 2022 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 Assets ​ ​ ​ ​ ​ ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market investments ​ $ 117,921 ​ $ — ​ $ — ​ $ 117,921 Short-term Investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper ​ ​ — ​ ​ 17,568 ​ ​ — ​ ​ 17,568 Total ​ $ 117,921 ​ $ 17,568 ​ $ — ​ $ 135,489 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance award ​ $ — ​ $ — ​ $ 57 ​ $ 57 Total ​ $ — ​ $ — ​ $ 57 ​ $ 57 ​ 10 Table of Contents ​ The following table summarizes changes in fair value measurements of the Performance Award during the three months ended March 31, 2022 (in thousands): ​ ​ ​ ​ ​ Balance as of January 1, 2022 ​ $ 444 Change in fair value ​ ​ ( 387 ) Balance as of March 31, 2022 ​ $ 57 ​ The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at December 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 Assets ​ ​ ​ ​ ​ ​ Cash and cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market investments ​ $ 118,535 ​ $ — ​ $ — ​ $ 118,535 Short-term Investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper ​ ​ — ​ ​ 23,010 ​ ​ — ​ ​ 23,010 Total ​ $ 118,535 ​ $ 23,010 ​ $ — ​ $ 141,545 Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance award ​ $ — ​ $ — ​ $ 444 ​ $ 444 Total ​ $ — ​ $ — ​ $ 444 ​ $ 444 ​ ​ ​ 5. Accrued Expenses Accrued expenses consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2022 As of December 31, 2021 Accrued clinical and regulatory ​ $ 2,049 ​ $ 1,236 Accrued contract manufacturing cost ​ ​ 2,176 ​ 1,482 Accrued compensation ​ ​ 1,218 ​ ​ 1,027 Accrued research and development-other ​ 444 ​ 435 Total accrued expenses ​ $ 5,887 ​ $ 4,180 ​ ​ 6. Leases The Company’s headquarters are located in Irvine, California, where it leases office space. The Company leases additional office space located in San Diego, California, and in Kent, United Kingdom. The lease terms for the Irvine, San Diego, and Kent offices extend through November 30, 2026, July 31, 2023, and December 20, 2022, respectively. The Company adopted ASU 2016-02 on January 1, 2022, which requires it to recognize a liability for lease payments and a ROU asset on the balance sheet. The Company elected the package of practical expedients permitted within the standard, which allows an entity to forego reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components. At March 31, 2022, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 5 % and 4.1 years, respectively. During the three months 11 Table of Contents ​ ended March 31, 2022, operating lease expenses recognized and cash paid for amounts included for the measurement of lease liabilities were immaterial. The Company has elected to net the amortization of the ROU assets and the reduction of the lease liabilities principal in other current and long-term liabilities in the consolidated statements of cash flows. Maturities of lease liabilities by fiscal year for our operating leases are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2022 2022 (remaining nine months) ​ ​ ​ $ 399 2023 ​ ​ ​ ​ 414 2024 ​ ​ ​ ​ 323 2025 ​ ​ ​ ​ 332 Thereafter ​ ​ ​ ​ 285 Total lease payments ​ ​ ​ ​ 1,753 Less: Imputed interest ​ ​ ​ ​ ( 169 ) Present value of lease liabilities ​ ​ ​ $ 1,584 ​ ​ 7. Convertible Preferred Stock and Stockholders’ Equity Series A Convertible Preferred Stock As of March 31, 2022, there were no shares of Series A convertible preferred stock outstanding. 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 As of March 31, 2022, there were no shares of Series B convertible preferred stock outstanding. In March 2021, the Company completed milestone closing of it’s the Series B convertible preferred stock financing and sold a total of 23,440,514 shares of Series B convertible preferred stock, at $ 2.0215 per share 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. ​ 8. Stock-Based Compensation In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the 2014 Equity Incentive Plan (2014 Plan). As of the effectiveness of the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan. Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, 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. Under the 2014 Plan, certain employees were granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until 12 Table of Contents ​ those shares vest. As of March 31, 2022, there were no shares subject to stock options that have been early exercised. Shares Reserved for Future Issuance As of March 31, 2022, the Company had reserved shares of its common stock for future issuance as follows: ​ ​ ​ ​ ​ Shares ​ ​ Reserved Common stock options outstanding 4,262,702 Unvested restricted stock units ​ 279,500 Available for future grants under the 2021 Equity Incentive Plan 2,165,387 Available for future grants under the 2021 Employee Stock Purchase Plan ​ 479,012 Available for future grants outside of the 2021 Plan as inducement award ​ 100,000 Total shares of common stock reserved 7,286,601 ​ Stock Options A summary of the Company’s stock option activity and related information during the three months ended March 31, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Weighted- Average Exercise Price ​ Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2021 ​ 4,215,643 ​ $ 5.49 ​ 8.5 ​ ​ Granted ​ 233,600 ​ $ 6.80 ​ ​ ​ ​ Exercised ​ ( 713 ) ​ $ 3.45 ​ ​ ​ ​ Forfeited/Expired ( 185,828 ) $ 6.48 ​ ​ Outstanding at March 31, 2022 4,262,702 $ 5.52 8.0 $ 379 Vested at March 31, 2022 1,490,020 $ 4.20 6.4 $ 368 Exercisable at March 31, 2022 2,703,228 $ 4.49 7.2 $ 375 ​ Options exercisable at March 31, 2022 include vested options and options eligible for early exercise. All outstanding options as of March 31, 2022 are expected to vest. Unrecognized stock-based expense at March 31, 2022 was $ 10.4 million, which is expected to be recognized over a weighted-average vesting term of 2.9 years. 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, ​ 2022 ​ 2021 Risk-free interest rate 1.8 % ​ 0.7 % Expected volatility 85.2 % ​ 71.2 % Expected term (in years) 6.0 ​ 5.9 ​ Expected dividend yield — % ​ — % ​ 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. 13 Table of Contents ​ Expected volatility. Since the Company recently completed its IPO and does not have sufficient trading history for its common stock the expected volatility assumption is based on 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. Fair value of common stock. For periods prior to the IPO, since there had been no public market for the Company’s common stock, the Company’s board of directors, with input from management, 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. Performance-Based Restricted Stock Units (PSUs) The following table summarizes PSU activity as of March 31, 2022, under the 2021 Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ Number of ​ Average Grant Date ​ ​ PSUs ​ Fair Value Outstanding at December 31, 2021 ​ 299,500 ​ $ 6.32 Granted ​ 10,000 ​ ​ 8.98 Released ​ — ​ ​ — Cancelled ​ ( 30,000 ) ​ ​ 6.69 Outstanding at March 31, 2022 ​ 279,500 ​ $ 6.37 ​ The PSUs vest based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date. The fair value of the awards was based on the value of the Company’s common stock at the date of the award and expense recognition is based on the probability of achieving the performance metric. The Company concluded that achievement of the performance conditions was not probable as of March 31, 2022, and therefore no compensation expense was recognized for the three months ended March 31, 2022 in connection with the PSUs. Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions. Market-Based Awards Restricted Stock Units In December 2021, the Company granted 100,000 market-based restricted stock units (MRSUs) to its chief executive officer (CEO) pursuant to the 2021 Plan. The MRSUs vest based on the Company’s closing stock price trading above $ 20 per share for 30 consecutive trading days subject to the employee’s continued employment with the Company through the date of achievement. The share price of the Company’s common stock on the date of issuance of the MRSUs was $ 6.69 per share. The fair value was $ 0.4 million based on Monte Carlo simulation model on the grant date. Compensation expense is recognized over the derived service period of 3 years . Stock- 14 Table of Contents ​ based compensation expense in connection with the MRSUs was immaterial for the three months ended March 31, 2022. As of March 31, 2022, there was $ 0.4 million of unrecognized compensation expense related to this MRSU. Performance Award In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a Performance Award in the amount of $ 7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $ 750 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 Performance Award is subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions. Since the IPO, neither of the events have yet been satisfied. The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as compensation cost over the derived service period. During the three-months ended March 31, 2022, the Company reversed $ 0.4 million in compensation expenses as a direct result of decreased value of the Performance Award caused by a decline in the Company’s common stock price. As of March 31, 2021, prior to the IPO, the Performance Award was not probable of being achieved; therefore, no stock-based compensation expense was recognized during the three months ended March 31, 2021. 2021 Employee Stock Purchase Plan (ESPP) In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO. As of March 31, 2022, 8,624 shares have been issued under the ESPP. In September 2021, the Company’s board of directors adopted the Company’s 2021 UK Sharesave Sub-plan (SAYE). An allocation of 25,875 shares of common stock from the ESPP reserve pool was approved and reserved for issuance under the SAYE. No shares have been issued under the SAYE through March 31, 2022. The stock-based compensation expense related to the ESPP and SAYE for the three months ended March 31, 2022, was immaterial. The following table summarizes stock compensation expense, including expense associated with award modifications for unvested options, reflected in the unaudited consolidated statements of operations and comprehensive loss (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2022 2021 Research and development $ 387 ​ $ 364 General and administrative ​ 720 ​ ​ 107 Total $ 1,107 ​ $ 471 ​ 15 Table of Contents ​ 9. 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 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. To date, the Company has paid a $ 3.0 million upfront payment and a total of $ 2.0 million in milestone payments and issued an aggregate of 576,443 shares of our common stock to vTv Therapeutics. 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. There were no milestone payments achieved or recorded for the three months ended March 31, 2022 and 2021. 10. Subsequent Events On May 2, 2022, the Company entered into a sales agreement with SVB Securities LLC (ATM facility), under which the Company may offer and sell, from time to time at its sole discretion, up to $ 20.0 million in shares of its common stock. The Company has no t yet sold any shares of its common stock under the ATM facility. ​ 16 Table of Contents ​