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Item 7. Management’s Discussion and Analysis

2023-03-09 compared with 2022-02-28 · 82 added, 94 removed, 191 unchanged (48% of the section changed)

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

The following Management’s discussion and analysis (“MD&A”) of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this Annual Report.

The following Management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this Annual Report.

This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve risks and uncertainties.

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Our lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete ER antagonist, or CERAN, and a selective ER degrader, or SERD, which we believe will drive deeper, more durable responses than existing therapies.

OP-1250, both as a monotherapy and in combination with inhibitors of cyclin-dependent kinase 4 and 6, or CDK4/6, demonstrated robust tumor shrinkage in several xenograft models, including a breast cancer brain metastasis model.

In August 2020, we initiated an ongoing Phase 1/2 dose escalation and expansion trial evaluating OP-1250 for the treatment of recurrent, locally advanced or metastatic ER-positive, or ER+, human epidermal growth factor receptor 2-negative, or HER2-, breast cancer.

We reported initial data from the Phase 1 dose escalation portion of this trial in November 2021, which provide proof-of-concept for OP-1250 as a monotherapy treatment for ER+/HER2- breast cancer.

OP-1250, both as a monotherapy and in combination with inhibitors of cyclin-dependent kinase 4 and 6, or CDK4/6, demonstrated robust anti-tumor activity in a range of preclinical xenograft models of breast cancer, including in ESR1 and PIK3CA mutations and central nervous system, or CNS, metastasis.

In August 2020, we initiated an ongoing Phase 1/2 monotherapy dose escalation and expansion study evaluating OP-1250 for the treatment of recurrent, locally advanced or metastatic ER-positive, or ER+, human epidermal growth factor receptor 2-negative, or HER2-, breast cancer.

We reported initial data from the Phase 1a dose escalation portion of this study in November 2021, which provided proof-of-concept for OP-1250 as a monotherapy treatment for ER+/HER2- breast cancer.

We reported additional monotherapy data from the Phase 1b dose expansion portion of this study in October 2022 and initiated the Phase 2 portion of the study.

We anticipate presenting Phase 2 clinical data for OP-1250 as a monotherapy in the second half of 2023.

In 2022, we also initiated Phase 1b/2 dose escalation and expansion studies evaluating OP-1250 in combination with cyclin-dependent kinase or CDK4/6 inhibitors palbociclib and ribociclib and phosphatidylinositol 3 - kinase alpha, or PI3K a inhibitor, alpelisib.

In December 2022, we reported initial data from the Phase 1a dose escalation portion of the study in combination with palbociclib which demonstrated combinability including no drug-drug interaction, or DDI, between the two agents.

We anticipate presenting results from the Phase 2 clinical study for OP-1250 in combination with palbociclib in the second quarter of 2023 and from the Phase 1b clinical study for OP-1250 in combination with ribociclib in the second half of 2023.

In July 2022, we were granted Fast Track designation from the FDA for OP-1250 for patients with ER+/HER2- metastatic breast cancer that has progressed following one or more lines of endocrine therapy with at least one line given in combination with a CDK4/6 inhibitor.

Based on the clinical results we have achieved to date, we are advancing OP-1250 through to late stage clinical development both as a monotherapy and in combination with other targeted agents.

We own worldwide development and commercialization rights to OP-1250.

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We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates .

Through December 31, 2021, we had received aggregate gross proceeds of $392.7 million from sales of our common stock, convertible preferred stock, issuance of convertible promissory notes since our inception, stock option exercises, and sale of stock through the employee stock purchase plan (“ESPP”).

As of December 31, 2021, we had $287.3 million in cash, cash equivalents and marketable securities.

In January 2020, we received proceeds of $3.0 million from the issuance of convertible promissory notes, or the 2020 Notes.

From March 2020 through June 2020, we issued 10,801,277 shares of our Series B convertible preferred stock at a

price of $4.712 per share for cash proceeds of $50.9 million, and 638,270 shares of our Series B convertible preferred stock upon conversion of the 2020 Notes (including accrued interest).

In September 2020, we issued 7,904,135 shares of our Series C convertible preferred stock at a price of $11.063 per share for cash proceeds of $87.4 million.

In November 2020, we completed the initial public offering of our common stock, in which we issued an aggregate of 12,650,000 shares of common stock, including 1,650,000 shares of common stock issued pursuant to the over-allotment option granted to the underwriters, at a price of $19.00 per share, for gross cash proceeds of $240.4 million, before underwriting discounts and commissions.

We received approximately $220.6 million in net proceeds, after deducting underwriting discounts, commissions and offering expenses.

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2024.

As of December 31, 2022, we had cash, cash equivalents, and marketable securities of $204.4 million.

Based on our current operating plan, we believe that our cash, cash equivalents, and marketable securities as of December 31, 2022 will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2025.

We have incurred significant operating losses since the commencement of our operations.

Our net losses were $71.1 million, $22.1 million, and $4.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, and we expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidate, and as we continue to operate as a public company.

Our net losses were $104.8 million and $71.1 million for the years ended December 31, 2022 and 2021, respectively.

We expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidate, make potential milestone payments to our licensors, and as we continue to operate as a public company.

Our net losses may fluctuate significantly from period to period, depending on the timing of expenditures on our research and development activities.

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We also expect to increase the size of our administrative function to support the growth of our business.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We will require substantial additional funding to develop our product candidates and support our continuing operations.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials, potential milestone payments to our licensors, and our expenditures on other research and development activities.

We will require substantial additional funding to develop our product candidate and support our continuing operations.

Until such time that we can generate significant revenue from product sales or other sources, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants.

We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all.

Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic and otherwise.

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

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

The COVID-19 pandemic continues to rapidly evolve.

As a result of the COVID-19 pandemic, we experienced some delays in setting up our current Phase 1/2 clinical trial and in clinical site initiation, including delays in recruiting clinical site investigators and clinical site staff, which we may experience again in the future.

The extent of the impact of the COVID-19 pandemic on our business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration of the outbreak and its impact on our development activities, planned clinical trial enrollment, future trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel.

The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.

To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and with many of our employees working remotely.

We continue to actively monitor the rapidly evolving situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

During 2021, although we modified our operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, our business, operations and development timelines were not material adversely affected.

In October 2021, the Company re-opened its offices to administrative employees, however due to the resurgence of cases relating to the spread of the Delta and Omicron variants, the Company continued to limit access to its offices and may close its offices again in the future as the COVID-19 pandemic continues to evolve.

The COVID-19 pandemic continues to evolve.

As a result of the COVID-19 pandemic, we experienced some delays in setting up our current Phase 1/2 clinical study and in clinical site initiation, including delays in recruiting clinical site investigators and clinical site staff, which we may experience again in the future for clinical trials, including ongoing clinical trials involving OP-1250 in combination with other therapies.

The extent of the impact of the COVID-19 pandemic on our business, operations, development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain, and will depend on factors, including the duration of the COVID-19 pandemic, frequency of outbreaks and the resultant impact on our development activities, planned clinical trial enrollment, future trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel.

We continue to actively monitor the evolving situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

During 2021 and 2022, although we modified our operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, our business, operations and development timelines were not materially adversely affected.

In March 2022, we fully re-opened our offices to all employees and continue to comply with protocols implemented by respective health authorities.

We also experienced subject enrollment timeline delays in a Phase 1b clinical study of OP-1250 in combination with another CDK4/6 inhibitor and with a PI3K a inhibitor.

We may experience these or other continuing impacts of the COVID-19 pandemic in the future.

We continue to monitor developments related to COVID-19 and may

close our offices again in the future.

The extent to which the COVID-19 pandemic may affect our business, operations and development timelines and plans in the future, including the resulting impact on our expenditures and capital needs, remains uncertain .

In addition to the ongoing COVID-19 pandemic, global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, recession risks and potential disruptions from the Russia-Ukraine conflict, all of which have resulted in volatility in the U.S.

and global financial markets, and disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally.

The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted.

Any continued or renewed disruption resulting from these factors could negatively impact our business.

We continue to monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows.

Components of our results of operations

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We track outsourced development costs by product candidate or nonclinical program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or nonclinical programs.

Research and development expenses to advance the development of our lead product candidate and nonclinical program were $51.1 million, $13.7 million and $3.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Research and development expenses to advance the development of our lead product candidate and nonclinical program were $82.3 million, and $51.1 million for the years ended December 31, 2022, and 2021, respectively.

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance OP-1250 or any other future product candidates we may develop into and through nonclinical studies and clinical trials and pursue regulatory approval of our product candidates.

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● obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

● maintaining a continued acceptable safety profiles of our products following approval;

● maintaining a continued acceptable safety profile of our products following approval;

● obtaining and retaining key research and development personnel.

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General and administrative

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for personnel in executive, finance, accounting, business development, legal, human resource and administrative functions.

General and administrative expenses also include costs not otherwise included in research and development expenses, including corporate facility costs, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, and professional fees for legal, patent and consulting services.

We expect that our general and administrative expenses will increase substantially in the foreseeable future as we increase our headcount to support the continued research and development of our programs and the growth of our business.

We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to ongoing consolidated financial statement audit and interim-period quarterly reviews, internal control over financial reporting compliance and audit, legal, other regulatory and compliance, director and officer insurance, investor and public relations and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Total other income (expense), net

Interest income, interest expense and other expense

Total other income (expense), net consists of interest income, interest expense, and other expense.

We expect that our general and administrative expenses will increase in the foreseeable future as we increase our headcount to support the continued research and development of our programs and the growth of our business.

We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to the building and improving of our IT infrastructure, including cyber security monitoring, legal, other regulatory and compliance, director and officer insurance, investor and public relations and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Total other income

Total other income consists of interest income and other expenses.

Interest income primarily consists of interest income on our cash equivalents and marketable securities.

Interest expense primarily consisted of interest on our convertible promissory notes, and a non-cash interest charge related to a beneficial conversion feature on a convertible note that was issued in January 2020.

Other expense consists of miscellaneous expenses not related to operating activities.

Other expense primarily consists of unrealized

foreign currency remeasurement gain (loss) and miscellaneous income (expense) not related to operating activities.

Results of operations

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The following table summarizes our results of operations for the years ended December 31, 2022 and 2021:

Years Ended December 31,

Year Ended December 31,

(in thousands)

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Loss from operations

Other income (expense), net:

Other income (expense):

Interest income

Interest expense

Other expense

Total other income (expense), net

Research and development expenses

Research and development expenses for the year ended December 31, 2021 were $51.1 million, compared to $13.7 million for the year ended December 31, 2020.

The increase of $37.4 million was primarily due to increased spending in (i) advancing the clinical study for our lead product candidate OP-1250 and the associated contract manufacturing costs, (ii) nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount, and an increase in non-cash stock-based compensation of $7.4 million recognized during the year ended December 31, 2021.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2021 were $20.4 million compared to $7.8 million for the year ended December 31, 2020.

The increase of $12.6 million was primarily due to increased spending in (i) personnel-related costs due to higher headcount, (ii) public company-related expenses, and (iii) other corporate costs and an increase in non-cash stock-based compensation expenses of $5.5 million recognized during the year ended December 31, 2021.

Other income (expense), net

Other income (expense), net for the year ended December 31, 2021 was $0.4 million, compared to $0.6 million expense for the year ended December 31, 2020.

The increase of $1.0 million was primarily due to non-cash interest charge incurred in connection with convertible notes issued in January 2020 that was not repeated in 2021, and an increase in interest income from our marketable securities in the year ended December 31, 2021.

Comparison of the years ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

Years Ended December 31,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other (expense) income:

Interest income

Interest expense

Total other income (expense), net

Net loss and comprehensive loss

Total other income

Research and development expenses

Research and development expenses for the year ended December 31, 2022 were $82.3 million, compared to $51.1 million for the year ended December 31, 2021.

The increase of $9.8 million was primarily due to increased spending in (i) advancing our lead product candidate OP-1250 clinical study and the associated contract manufacturing costs, (ii) other nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount, and an increase in non-cash stock-based compensation of $2.0 million recognized during the year ended December 31, 2020.

The increase of $31.2 million was primarily due to increased spending in (i) advancing the clinical study for our lead product candidate OP-1250 and the associated contract manufacturing costs, (ii) other nonclinical research and discovery program costs, including the $8.0 million upfront payment in connection with the Aurigene Agreement, and (iii) personnel-related costs due to increased headcount, including non-cash stock-based compensation expense increase of $3.1 million.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2022 were $24.7 million, compared to $20.4 million for the year ended December 31, 2021.

The increase of $7.4 million was primarily due to increased salary expense associated with our expanded executive team, fees paid to outside consultants in connection with our initial public offering and operating as a public company, and an increase in non-cash stock-based compensation of $1.1 million recognized during the year ended December 31, 2020.

Other income (expense), net

Other income (expense), net for the year ended December 31, 2020 was $(0.6) million, which primarily consisted of a non-cash interest charge incurred in connection with convertible notes issued in January 2020.

The increase of $4.3 million was primarily due to increased spending in (i) personnel-related expenses due to higher headcount, and (ii) public company-related costs, including legal compliance and other corporate costs.

Other income for the year ended December 31, 2022 was $2.2 million, compared to $0.4 million expense for the year ended December 31, 2021.

The increase of $1.8 million was primarily due to an increase in interest income from our marketable securities.

Liquidity and capital resources

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

Our net losses were $71.1 million, $22.1 million, and $4.3 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Our net losses were $104.8 million and $71.1 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, we had $204.4 million in cash, cash equivalents and marketable securities and an accumulated deficit of $209.0 million.

We had no debt outstanding as of December 31, 2022.

Through December 31, 2021, we had received aggregate gross proceeds of $392.7 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes, stock option exercises, and the sale of stock through the ESPP.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the nonclinical and clinical development of OP-1250.

We expect that our research and development and general and administrative costs will increase in connection with conducting additional nonclinical studies and clinical trials for our current and future research programs and product candidates, contracting with CMOs to support nonclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations.

Through December 31, 2022, we had received aggregate gross proceeds of $393.2 million from sales of our common stock, convertible preferred stock and

issuance of convertible promissory notes, stock option exercises, and the sale of stock through the 2020 Employee Stock Purchase Plan (“2020 ESPP”).

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of OP-1250 and other nonclinical research and development programs.

We expect that our research and development and general and administrative costs will increase in connection with conducting clinical trials and additional nonclinical programs for our current and future research programs and product candidates, contracting with CMOs to support clinical trials and other nonclinical programs, expanding our intellectual property portfolio, and providing general and administrative support for our operations.

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

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We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if at all, that will occur.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, make potential milestone payments to our licensors, and seek marketing approval for, our product candidates.

In addition, if we obtain marketing approval for our product candidates, we expect to incur significant commercialization expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators.

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The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into 2024 at which point we would need to obtain substantial additional funding in connection with our continuing operations.

We expect our cash, cash equivalents and marketable securities as of December 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into 2025 at which point we would need to obtain substantial additional funding in connection with our continuing operations.

The following table presents our material cash requirements for future periods:

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We included certain contracts that have significant cancellation penalties and are material, which make the continuation of these arrangements reasonable.

In addition, under the Aurigene Agreement, we have payment obligations that are contingent upon future events such as the achievement of specified development, regulatory and commercial milestones.

Financial terms of the Aurigene Agreement include potential future milestone payments of up to $60.0 million in clinical development and regulatory milestones, and up to $370.0 million in commercial milestones.

Aurigene is also eligible to receive mid-single digit to the low double digit royalties on product sales, if any.

The amount and timing of milestone obligations are unknown or uncertain as we are unable to estimate the timing or likelihood

of achieving the milestone events.

Additionally, the amount of royalty payments are based upon future product sales, which we are unable to predict with certainty.

These potential obligations are further described in Note 12 to our audited consolidated financial statements.

We also enter into contracts in the normal course of business with CROs and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services.

These contracts generally provide for termination on notice, and therefore are cancelable contracts.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

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Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

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

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

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The following table shows a summary of our cash flows for each of the periods presented:

Years Ended December 31,

Year Ended December 31,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating activities

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The net loss consisted primarily of $82.3 million in research and development expenses and $24.7 million in general and administrative expenses.

The non-cash charges consisted primarily of stock-based compensation of $18.8 million, depreciation and amortization expenses of $0.4 million, and non-cash lease expense of less than $0.1 million, net of cash payments of $1.3 million.

These non-cash expenses were partially offset by net discount accretion on our marketable securities of $0.8 million.

The change in operating assets and liabilities was primarily due to (i) an increase of $7.0 million in other current liabilities, and (ii) an increase of $0.4 million in accounts payable, which is primarily resulted from timing of invoicing by vendors and related payments.

The changes are partially offset by (i) an increase of $2.0 million in prepaid expenses and other current assets, and (ii) an increase of $1.1 million in other assets mostly due to vendor deposits paid for clinical studies .

Net cash used in operating activities during the year ended December 31, 2021 consisted primarily of our net loss of $71.1 million, partially offset by non-cash charges of $16.6 million and a net increase of $3.8 million in net operating assets and liabilities.

The net loss consisted primarily of $51.1 million in research and development expenses and $20.4 million in general and administrative expenses.

The non-cash charges consisted primarily of stock-based compensation of $15.9 million, depreciation and amortization expenses of $0.4 million, and non-cash lease expense of $0.2 million, net of cash payments of $1.0 million.

The change in operating assets and liabilities was primarily due to a net increase of $0.1 million in other assets and prepaid expenses and other current assets related to advanced payments for corporate insurance and subscriptions and licenses, and a decrease of $0.7 million in accounts payable, partially offset by an increase of $4.6 million in accrued liabilities, primarily as a result of timing of receipts of invoices.

Net cash used in operating activities during the year ended December 31, 2020 consisted primarily of our net loss of $22.1 million, partially offset by non-cash charges of $3.8 million and a net change of $1.5 million in net operating assets and liabilities.

The net loss consisted primarily of $13.7 million in research and development expenses and $7.8 million in general and administrative expenses.

The non-cash charges consisted primarily of stock-based compensation of $3.1 million and non-cash interest expense of $0.6 million related to our 2020 Convertible Notes.

The change in operating assets and liabilities was primarily due to an increase of $3.6 million in prepaid expenses and other current assets related to advanced payments for corporate insurance and research and development activities, an increase of $0.5 million in other assets, and a decrease of $0.2 million in accounts payable, partially offset by an increase of $2.8 million in invoices and accrued liabilities, primarily as a result of timing of invoice payment.

Net cash used in operating activities during the year ended December 31, 2019 consisted primarily of our net loss of $4.3 million, partially offset by an increase in accounts payable of $1.2 million.

The net loss primarily consisted of $3.9 million in research and development expenses and $0.4 million in general and administrative expenses.

The increase in accounts payable and other current liabilities was due to the timing of the posting of the invoices and the overall increase in research and development expenses in the year ended 2019.

Investing Activities

Net cash provided by investing activities during the year ended December 31, 2022 was predominately due to maturities of marketable securities which was partially offset by the purchase of marketable securities .

Net cash used in investing activities during the year ended December 31, 2021 was predominately due to purchases of marketable securities which was financed through the proceeds from the IPO and convertible preferred stock sale, and purchases of equipment, partially offset by the maturities of marketable securities.

Net cash used in investing activities during the year ended December 31, 2020 consisted of nominal purchases of equipment.

There were no cash flows from investing activities during the years ended December 31, 2019.

Financing activities

Net cash provided by financing activities during the year ended December 31, 2022 consisted of $0.3 million and $0.1 million in net proceeds from the sale of our common stock under the 2020 ESPP and the exercise of stock options, respectively.

Net cash provided by financing activities during the year ended December 31, 2020 consisted primarily of $220.6 million, $85.8 million, and $50.6 million in net proceeds from our initial public offering, sale and issuance of our Series C and B convertible preferred stock, and $3.0 million in proceeds from the sale and issuance of our convertible promissory notes, respectively.

These cash inflows were partially offset by cash outflows of $2.3 million for the repurchase of Series A convertible preferred stock.

There were no cash flows from financing activities during the year ended December 31, 2019.

Net cash provided by financing activities during the year ended December 31, 2021 consisted of $0.7 million and $0.7 million in net proceeds from the sale of our common stock under the 2020 ESPP and the exercise of stock options, respectively.

Critical accounting estimates

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

If the actual timing of the performance of services or the level of effort varies from our estimate, we

adjust the accrual or amount of prepaid expense accordingly.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly.

Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

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To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Emerging growth company status

Until December 31, 2021, we were an “emerging growth company” as defined in the JOBS Act, and therefore, we were able to take advantage of certain exemptions from various public company reporting requirements, including, the exemption from the requirement to obtain an attestation report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act, less extensive disclosure about our executive compensation arrangements, and no requirement for stockholder non-binding advisory votes on executive compensation or golden parachute arrangements.

Effective December 31, 2021, we are deemed a “large accelerated filer” as our public float as of June 30, 2021 was greater than $700 million, and thus we are no longer classified as an “emerging growth company”.

As such, we conducted an Internal Control over Financial Reporting (“ICFR”) assessment for the year ended December 31, 2021, and have included management’s report in this Annual Report.

Smaller reporting company

Because our annual revenue was less than $100.0 million in 2022 and the market value of our voting and non-voting common stock held by non-affiliates was less than $700.0 million measured on the last business day of our second fiscal quarter in 2022, we qualify as a “smaller reporting company” as defined in the Exchange Act.

We took advantage of certain of the scaled disclosures available to smaller reporting companies including, among other things, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (“Section 404”), presenting only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and presenting reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

Recently issued accounting pronouncements

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis