What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-03-09 compared with 2022-02-28 · 184 added, 225 removed, 487 unchanged (46% of the section changed)

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Index to consolidated financial statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Olema Pharmaceuticals, Inc.

To the Stockholders and the Board of Directors of Olema Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Olema Pharmaceuticals, Inc.

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Adoption of ASU No.2016-02

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2021 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842), and the related amendments.

Critical Audit Matters

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(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by

communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Clinical Trial Accrual

Description of the Matter

As discussed in Note 2 in the consolidated financial statements, the Company enters into contracts with clinical research organizations (CRO) to conduct clinical services on their behalf.

As discussed in Note 2 in the consolidated financial statements, the Company enters into contracts with clinical research organizations (CROs) to conduct clinical services on their behalf.

Judgments and estimates are required to determine the amounts accrued for estimated ongoing research and development costs.

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How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls that addressed the risks identified above related to the information used in the Company’s process for recording accrued clinical trial costs.

For example, we tested controls over management’s review of clinical trial progress in comparison to information and invoices received from third parties and over the completeness and accuracy of data used to calculate the accrual.

To test the clinical trial accrual, our audit procedures included, among others, reading a sample of the Company’s agreement contracts with the CROs to understand key financial and contractual terms and testing the accuracy and completeness of the underlying data used in the accrual computations.

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Iselin, New Jersey

February 28, 2022

March 9, 2023

Olema Pharmaceuticals, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

(Amounts in thousands, except for share amounts)

Current assets:

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Consolidated Statements of Operations and Comprehensive Loss

(Amounts in thousands, except share and per share amounts)

(Amounts in thousands, except for share and per share amounts)

Years Ended December 31,

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Interest income

Interest expense

Other expense

Total other income (expense), net

Repurchase and retirement of Series A and Series A-1 convertible preferred stock

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders, basic and diluted

Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted

Total other income

Net loss per share, basic and diluted

Weighted average shares used to compute net loss per share, basic and diluted

Years Ended December 31,

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Olema Pharmaceuticals, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Amounts in thousands, except share amounts)

Preferred Stock

Consolidated Statements of Stockholders’ Equity

(Amounts in thousands, except for share amounts)

Comprehensive

Stockholders'

Equity (Deficit)

Balances at December 31, 2020

Net loss and comprehensive loss

Balances at December 31, 2019

Beneficial conversion option recognized upon issuance of 2020 convertible notes

Beneficial conversion option recognized upon repurchase of 2020 convertible notes on settlement date

Extinguishment of 2020 convertible notes

Issuance of Series B convertible preferred stock, net of issuance costs of $ 286

Issuance of Series B convertible preferred stock in connection with the conversion of convertible notes

Repurchase and retirement of Series A and Series A-1 convertible preferred stock

Issuance of Series C convertible preferred stock, net of issuance costs of $ 1,662

Conversion of convertible preferred units to common stock

( 23,765,075 )

Issuance of common stock in connection with initial public offering, net of underwriting discounts, commissions and offering costs of $ 19,840

Exercise of stock options

Vesting of early exercised stock options

Vesting of restricted stock awards

Exercise of stock options

Issuance of shares under the ESPP plan

Stock-based compensation expense

Net loss and comprehensive loss

Net unrealized loss on marketable securities

Balances at December 31, 2021

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Depreciation and amortization expense

Non-cash interest expense

Non-cash lease expense

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Purchases of marketable securities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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Proceeds from issuance of common stock under the ESPP plan

Proceeds from the issuance of convertible notes

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

Proceeds from issuance of Series C convertible preferred stock, net of issuance costs

Repurchase of shares of Series A and Series A-1 convertible preferred stock

Proceeds from the settlement of non-recourse notes

Proceeds from issuance of common stock upon initial public offering, net of issuance costs

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Supplemental disclosure of non-cash investing and financing activities:

Conversion of convertible notes into Series B convertible preferred stock

Conversion of series A, Series A-1, Series B and Series C stock into common stock

Deferred offering costs included in other current liabilities

Reclassification of prepaid expenses and other current liabilities into other assets

Vesting of early exercised stock options

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The Company’s wholly owned, lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete estrogen receptor (“ER”) antagonist (“CERAN”) and a selective ER degrader (“SERD”).

The Company is currently evaluating OP-1250 in a Phase 1/2 dose escalation and expansion trial for the treatment of recurrent, locally advanced or metastatic estrogen receptor-positive (“ER+”), human epidermal growth factor receptor 2-negative (“HER2-”) breast cancer.

It is currently being evaluated as a single agent in an ongoing Phase 1/2 clinical study, and in Phase 1b/2 combination with palbociclib, ribociclib, and alpelisib, in patients with recurrent, locally advanced or metastatic estrogen receptor-positive (“ER+”), human epidermal growth factor receptor 2-negative (“HER2-“) breast cancer.

The Company is located in San Francisco, California and was incorporated in Delaware on August 7, 2006 under the legal name of CombiThera, Inc.

and on March 25, 2009 was renamed Olema Pharmaceuticals, Inc.

The Company’s principal operations are based in San Francisco, California, and it operates in one business segment and therefore has only one reportable segment.

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of COVID-19, the ability to secure additional capital to fund operations and commercial success of its product candidates.

The Company’s principal operations are based in San Francisco, California, and has operations in Cambridge, Massachusetts.

Olema Oncology Australia Pty Ltd was incorporated on January 6, 2021 and is a wholly-owned subsidiary of the Company (collectively with Olema Pharmaceuticals, Inc.

referred to as “Olema” or the “Company” herein).

It operates in one business segment and therefore has only one reportable segment.

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of COVID-19 and other geopolitical and macroeconomic events, such as the COVID-19 pandemic and the ongoing conflict between Ukraine and Russia and related sanctions, the ability to secure additional capital to fund operations and commercial success of its product candidates.

OP-1250 and any future product candidates the Company may develop will require extensive nonclinical and clinical testing and regulatory approval prior to commercialization.

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Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Initial Public Offering

In November 2020, the Company completed its initial public offering (“IPO”) of its common stock.

In connection with its IPO, the Company issued and sold 12,650,000 shares of its common stock, at a price to the public of $ 19.00 per share.

As a result of the IPO, the Company received $ 220.6 million in net proceeds, after deducting underwriting discounts and commissions and offering costs of $ 19.8 million.

Upon the closing of the IPO, 23,765,075 shares of outstanding convertible preferred stock were automatically converted into 23,765,075 shares of common stock with the related carrying value of $ 148.3 million reclassified to common stock and additional paid-in capital.

In connection with the IPO, the Company amended and restated its amended and restated certificate of incorporation to change the authorized capital stock to 490,000,000 shares designated as common stock and 10,000,000 shares designated as preferred stock, all with a par value of $ 0.0001 per share.

The Company had $ 287.3 million of cash, cash equivalents and marketable securities at December 31, 2021, which management believes is sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the filing date of these consolidated financial statements.

Impact of COVID-19

The extent of the impact of the COVID-19 pandemic on the Company’s 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 the Company’s development activities, planned clinical trial enrollment, future trial sites, clinical research organizations (“CROs”), third-party manufacturers, and other third parties with whom the Company does business, as well as its impact on regulatory authorities and the Company’s key scientific and management personnel.

During 2021, although the Company modified its operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, its 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 Company had $ 204.4 million of cash, cash equivalents and marketable securities at December 31, 2022, which management believes is sufficient to fund its operating expenses and capital expenditure requirements into 2025.

Impact of COVID-19 and Other Geopolitical and Macroeconomic Events

The extent of the impact of the COVID-19 pandemic on the Company’s 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 the Company’s development activities, planned clinical trial enrollment, future trial sites, contract research organizations (“CROs”), third-party manufacturers, and other third parties with whom the Company does business, as well as its impact on regulatory authorities and the Company’s key scientific and management personnel.

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

In March 2022, the Company fully re-opened its offices to all employees and continues to comply with protocols implemented by

respective health authorities.

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.

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.

The Company continues to monitor developments related to COVID-19 and may close its offices again in the future.

The extent to which the COVID-19 pandemic may affect the Company’s business, operations and development timelines and plans in the future, including the resulting impact on its 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, which has resulted in volatility in the U.S.

and global financial markets and which has led to, and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally.

The extent of the impact of these factors on the Company’s operational and financial performance, including its ability to execute its 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 the Company’s business.

The Company continues to monitor the impact of these macroeconomic factors on its results of operations, financial condition and cash flows.

Summary of Significant Accounting Policies

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These consolidated financial statements include the accounts of Olema Pharmaceuticals, Inc.

and its wholly owned subsidiary, Olema Oncology Australia Pty Ltd incorporated on January 6, 2021.

and its wholly owned subsidiary, Olema Oncology Australia Pty Ltd.

All intercompany balances and transactions have been eliminated upon consolidation.

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The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period.

Significant areas that require management’s estimates include accruals of research and development expenses, including accrual of research contract costs, share-based compensation assumptions, and fair value of common stock and convertible preferred stock prior to the IPO.

Significant areas that require management’s estimates include accruals of research and development expenses, including accrual of research contract costs, stock-based compensation assumptions, including the fair value of common stock.

On an ongoing basis, the Company evaluates its estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances.

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Cash and cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase.

Cash deposits are all in reputable financial institutions in the United States and as of December 31, 2021 and 2020, cash and cash equivalents consisted of cash on deposit with U.S.

Cash deposits are all in reputable financial institutions in the United States as of December 31, 2022 and 2021.

Cash and cash equivalents consisted of cash on deposit with U.S.

banks, including the Company’s bank account for its Australia subsidiary, denominated in U.S.

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Management determines the appropriate classification of its investments at the time of purchase and reevaluates such designation as of each balance sheet date.

Unrealized gains and losses are excluded from earnings and are reported as a

component of comprehensive loss.

Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other expense.

Unrealized gains and losses are excluded from net loss and are reported as a component of comprehensive loss.

Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest income.

The cost of securities sold is based on the specific-identification method.

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Targeted Improvements (the foregoing ASUs collectively referred to as “Topic 842”).

Under the new guidance, lessees are required to

recognize for all leases (with the exception of short-term leases) at the commencement date:

Under the new guidance, lessees are required to recognize for all leases (with the exception of short-term leases) at the commencement date:

(1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis;

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The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company has operating leases for its manufacturing, research and development and office facilities.

For any lease modification, the Company reassesses the lease classification, remeasures the related lease liability using an updated discount rate that reflects the modified lease term, and adjusts the related ROU asset under the lease modification guidance under Topic 842.

The Company has operating leases for its research and development and office facilities.

Fixed lease payments on operating leases are recognized over the expected term of the lease on a straight-line basis.

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Research and development expenses consist of costs incurred to discover, research and develop product candidates.

These costs are recorded within research and development expenses in the consolidated statements of operations and comprehensive loss and include personnel expenses, stock-based compensation expenses, allocated general and administrative expenses, and external costs including fees paid to consultants, CROs and contract manufacturing organizations (“CMOs”), in connection with nonclinical studies and clinical trials, and other related clinical trial fees, such as for investigator fees, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis.

Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses.

These costs are recorded within research and development expenses in the consolidated statements of operations and include personnel expenses, stock-based compensation expenses, allocated general and administrative expenses, and external costs including fees paid to consultants and CROs and contract manufacturing organizations (“CMOs”), in connection with nonclinical studies and clinical trials, and other related clinical trial fees, such as for investigator fees, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis.

Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses and other current

Such amounts are recognized as an expense as the goods are delivered or the related services are performed.

Costs incurred in obtaining technology licenses that do not meet the definition of a business are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future uses.

Reimbursements of certain costs associated with research activities performed under the agreement with Novartis Institutes for BioMedical Research, Inc.

(“Novartis”) are recorded as a reduction of research and development expenses, as described in Note 12, Commitments and Contingencies – Clinical Collaboration and Supply Agreement .

Research Contract Costs and Accruals

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The Company records accruals for estimated ongoing research and development costs.

When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs.

When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the projects, studies or clinical trials, including the phase or completion of events, invoices received and contracted costs.

Judgments and estimates are made in determining the accrued balances at the end of any reporting period.

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The Company’s historical accrual estimates have not been materially different from the actual costs.

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.

Amounts incurred are classified as general and administrative expenses.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation, and insignificant for all periods presented.

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives.

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As of December 31, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions.

Common Stock Valuation

Due to the absence of an active market for the Company’s common stock prior to its IPO, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock.

In determining the fair value of options granted prior to the IPO, the Company estimated fair value of its common stock as of each measurement date.

Significant changes to the

key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date.

Follow the Company’s initial public offering, the fair market value of its common stock is determined based on the closing price of its common stock as reported by the Nasdaq Global Select Market on the date of grant.

Comprehensive Loss

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Stock-Based Compensation

All stock-based compensation cost, including grants of stock options and restricted stock awards issued under the Company’s equity incentive plans and ESPP, is measured at the grant date based on the estimated fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period.

Stock-based compensation cost, including grants of stock options and restricted stock awards issued under the Company’s equity incentive plans and ESPP, is measured at the grant date based on the estimated fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period.

Stock-based compensation cost for performance-based restricted stock unit awards issued under the Company’s equity incentive plan is measured at the grant date based on the estimated fair value of the award, which is based on the closing stock price on the grant date, and is recognized as an expense when the Company determines that it is probable that the performance goals will be achieved, which the Company assess on a quarterly basis.

The Company recognizes stock compensation in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”).

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As part of the requirements of ASC 718, the Company has elected to account for forfeitures of stock option grants as they occur.

Foreign Currency Transactions

The functional currency of Olema Oncology Australia Pty Ltd, the Company’s wholly-owned subsidiary, is the U.S.

Accordingly, all monetary assets and liabilities of the subsidiary are remeasured into U.S.

dollars at the current period-end exchange rates and non-monetary assets are remeasured using historical exchange rates.

Income and expense elements are remeasured to U.S.

dollars using the average exchange rates in effect during the period.

Remeasurement gains and losses are recorded as other income (expense) on the consolidated statements of operations.

The Company is subject to foreign currency risk with respect to its clinical and manufacturing contracts denominated in currencies other than the U.S.

dollar, predominantly the Australian dollar and the Euro.

Payments on contracts denominated in foreign currencies are made at the spot rate on the day of payment.

Changes in the exchange rate between billing dates and payment dates are recorded within other income (expense) on the consolidated statements of operations.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss per common share by the weighted average number of common shares outstanding for the period without consideration of common stock equivalents.

Basic net loss per common share is computed by dividing the net loss per common share by the weighted average number of common shares outstanding for the period without consideration of common stock

Diluted net loss per common share is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities, and by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares.

For purpose of this calculation, outstanding stock options, including unvested early exercised options, unvested restricted stock awards, contingently issuable common stock related to the 2020 Employee Stock Purchase Plan (the “ESPP”), and convertible preferred stock are considered potential dilutive common shares.

For purpose of this calculation, outstanding stock options, including unvested early exercised options, unvested restricted stock awards, unvested performance-based restricted stock unit awards, contingently issuable common stock related to the 2020 Employee Stock Purchase Plan (the “ESPP”) are considered potential dilutive common shares.

Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company.

Accordingly, in periods in which the Company reported a net loss, such losses were not allocated to such securities.

In periods in which the Company reported a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The Company reported a net loss for all periods presented.

Recent Accounting Pronouncements

The Company lost its status as an emerging growth company on December 31, 2021, when it qualified as a large accelerated filer based on its market capitalization as of June 30, 2021, according to Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

As a result, the Company adopted all accounting pronouncements formerly deferred under the extended transition period available for emerging growth companies according to public company standards at December 31, 2021.

The adoption dates for the new accounting pronouncements disclosed below have been presented as such.

Where allowable, the Company has early adopted certain standards as described below.

Recently Adopted Accounting Pronouncements

The Company adopted ASU No.

2016-02, Leases, Topic 842, or ASU 842 as of January 1, 2021 and recorded adoption entries during the fourth quarter of 2021 using the modified retrospective approach as required.

The Company elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit on the date of adoption.

The Company elected to combine lease components (for example fixed rent payments) with non-lease components (for example, common-area maintenance costs) on the Company’s research and development and office facilities asset classes.

The Company also elected the “package of practical expedients ”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs.

Lastly, the Company elected the hindsight expedient to determine the lease terms for existing leases.

The election of the hindsight expedient did not have a significant impact on the calculation of the expected lease term.

Upon the adoption of ASU 842 as of January 1, 2021 (recorded in the fourth quarter of 2021), the Company recorded operating lease right-of-use assets of $ 1.0 million, including the derecognition of prepaid rent of $ 0.1 million, with the corresponding operating lease liabilities of $ 0.9 million.

There was no material impact to the opening balance of accumulated deficit upon the adoption.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments — Credit Losses (Topic 326), or ASU 2016-13:

Measurement of Credit Losses on Financial Instruments.

This standard requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected.

The measurement of current expected credit losses (“CECL”) is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability.

ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors.

An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment.

This standard is effective for public companies who are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those years.

These standards require using a modified retrospective approach with the cumulative effect recognized as an adjustment to retained earnings.

The Company adopted the new guidance under ASU 2016-13 as of January 1, 2021 at December 31, 2021.

The adoption did not have an impact on the Company’s consolidated financial position or results of operations.

In August 2018, the FASB issued ASU No.

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, or ASU 2018-15.

ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, Intangibles—Goodwill and Other—Internal Use Software (ASC 350-40), to determine which implementation costs to capitalize as assets or expense as incurred.

The internal-use software guidance in ASC 350-40 requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred.

A customer’s accounting for the hosting component of the arrangement is not affected by this guidance.

The amendments in ASU No.

2018-15 are effective for fiscal years beginning after December 15,

2019 for public entities.

For all other entities, the guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021.

Early adoption permitted.

The Company early adopted this guidance effective on January 1, 2021.

The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 , or ASU 2018-18.

This standard provides guidance on the interaction between Revenue Recognition (Topic 606) and Collaborative Arrangements (Topic 808) by aligning the unit of account guidance between the two topics and clarifying whether certain transactions between collaborative participants should be accounted for as revenue under Topic 606.

ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Early adoption is permitted.

The Company adopted this guidance effective on January 1, 2021.

The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

There were no new accounting pronouncements that were relevant to the Company as of and for the year ended December 31, 2022.

Fair Value Measurement

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Money market funds

Corporate bonds

Commercial paper

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The Company considers its investment portfolio of marketable securities to be available-for-sale.

The Company periodically reviews its available-for-sale marketable investments for other-than-temporary impairment.

The Company periodically reviews its available-for-sale marketable securities for other-than-temporary impairment.

The Company considers factors such as the duration, severity and the reason for the decline in value, the potential recovery period and its intent to sell.

For debt securities, the Company also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses.

During the year ended December 31, 2021, the Company did not recognize any other-than-temporary impairment loss.

There was no allowance for losses on available-for-sale debt securities, which were attributable to credit risk for the year ended December 31, 2021.

There were five marketable securities that have been in a consecutive loss position for more than 12 months as of December 31, 2022.

They had $ 0.3 million unrealized loss with a fair value of $ 12.7 million as of December 31, 2022.

The Company does not believe that the total unrealized losses of $ 1.8 million as of December 31, 2022 are credit related but are rather a reflection of current market yields and/or current marketplace bid/ask spreads.

During the years ended December 31, 2022 and 2021, respectively, the Company did not recognize any other-than-temporary impairment loss.

As of December 31, 2022, there was no allowance for losses on available-for-sale debt securities attributable to credit risk.

As of December 31, 2022, all of the Company’s cash and cash equivalents consisted of cash on deposit with U.S.

banks, including the Company’s bank account for its Australia subsidiary, denominated in U.

banks denominated in U.

dollars and Australian dollars.

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Prepaid expenses and other current assets consisted of the following (in thousands):

Prepaid clinical trial costs

Prepaid insurance

Reimbursable research and development costs from a collaboration partner

Prepaid clinical trial costs

Prepaid subscriptions and licenses

Interest receivable

Prepaid research contracts

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Other current liabilities consisted of the following (in thousands):

Accrued R&D related costs

Accrued research and development related costs

Accrued employee bonuses

Accrued professional fees

Early exercise of unvested stock options

Accrued payroll related costs

Early exercise of unvested stock options

Accrued taxes

Convertible Notes

On March 17, 2020, then outstanding convertible promissory notes were settled with 2,545,277 shares of Series B convertible preferred stock at $ 4.712 per share for gross proceeds of approximately $ 12.0 million.

As of December 31, 2021 and 2020, there were no convertible notes outstanding.

Refer to Note 5 “Convertible Notes” included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 17, 2021 with the SEC.

Convertible Preferred Stock

Upon the closing of the Company’s IPO, each then outstanding share of convertible preferred stock was converted into one share of common stock.

As of December 31, 2021 and 2020, there was no convertible preferred stock outstanding.

Refer to Note 6 “Convertible Preferred Stock” included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 17, 2021 with the SEC.

As of each of the balance sheet dates below, the Company had reserved shares of common stock for issuance in connection with the following:

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Options outstanding under the 2020 Equity Incentive Plan

Shares available for future grant under the 2020 Equity Incentive Plan

Options outstanding under the 2022 Inducement Plan

Shares available for future grant under the 2020 Equity Incentive Plan and the 2022 Inducement Plan

Available for the 2020 Employee Stock Purchase Plan

Unvested performance-based restricted stock unit awards outstanding under the 2020 Equity Incentive Plan

Unvested restricted stock awards outstanding under the 2014 Stock Plan

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In 2014, the Company’s Board of Directors and stockholders approved and adopted the 2014 Stock Plan (the “2014 Plan”).

The 2014 Plan was intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company.

The 2014 Plan permitted the grant of options and restricted stock awards (including restricted stock purchase rights and restricted stock bonus awards).

The maximum aggregate number of shares that may be subject to awards and sold under the 2014 Plan as of December 31, 2019 was 717,360 shares, which was subsequently increased to 4,842,180 in September 2020.The 2014 Plan was terminated on the date the 2020 Equity Incentive Plan (the “2020 Plan”), which is described below, became effective, and no additional awards will be made pursuant to the 2014 Plan.

The 2014 Plan was terminated on the date the 2020 Equity Incentive Plan (the “2020 Plan”), which is described below, became effective, and no additional awards will be made pursuant to the 2014 Plan.

However, any outstanding awards granted under the 2014 Plan will remain outstanding, subject to the terms of the 2014 Plan award agreements, until such outstanding options are exercised or until any awards terminate or expire by their terms.

In 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Plan.

The 2020 Plan is intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company.

In 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Equity Incentive Plan (the “2020 Plan”).

The 2020 Plan permits the grant of options, restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

The maximum number of shares of common stock that may be issued under the 2020 Plan will not exceed 6,494,510 shares of the Company’s common stock, which is the sum of (i) 2,152,080 new shares, plus (ii) an additional number of shares not to exceed 4,342,430 shares, consisting of any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the Company’s 2014 Plan that, on or after the 2020 Plan becomes effective, terminate or expire prior to exercise or settlement;

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In addition, the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan automatically increases on January 1 of each year for a period of ten years , beginning on January 1, 2021 and continuing through January 1, 2030, in an amount equal to the lesser of (1) 5 % of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year.

The maximum number of shares of the common stock that may be issued on the exercise of incentive stock options under the 2020 Plan is 19,483,530 shares.

The 2020 Plan permits the grant of options restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

The exercise price for each option and stock appreciation right is established in the discretion of the Board, provided that the exercise price of a stock option will not be less than 100 % of the fair market value of the Company’s common stock on the date of grant.

In 2022, the Company’s Board of Directors approved and adopted the 2022 Inducement Plan (the “2022 Inducement Plan”).

Under the 2022 Inducement Plan, initially 2,000,000 shares of common stock were reserved for issuance.

The 2022 Inducement Plan permits the grant of options, restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

The exercise price for each option and stock appreciation right shall be established at the discretion of the Board, provided that the exercise price of a stock option will not be less than 100 % of the fair market value of the Company’s common stock on the date of grant.

Specific vesting for stock options and stock appreciation rights is service related and determined in each award agreement, where stock options and stock appreciation rights are fully vested at the grant date or follow a graded vesting schedule.

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Expected dividend yield is 0 % since the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used to determine the estimated grant-date fair value of stock options granted to employees and directors under the 2020 Plan were as follows, presented as a weighted average:

The assumptions that the Company used to determine the estimated grant-date fair value of stock options granted to employees and directors under the 2020 Plan and the 2022 Inducement Plan were as follows, presented as a weighted average:

Risk-free interest rate

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Stock Option Activity

The following table summarizes the stock option activity under the 2014 Plan and the 2020 Plan:

The following table summarizes the stock option activity under the 2014 Plan, the 2020 Plan and the 2022 Inducement Plan:

Intrinsic Value

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(2) Balance as of December 31, 2022 includes 18,640 unvested early exercised stock options.

The weighted-average grant-date fair value per share of options granted during the year ended December 31, 2021, 2020, and 2019 was $ 21.87 , $ 7.26 , and $ 0 , respectively.

The weighted-average grant-date fair value per share of options granted during the years ended December 31, 2022 and 2021 was $ 3.83 and $ 21.87 , respectively.

For the years ended December 31, 2022 and 2021, there were 1,670,701 and 1,286,729 shares vested, respectively.

The weighted-average grant date fair value per share of options vested during the year ended December 31, 2021 was $ 7.48 .

The total fair value of options vested during the year ended December 31, 2021, 2020, and 2019 was $ 10.9 million, $ 1.7 million, and $ 1,000 , respectively.

The aggregate intrinsic value of options exercised was $ 0.73 million, $ 0.1 million, and $ 0 for the years ended December 31, 2021, 2020, and 2019, respectively.

The weighted-average grant date fair value per share of options vested during the years ended December 31, 2022 and 2021 was $ 6.76 and $ 7.48 , respectively.

The total fair value of options vested during the years ended December 31, 2022 and 2021 was $ 11.3 million and $ 10.9 million, respectively.

The aggregate intrinsic value of options exercised during the years ended December 31, 2022 and 2021 was $ 0.3 million and $ 0.7 million, respectively.

As of December 31, 2022, the total unrecognized compensation expense related to unvested options was $ 34.7 million, which the Company expects to recognize over an estimated weighted average period of 2.54 years.

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Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the price paid by the purchaser.

Such shares are not deemed to be outstanding for accounting purposes until they vest and are therefore excluded from shares outstanding and from basic and diluted net loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature.

are not deemed to be outstanding for accounting purposes until they vest and are therefore excluded from shares outstanding and from basic and diluted net loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature.

A liability is recognized related to the cash proceeds of the unvested options and is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses.

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As of December 31, 2022, the total unrecognized compensation expense related to unvested RSAs was $ 0.7 million, which the Company expects to recognize over an estimated weighted average period of 1.5 years.

Stock-Based Compensation Expense

Stock-based compensation expense related to awards granted under the 2014 Plan, including the RSAs, the 2020 Plan and the 2020 ESPP was classified in the consolidated statements of operations and comprehensive loss as follows (in thousands):

Years Ended December 31,

Research and development

General and administrative

2020 Employee Stock Purchase Plan

In 2020, the Company’s board of directors and stockholders approved and adopted the 2020 Employee Stock Purchase Plan (the “ESPP”).

The ESPP became effective immediately prior to the date of the underwriting agreement related to the IPO.

Performance-Based Restricted Stock Unit Awards

In November 2022, the Company granted to certain employees 710,000 shares of performance-based restricted stock unit awards (the “PSUs”) under the 2020 Plan as consideration for services subject to performance conditions with a fair value based on the closing price of the underlying common stock on the date of grant.

Pursuant to the terms of the PSUs, 65 % of each PSU vests upon certification by the Compensation Committee of the Company of achieving a pre-determined performance goal by June 30, 2024, and 35 % of each PSU vests upon certification by the Compensation Committee of the Company of achieving a pre-determined performance goal by June 30, 2024.

Expense recognition for PSUs commences when it is determined that attainment of the performance goal is probable or met.

As of December 31, 2022, it was determined that the performance goals were not yet met, and therefore, the Company recorded zero stock-based compensation expense related to the PSUs for the year ended December 31, 2022.

2020 Employee Stock Purchase Plan (“2020 ESPP”)

In 2020, the Company’s board of directors and stockholders approved and adopted the 2020 ESPP.

The 2020 ESPP permits eligible employees who elect to participate in an offering under the 2020 ESPP to have up to 15 % of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the 2020 ESPP.

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The current offering period will consist of two (2) six-month purchase periods (each a “Purchase Period”) during which payroll deductions of the participants are accumulated under the 2020 ESPP.

The last business day of each Purchase Period is referred to as the “Purchase Date.” The first Purchase Period commenced on November 18, 2020 with a purchase date of May 15, 2021.

The second Purchase Period commenced on May 16, 2021 and had a purchase date of November 15, 2021.

A total of 430,416 shares of common stock were initially reserved for issuance pursuant to the ESPP.

The last business day of each Purchase Period is referred to as the “Purchase Date.” A total of 430,416 shares of common stock were initially reserved for issuance pursuant to the 2020 ESPP.

The 2020 ESPP is a compensatory plan as defined by the authoritative guidance for stock-based compensation.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock offered under the 2020 ESPP.

The valuation methodology is similar to the stock options.

Stock-based compensation expense related to the ESPP was $ 0.2 million and less than $ 0.1 million for the years ended December 31, 2021 and 2020, respectively.

The reconciliation of the Federal statutory income tax benefit (provision) to the Company’s effective income tax provision is as follows (in thousands):

Stock-based compensation expense related to the 2020 ESPP was $ 0.4 million and $ 0.2 million for the years ended December 31, 2022 and 2021, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense related to awards granted under the 2014 Plan, including the RSAs, the 2020 Plan, the 2022 Inducement Plan, and the 2020 ESPP was classified in the consolidated statements of operations and comprehensive loss as follows (in thousands):

Years Ended December 31,

Research and development

General and administrative

The reconciliation of the Federal statutory income tax (provision) benefit to the Company’s effective income tax provision is as follows (in thousands):

Years Ended December 31,

Federal statutory income tax

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Permanent differences in non-tax-deductible executive compensation

Other permanent items

Permanent differences in foreign jurisdiction

Permanent differences others

Foreign research and development tax credit

Other deferred items

Valuation allowance

Provision for income taxes

Net expense for income taxes

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The Company’s deferred income tax assets and liabilities at December 31, 2021 and 2020 were comprised of the following (in thousands):

The Company’s deferred income tax assets and liabilities at December 31, 2022 and 2021 comprised the following (in thousands):

As of December 31,

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Net operating loss carryforwards

Capitalized research and development

Equity compensation

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The Company’s valuation allowance increased during the years ended December 31, 2022 and 2021 due primarily to the generation of net operating losses, as follows (in thousands):

Years Ended December 31,

Valuation allowance at beginning of year

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The Company has not incurred any material interest or penalties as of the current reporting date with respect to income tax matters.

The Company does not expect that there will be unrecognized tax benefits within 12 months of the reporting date.

The Company is subject to U.S.

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The Federal and state income tax returns for tax years prior to 2022 may remain open to examination as carry-forward attributes generated prior may be adjusted upon examination.

The unrecognized tax benefit amounts are not reflected in the determination of the Company’s deferred tax assets.

If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance.

Net Loss Per Common Share

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Years Ended December 31,

Repurchase and retirement of Series A and Series A-1 convertible preferred stock

Net loss attributable to common stockholders

Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted

Net loss per share attributable to common stockholders, basic and diluted

Weighted average shares used to compute net loss per share, basic and diluted

Net loss per share, basic and diluted

The potentially dilutive shares that were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented are as follows:

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Unvested restricted common stock

Unvested performance-based restricted stock units

Options to purchase common stock

Employee stock purchase plan contingently issuable

Convertible preferred stock (as converted to common shares)

Included in the potentially dilutive options to purchase common stock noted above for 2019 are 211,621 shares issued upon exercise of options under non-recourse notes receivable during 2015 (see Note 10, “Stock-Based Compensation”).

The Company determined the purchase of the stock to be non-substantive, and as such, the

shares subject to the promissory notes will not be deemed outstanding until such time as the promissory notes have been repaid.

Accordingly, the Company has excluded these shares from the calculation of basic and diluted net loss per share for the year ended December 31, 2019.

As of December 31, 2020, all outstanding principal and accrued interest relating to the Non-Recourse Notes were settled in full by the two noteholders, and as a result, the Company issued 211,621 shares of common stock to the noteholders and included these shares in the basic and diluted net loss per share for year ended December 31, 2020.

As of December 31, 2021, included in the potentially dilutive options to purchase common stock are 46,598 unvested stock options that were early exercised by an employee and a non-employee in September 2020 (see Note 10, “Stock-Based Compensation”).

Included in the potentially dilutive options to purchase common stock are 18,640 unvested stock options that were early exercised by an employee and a non-employee in September 2020 (see Note 8, “Stock-Based Compensation”).

The Company determined the early exercises to be non-substantive as the shares were subject to repurchase rights.

Accordingly, the Company has excluded these shares from the calculation of basic and diluted net loss per share for the year ended December 31, 2021.

Management Services Agreements

Accordingly, the Company has excluded these shares from the calculation of basic and diluted net loss per share for the years ended December 31, 2022 and 2021.

The Company leases certain of its facilities under non-cancellable operating leases expiring at various dates through 2026.

On June 1, 2013, the Company entered into a management services agreement with MandalMed, Inc.

(“MandalMed”) (the “MandalMed Services Agreement”) to lease approximately 5,762 square feet of space for the use laboratory benches, lab equipment, office space, and administrative and facilities services.

The Company subsequently entered into several amendments to extend the lease term to November 2020.

On November 3, 2020, the Company entered into the sixth amendment to the MandalMed Services Agreement to extend the term to December 31, 2021.

As part of the sixth amendment, the Company leased additional space of approximately 2,130 square feet (the “Additional Space”) for a three year period commencing on December 1, 2020 and ending on November 30, 2023.

(“MandalMed”) (the “MandalMed Services Agreement”) to have access to and use a portion of approximately 5,762 square feet of space for the use of laboratory benches, lab equipment, office space, and administrative and facilities services.

The Company subsequently entered into six amendments to extend the agreement term to November 2023.

As part of the sixth amendment, the Company gained access to use additional space of approximately 2,130 square feet (the “Additional Space”) for a three year period commencing on December 1, 2020 and ending on November 30, 2023.

According to the terms of the MandalMed Services Agreement, the Company paid a security deposit of less than $ 0.1 million and is required to pay monthly rent and common area charges.

On August 27, 2020, the Company entered into a lease agreement with 512 2nd Street LLC to lease approximately 3,500 square feet of office space in San Francisco, California (the “Office Space Lease Agreement”).

The Office Space Lease Agreement is for a period of two years commencing on September 1, 2020 and ending August 31, 2022.

In April 2022, the Company extended the Office Space Lease Agreement up to August 31, 2023 and has one year renewal option to extend the term up to August 31, 2024.

According to the terms of the Office Space Lease Agreement, the Company paid a $ 0.1 million security deposit and is required to pay monthly rent and common area charges.

The extension of the lease term was accounted for as a modification under Topic 842 and the Company recorded additional ROU asset and lease liability of $ 0.3 million and $ 0.3 million, respectively, in the consolidated financial statements.

On December 15, 2020, the Company entered into a lease agreement with Tennieh LLC to lease approximately 9,800 square feet of office space in San Francisco, California (the “Laboratory Lease Agreement”).

The Laboratory Lease Agreement is for a period of five years commencing approximately February 1, 2021 and ending January 31, 2026.

According to the terms of the Office Space Lease Agreement, the Company paid a $ 0.4 million security deposit and is required to pay monthly rent and common area charges.

The following table summarizes total lease expense during the year ended December 31, 2021 (in thousands):

Year Ended December 31,

According to the terms of the Laboratory Lease Agreement, the Company paid a $ 0.4 million security deposit and is required to pay monthly rent and common area charges.

The following table summarizes total lease expense during the years ended December 31, 2022 and 2021 (in thousands):

Years Ended December 31,

Straight-line operating lease expense

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Total operating lease expense

Rent expense was $ 0.2 million and $ 0.1 million for the years ended December 31, 2020 and 2019, respectively.

Rent expense is measured based upon amortizing minimum lease payments, including rent escalations under the lease term, using the straight-line method over the term of the lease.

The following table summarizes supplemental cash flow information during the year ended December 31, 2021 (in thousands):

Year Ended December 31,

The following table summarizes supplemental cash flow information during the year ended December 31, 2022 and 2021 (in thousands):

Years Ended December 31,

Cash paid for amounts included measurement of lease liabilities:

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ROU asset obtained in exchange for a new operating lease liability

(*) Relates to the Laboratory Lease Agreement.

The following table summarizes the Company’s future minimum lease payments and reconciliation of lease liabilities as of December 31, 2022 (in thousands):

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Lease liabilities, non-current

The following table summarizes lease term and discount rate as of December 31, 2021:

Year Ended December 31,

The following table summarizes lease term and discount rate as of December 31, 2022 and 2021:

Years Ended December 31,

Weighted-average remaining lease term (years)

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(“Novartis”) (the “Novartis Agreement”).

The collaboration is focused on the evaluation of the safety, tolerability and efficacy of OP-1250 in combination with Novartis’ proprietary CDK4/6 inhibitor Kisqali® (ribociclib) and/or Novartis’ proprietary phosphatidylinositol 3-kinase inhibitor Piqray® (alpelisib) (collectively the “Novartis Study Drugs”) as part of the Company’s planned Phase 1b clinical trial of OP-1250 in patients with metastatic estrogen receptor-positive breast cancer.

The collaboration is focused on the evaluation of the safety, tolerability and efficacy of OP-1250 in combination with Novartis’ proprietary CDK4/6 inhibitor Kisqali® (ribociclib) and/or Novartis’ proprietary PI3K a inhibitor Piqray® (alpelisib) (collectively the “Novartis Study Drugs”) as part of the Company’s planned Phase 1b clinical study of OP-1250 in patients with metastatic estrogen receptor-positive breast cancer.

The Company will be responsible for the conduct of the clinical trials for the combined therapies in accordance with a mutually agreed development plan.

As part of the collaboration, the parties granted to each other a non-exclusive, royalty- free license under certain of the parties’ respective background patent rights and other technology to

use the parties’ respective study drugs in research and development, solely to the extent reasonably needed for the other party’s activities in the collaboration.

As part of the collaboration, the parties granted to each other a non-exclusive, royalty- free license under certain of the parties’ respective background patent rights and other technology to use the parties’ respective study drugs in research and development, solely to the extent reasonably needed for the other party’s activities in the collaboration.

All inventions and data developed in the performance of the clinical trials for the combined therapies (other than those specific to each component study drug), will be jointly owned by the parties.

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In addition, Novartis may terminate the Novartis Agreement if certain disputes between the parties are not resolved after following the applicable dispute resolution procedures, and the Company may terminate the Novartis Agreement in the event the Company terminates all clinical trials of the combined therapies other than due to a material safety issue or upon a clinical hold.

For the year ended December 31, 2021 and 2020, costs incurred reimbursable by Novartis were not material to the consolidated financial statements.

Costs associated with research activities performed under the agreement are included in research and development expenses in the accompanying consolidated financial statements, with any reimbursable costs from Novartis reflected as a reduction of such expenses.

For the year ended December 31, 2022, costs reimbursable from Novartis were $ 1.4 million.

As of December 31, 2022, the receivable due from Novartis was $ 1.4 million, which is recorded under prepaid expenses and other current assets in the accompanying consolidated financial statements.

There was no such cost incurred as of and for the year ended December 31, 2021.

Clinical Trial Agreement

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Under the terms of the non-exclusive agreement, the Company will be responsible for conducting the clinical trial for the combined therapies and Pfizer is responsible for supplying IBRANCE® to the Company at no cost to the Company.

As part of the collaboration, the parties granted to each other a non-exclusive, royalty- free license under certain of the parties’ respective patent rights in the combination of IBRANCE® and OP-1250 to use the parties’ respective study drugs in research and development, solely to the extent reasonably needed for the other party’s activities in the collaboration.

All inventions and data developed in the performance of the clinical trials for the combined therapies (other than those specific to each component study drug), will be jointly owned by the parties.

The Company is responsible for manufacturing, packaging and labeling OP-1250, and for packaging and labeling all drugs used in the clinical trials for the combined therapies (other than IBRANCE® (palbociclib)).

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The Pfizer Agreement does not grant any right of first negotiation to participate in future clinical trials, and each of the parties retains all rights and ability to evaluate their respective compounds.

Costs incurred in connection to the Pfizer Agreement are included in the Research and Development expense in the consolidated statements of operations for the year ended December 31, 2021 and 2020.

Costs incurred in connection to the Pfizer Agreement are included in the research and development expense in the accompanying consolidated statements of operations and comprehensive loss for the years ended December 31, 2022, and 2021.

License Agreement

In June 2022, the Company entered into an exclusive global license agreement with Aurigene Discovery Technologies Limited (“Aurigene”) to research, develop and commercialize novel small molecule inhibitors of an undisclosed oncology target (“the Aurigene Agreement”).

Under the terms of the Aurigene Agreement, Aurigene will provide to the Company an exclusive license to its portfolio of novel small molecule inhibitors of the target.

Financial terms of the Aurigene Agreement include a $ 8.0 million upfront payment for rights to a pre-existing Aurigene program and 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 digits to the low double digits royalties on product sales, if any.

During the research term, the Company will contribute funding to Aurigene to facilitate Aurigene’s ongoing discovery efforts.

The Company and Aurigene will jointly direct further preclinical work and, if successful, the Company will lead clinical development as well as regulatory and commercial activities.

The Company and Aurigene jointly own collaboration compounds and rights to any inventions made during the research term.

The term of the Aurigene Agreement will continue until the expiration of the last-to-expire of all payment obligations with respect to all licensed products thereunder, unless terminated earlier in accordance with the terms of the Aurigene Agreement.

The Aurigene Agreement may be terminated (a) by the Company for

convenience, in its sole discretion, upon prior written notice to Aurigene, (b) by either the Company or Aurigene in connection with the other party’s uncured material breach or (c) by either the Company or Aurigene in connection with the insolvency of the other party.

The $ 8.0 million upfront payment was incurred in June 2022 and recorded as research and development expense in the accompanying consolidated statements of operations and comprehensive loss.

Costs incurred and milestones payments due to Aurigene prior to regulatory approval are recognized as research and development expenses in the period incurred.

Payments due to Aurigene upon or subsequent to regulatory approval will be accrued as a provision to cost of sales in the period when achievement of respective milestone target is probable.

As of December 31, 2022, it was determined that it is not probable to achieve any of the milestone target, and therefore, the Company recorded zero expense related to the milestone for the year ended December 31, 2022.

Management Services Agreements

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The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited.

As of December 31, 2021 and 2020, the Company had not incurred any material costs as a result of such indemnifications.

As of December 31, 2022 and 2021, respectively, the Company had not incurred any material costs as a result of such indemnifications.

Subsequent Event

On March 9, 2023, the Company announced a corporate restructuring and portfolio prioritization to focus its resources on the late-stage clinical development of OP-1250 for the treatment of ER+ / HER2- metastatic breast cancer.

As part of this restructuring, the Company’s workforce will be reduced by approximately 25 %, affecting employees across research, early development, and general and administrative functions in the Company.

This workforce reduction is expected to be completed by the end of the first quarter of 2023.

Affected employees will be eligible to receive severance and other benefits, contingent upon such employee’s execution and the

effectiveness of a separation agreement, which includes a general release of claims against the Company.

The Company estimates that these severance and other costs will result in a one-time accounting charge of approximately $ 2.8 million in the first quarter of 2023, $ 2.7 million of which is attributable to cash expenditures expected to be paid in the same quarter.

The charges that the Company expects to incur in connection with the restructuring are subject to a number of assumptions, and actual results may differ materially.

The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the restructuring.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 7A. Quantitative and Qualitative Disclosures About Market Risk