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Item 7. Management’s Discussion and Analysis

2023-05-18 compared with 2022-05-19 · 83 added, 103 removed, 236 unchanged (44% of the section changed)

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We have based these forward-looking statements on our current expectations and projections about future events.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Annual Report on Form 10-K, particularly including those risks identified in Part I, Item 1A “Risk factors” and our other filings with the Securities Exchange Commission, or SEC.

We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Annual Report on Form 10-K.

Statements made herein are as of the date of the filing of this Annual Report on Form 10-K with the SEC and should not be relied upon as of any subsequent date.

Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report on Form 10-K, they may not be predictive of

results or developments in future periods.

We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

We are a clinical-stage biotechnology company committed to applying our leading expertise in the field of oncolytic immunotherapy to transform the lives of cancer patients through our novel tumor-directed oncolytic immunotherapies.

Our proprietary tumor-directed oncolytic immunotherapy product candidates are designed and intended to maximally activate the immune system against cancer.

proprietary tumor-directed oncolytic immunotherapy product candidates are designed and intended to maximally activate the immune system against cancer.

Oncolytic immunotherapy is an emerging drug class, which we intend to establish as the second cornerstone of immune-based cancer treatments, alongside checkpoint blockade.

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Since our inception, we have devoted substantially all of our resources to developing our proprietary RPx platform, building our intellectual property portfolio, conducting research and development of our product candidates, business planning, raising capital and providing selling, general and administrative support for our operations.

To date, we have financed our operations primarily with proceeds from the sale of equity securities and to a lesser extent the proceeds from the issuance of debt securities.

We do not have any products approved for sale and have not generated any revenue from product sales.

Since commencement of our initial public offering, or IPO, on July 20, 2018, we have raised an aggregate of approximately $569.0 million in net proceeds to fund our operations, of which $101.2 million was from our IPO, $463.4 million was from three separate follow-on offerings, or the Public Offerings, that we closed in November 2019, June 2020 and October 2020, respectively, and $4.4 million was from at-the-market offerings.

We sold 7,407,936 shares of common stock in our IPO, an aggregate of 13,619,822 shares of our common stock and pre-funded warrants to purchase 5,284,238 shares of our common stock in the Public Offerings, and 287,559 shares of common stock through our at-the-market facility.

Funds affiliated with two separate institutional investors hold all of our outstanding pre-funded warrants.

Other than as set forth in Notes 8, 9 and 10 of the "Notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on From 10-K, the shares of our common stock into which our outstanding pre-funded warrants are exercisable are not included in the number of issued and outstanding shares of our common stock set forth in this Annual Report on Form 10-K.

In addition, on August 8, 2019, we entered into a Loan and Security Agreement with Hercules Capital, Inc., or Hercules, which we refer to as the Hercules Loan Agreement, pursuant to which we borrowed $10.0 million under a secured term loan facility in the amount of $30.0 million.

The Hercules Loan Agreement was subsequently amended on June 1, 2020, in order to, among other things, increase the secured term loan facility from $30.0 million to $40.0 million.

On December 15, 2020, we paid a total of $10.8 million, representing the outstanding principal, accrued and unpaid interest, fees, costs and expenses due and owing under the Hercules Loan Agreement and related loan documents, in repayment of all of our outstanding obligations thereunder, and thereby terminated the Hercules Loan Agreement and the related loan documents.

Since our inception, we have incurred significant operating losses.

To date, we have incurred significant operating losses and we have financed our operations primarily with proceeds from the sale of equity securities and to a lesser extent the proceeds from the issuance of debt securities.

Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates.

We do not have any products approved for sale and have not generated any revenue from product sales.

Since our initial public offering, or IPO, on July 20, 2018, we have raised an aggregate of approximately $849.1 million in net proceeds to fund our operations, of which $101.2 million was from our IPO, $706.0 million was from four separate follow-on offerings, or the Public Offerings, that we closed in November 2019, June 2020, October 2020 and December 2022, respectively, and $41.9 million was from at-the-market offerings.

We sold 7,407,936 shares of common stock in our IPO, an aggregate of 20,430,480 shares of our common stock and pre-funded warrants to purchase 9,484,238 shares of common stock in the Public Offerings, and 2,313,997 shares of common stock through our at-the-market facilities.

Our net losses were $174.3 million and $118.0 million for the years ended March 31, 2023 and 2022, respectively.

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These losses have resulted primarily from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We expect to continue to incur significant expenses and increasing operating losses for the next several years and our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of one or more of our product candidates.

We anticipate that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly as we advance the clinical trials, development and pre-commercial activities related to our RPx platform product candidates, and if and as we:

• conduct our current and future clinical trials with RP1, RP2 and RP3;

• further preclinical development of our RPx platform;

• qualify, operate or maintain our own in-house manufacturing facility;

• further preclinical development of our platform;

• operate our in-house manufacturing facility;

• seek to identify and develop additional product candidates;

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• hire and retain additional clinical, quality control, scientific and selling, general and administration personnel;

• acquire or in-license other drugs and technologies;

• acquire or in-license other drugs, technologies or intellectual property rights;

• add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and operations as a public company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for RP1 or our other product candidates.

If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership in any jurisdiction, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing, and distribution.

As a result, we will need additional funding to support our continuing operations and pursue our growth strategy.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, lines of credit, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements.

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

If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.

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In addition, we may incur unforeseen costs as a result of disruptions in raw material supplies, clinical product supplies, and preclinical studies or clinical trial delays.

information that may emerge concerning COVID-19, the actions taken in an effort to contain it or to potentially treat or continue to vaccinate against COVID-19 and the economic impact on local, regional, national and international markets.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken in an effort to contain it or to potentially treat or continue to vaccinate against COVID-19 and the economic impact on local, regional, national and international markets.

We continue to actively monitor this situation and the possible effects on our financial condition, liquidity, operations, suppliers, supplies, industry and workforce.

For additional information, see “Risk Factors — Our financial condition and results of operations could be adversely affected by the coronavirus disease-2019, or COVID-19, outbreak.” in Part I, Item 1A of this Annual Report on Form 10-K.

Components of our results of operations

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Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:

• expenses incurred under agreements with third parties, including clinical research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture our product candidates for use in our preclinical and clinical trials;

• expenses incurred under agreements with third parties, including clinical research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture our raw materials and/or product candidates for use in our preclinical and clinical trials;

• salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

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• facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

These costs will be partially offset by our agreement with Regeneron related to our CERPASS trial.

We expense research and development costs as incurred.

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Our direct external research and development expenses are tracked on a program-by-program basis and consist of costs, such as fees paid to consultants, contractors, CMOs, and CROs in connection with our preclinical and clinical development activities.

We do not allocate personnel costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.

All non-employee costs associated with our manufacturing facility have been fully burdened to our RP1 program.

We do not allocate personnel costs, costs associated with our discovery efforts, laboratory supplies or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified.

Non-employee costs associated with our manufacturing facility including depreciation, amortization and facility costs are appropriately allocated to development programs based on the percentage of time spent per program.

Research and development activities are central to our business model.

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We expect that our research and development expenses will continue to increase for the foreseeable future as we continue enrollment and initiate additional clinical trials and continue to discover and develop additional product candidates.

The successful development and commercialization of our product candidates is highly

The successful development and commercialization of our product candidates is highly uncertain.

This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

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A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.

For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development.

enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development.

We may never succeed in obtaining regulatory approval for any of our product candidates.

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Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate, commercial, and business development and administrative functions.

Selling, general and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, pre-commercial planning, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Selling, general and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, pre-commercial planning, marketing and strategic planning, business development, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our selling, general and administrative expenses will continue to increase in the future as we increase our selling, general and administrative headcount to support our continued research and development and pre-launch activities to prepare for potential commercialization of our product candidates.

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Research and development incentives consists of reimbursements of research and development expenditures.

We participate, through our subsidiary in the United Kingdom, in the research and development program provided by the United

Kingdom tax relief program, such that a percentage of up to 14.5% of our qualifying research and development expenditures are reimbursed by the United Kingdom government, and such incentives are reflected as other income.

We participate, through our subsidiary in the United Kingdom, in the research and development program provided by the United Kingdom tax relief program, such that a percentage of up to 14.5% of our qualifying research and development expenditures are reimbursed by the United Kingdom government, and such incentives are reflected as other income.

Investment income

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Interest expense on debt obligations

Interest expense on debt obligations consists of the amortization of debt discount and cash paid for interest under the term loan facility with Hercules.

Loss on extinguishment of debt

Loss on extinguishment of debt consists of the loss from extinguishment of debt obligations under the term loan facility with Hercules.

Interest expense on debt obligations consists of the amortization of debt discount and cash paid for interest under the Hercules Loan Agreement.

Other income (expense), net

Other income (expense), net consists primarily of realized and unrealized foreign currency transaction gains and losses.

Since our inception and through March 31, 2022, we have not recorded any income tax benefits for the net losses we incurred in each jurisdiction in which we operate, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards will not be realized.

During the year ended March 31, 2023, the Company recorded an income tax provision of $0.3 million related to U.S.

current taxes primarily due to the transfer pricing arrangement between the U.S.

and the U.K., as well as unfavorable adjustments related to stock compensation, resulting in U.S.

taxable income reduced by certain prior year available net operating losses.

During the year ended March 31, 2022, the Company recorded no income tax benefit for the net operating losses incurred due to the uncertainty of the realization of such losses.

Results of operations

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Interest expense on finance lease liability (2,197) (2,223) 26 (1) %

Loss on extinguishment of debt — (913) 913 (100) %

Interest expense on debt obligations (1,963) — (1,963) (100) %

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Total other income (expense), net 3,084 278 2,806 1009 %

Loss before income taxes $ (173,996) $ (118,036) $ (55,960) 47 %

Income tax provision 288 — 288 (100) %

Net loss $ (174,284) $ (118,036) $ (56,248) 48 %

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Total research and development expenses $ 126,527 $ 79,545 $ 46,982 59 %

The change in our direct research and development expenses between our product candidates is associated with technology transfer, process development, qualification and comparability of our in-house manufactured materials compared to our third-party manufactured materials in readiness for utilizing our product candidates made at our in-house manufacturing facility in our clinical development programs and preparation for potential commercial manufacture, if approved.

Manufacturing continued to focus on RP2 and RP3 technology transfers and process development during the fourth quarter, as well as continued readiness for clinical trial development of these product candidates made at our in-house facility.

The change in our direct research and development expenses between our product candidates is primarily associated with technology transfer from RP2 to RP3, process development, qualification and comparability of our in-house manufactured materials compared to our third-party manufactured materials in readiness for utilizing our product candidates made at our in-house manufacturing facility in our clinical development programs and preparation for potential commercial manufacture, if approved.

The increase in RP1 is primarily the result of an increase in our number of clinical trial sites and patient enrollment as compared to the prior year, and a reduction of $5.7 million of costs sharing in the CERPASS trial from Regeneron during the current period as discussed in Note 12 to the consolidated financial statements appearing elsewhere in this Annual Report.

During the second half of the year, manufacturing shifted focus to validation batches for RP1, which is the driver of the change in program costs year over year.

The increase of $21.8 million in our unallocated expenses was due primarily to a $16.1 million increase in personnel-related costs, including a $14.6 million increase in payroll and fringe benefits and a stock-based compensation increase of $1.5 million.

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Personnel related costs for the years ended March 31, 2023 and 2022 included stock-based compensation expense of $10.1 million and $8.6 million, respectively.

Additionally, the increase in other expenses is largely driven by $3.2 million of increased costs related to our manufacturing facility and related lease costs, as well as an increase of $1.9 million in research costs and an increase of $0.9 million in lab supplies.

Additionally, the increase in other expenses is primarily driven by an increase of $2.6 million in consulting costs across our platform and a $0.9 million of increased costs related to our manufacturing facility and related lease costs.

Selling, general and administrative expenses

Selling, general and administrative expenses were $50.6 million for the year ended March 31, 2023, compared to $38.8 million for the year ended March 31, 2022.

The increase of $15.6 million is primarily the result of an increase of $13.1 million in personnel related costs, including a stock-based compensation increase of $9.6 million, an increase of $3.2 million in payroll and fringe benefits and a $0.3 million increase in travel and entertainment.

The increase in personnel related costs was driven by the continued hiring of additional personnel in our selling, general and administrative functions, including the addition of commercial personnel associated with pre-launch commercial planning and initial build of the Company's commercial infrastructure, which accounts for approximately $1.7 million of the increase compared to prior year, as we expand our operations.

The increase of $11.8 million is primarily the result of an increase of $5.9 million in personnel related costs, including a stock-based compensation increase of $2.4 million, an increase of $3.5 million in payroll and fringe benefits.

The increase in personnel related costs was driven by the continued hiring of additional personnel in our selling, general and administrative functions, focusing on additional pre-launch planning and initial build of the Company's commercial infrastructure, which accounts for approximately $1.2 million of the increase compared to prior year.

Additionally, there is an increase of $4.9 million in other variable costs which is driven by external spend increases for sales and marketing programs, advertising and market research.

Total other income (expense), net

Other income (expense) for the year ended March 31, 2022 was $0.3 million compared to $(0.9) million for the year ended March 31, 2021.

The net change of $1.2 million is primarily attributable to a decrease in expense of $0.9 million as a result of a loss related to the extinguishment of debt in the prior year which did not recur in the current year, as well as a decrease in expense of $0.8 million as a result of interest expense on the aforementioned debt obligations in the prior year which did not recur during the current year.

Furthermore, the Company earned approximately $0.5 million more in interest income on investments in the prior year as compared to the current year, and there is an increase in expense of $0.4 million in the current year due to the changes in foreign exchange rates of the Great British Pound to United States Dollar.

Other income for the year ended March 31, 2023 was $3.1 million compared to $0.3 million for the year ended March 31, 2022.

The net change of $2.8 million is primarily attributable to an increase of $9.6 million in investment income in the current year as compared to the prior year.

This increase was somewhat offset by a $4.6 million increase in expense due to the changes in foreign exchange rates of the Great British Pound to United States Dollar, as well as an increase in expense of $2.0 million as a result of interest expense on debt obligations.

Income tax provision

Income tax provision for the year ended March 31, 2023 was $0.3 million compared to $0.0 million for the year ended March 31, 2022.

The income tax provision for the current year is attributable to U.S.

current taxes primarily due to the transfer pricing arrangement between the U.S.

and the U.K., as well as unfavorable adjustments related to stock compensation, resulting in U.S.

taxable income reduced by certain prior year available net operating losses.

Liquidity and capital resources

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.

We have not yet commercialized any of our product candidates, which are in

various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for the foreseeable future, if at all.

We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for the foreseeable future, if at all.

Sources of liquidity

To date, we have financed our operations primarily with proceeds from the sale of equity securities and, to a lesser extent, proceeds from the issuance of debt.

Through March 31, 2022, we had received net proceeds of $655.8 million from our sales of equity securities and $10.0 million from our incurrence of debt under the term loan facility with Hercules, which was repaid in full in December 2020.

To date, we have financed our operations primarily with proceeds from the sale of equity securities and, to a lesser extent, proceeds from borrowing under a secured loan facility.

Through March 31, 2023, we had received net proceeds of $935.9 million through the sale of equity securities, as well as net $27.8 million from our incurrence of debt under the Hercules Loan Agreement.

As of March 31, 2023, we had cash and cash equivalents and short-term investments of $583.4 million.

In July 2018, we completed our IPO and issued and sold 7,407,936 shares of our common stock at a public offering price of $15.00 per share, resulting in net proceeds of $101.2 million after deducting underwriting discounts, commissions and other offering expenses of approximately $9.9 million.

In the fourth calendar quarter of 2019, we closed a registered public offering for the issuance and sale of 4,516,561 shares of our common stock at a public offering price of $13.61 per share and pre-funded warrants to purchase 2,200,000 shares of our common stock at a purchase price of $13.6099 per pre-funded warrant, which was equal to the public offering price per share of the common stock less the $0.0001 per share exercise price of each pre-funded warrant.

We received aggregate net proceeds of approximately $85.6 million after deducting underwriting discounts, commissions and other offering expenses of approximately $5.8 million.

In June 2020, we closed a second registered public offering for the issuance and sale of 3,478,261 shares of our common stock at a public offering price of $23.00 per share and pre-funded warrants to purchase 1,521,738 shares of our common stock at a purchase price of $22.9999 per pre-funded warrant, which was equal to the public offering price per share of common stock less the $0.0001 per share exercise price of each pre-funded warrant.

We received aggregate net proceeds of approximately $107.8 million after deducting underwriting discounts, commissions and other offering expenses of approximately $7.2 million.

In October 2020, we closed a third registered public offering for the issuance and sale of 5,625,000 shares of our common stock at a public offering price of $40.00 per share and pre-funded warrants to purchase 1,562,500 shares of our common stock at a purchase price of $39.9999 per pre-funded warrant, the public offering price per share of common stock less the $0.0001 per share exercise price of each pre-funded warrant.

We received aggregate net proceeds of approximately $270.0 million after deducting underwriting discounts, commissions and other offering expenses of approximately $17.5 million.

In addition to registered public equity offerings, we also established an at-the-market offering program pursuant to a sales agreement that we entered into with SVB Leerink LLC, or the Agent, on August 8, 2019, or the 2019 Sales Agreement.

Under the 2019 Sales Agreement, and prior to its amendment in June 2020, we could sell from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock.

In June 2020, we amended the 2019 Sales Agreement to reduce the aggregate offering amount thereunder from $75.0 million to $30.0 million.

We sold 287,559 shares of our common stock under the 2019 Sales Agreement for net proceeds of approximately $4.4 million.

On August 11, 2020, in connection with our entry into separate sales agreement with the Agent, or the 2020 Sales Agreement, we and the Agent mutually agreed to terminate the 2019 Sales Agreement.

Under the 2020 Sales Agreement, and prior to its amendment in October 2020, we could sell from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock.

In October 2020, we amended the 2020 Sales Agreement to reduce the aggregate offering amount thereunder from $75.0 million to $62.5 million.

We did not issue or sell any shares of our common stock under the 2020 Sales Agreement during the year ended March 31, 2022.

For additional information, see Note 17, Subsequent events , of the "notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on Form 10-K.

Our incurrence of debt was conducted entirely under the Hercules Loan Agreement, as amended, pursuant to which we borrowed $10.0 million of a maximum of $40.0 million.

On December 15, 2020, we entered into a Payoff Letter with Hercules and paid a total of $10.8 million to Hercules in connection therewith, representing the outstanding principal, accrued and unpaid interest, fees, costs and expense due and owed to Hercules, thereby terminating the Hercules Loan Agreement and the related loan documents.

The following table summarizes our cash flows for each of the periods presented:

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Net cash used in operating activities $ (128,050) $ (82,180)

Net cash (used in) provided by investing activities (1,806) (188,776)

Net cash (used in) investing activities (142,502) (1,806)

Net cash provided by financing activities 311,303 6,598

Effect of exchange rate changes on cash and cash equivalents (109) 818

Net (decrease) increase in cash and cash equivalents $ (76,570) $ 123,018

Net increase (decrease) in cash and cash equivalents $ 40,642 $ (76,570)

Operating activities

During the year ended March 31, 2023, net cash used in operating activities was $128.1 million, primarily resulting from our net loss of $174.3 million, partially offset by non-cash charges of $31.1 million, consisting primarily of stock-based compensation expense of $28.1 million, and an increase in cash of $15.1 million related to changes in our operating assets and liabilities.

Changes in our operating assets and liabilities for the year ended March 31, 2023 consisted primarily of a $11.4 million increase in accrued expenses and other current liabilities, a net $2.4 million change in operating and financing right-of-use assets and lease liabilities, and a $2.0 million increase in accounts payable.

During the year ended March 31, 2022, net cash used in operating activities was $82.2 million, primarily resulting from our net loss of $118.0 million, partially offset by non-cash charges of $28.6 million, consisting of stock-based compensation expense of $24.3 million and $4.4 million of expense related to depreciation and amortization and net amortization of premiums and discounts on short-term investments, and an increase in cash of $7.2 million related to changes in our operating assets and liabilities.

Changes in our operating assets and liabilities for the year ended March 31, 2022 consisted primarily of a $4.7 million increase in accrued expenses and other current liabilities, a net $2.5 million change in operating and financing right-of-use assets and lease liabilities, a $1.1 million increase in accounts payable and a $0.8 million increase in prepaid expenses and other current assets, as well as a $0.2 million increase in research and development incentives receivable from the United Kingdom government due to the timing and amount of qualifying expenditures.

During the year ended March 31, 2021, net cash used in operating activities was $61.4 million, primarily resulting from our net loss of $80.9 million, partially offset by an increase in non-cash charges of $16.0 million, primarily consisting of stock-based compensation expense, and an increase in cash of $3.5 million related to changes in our operating assets and liabilities.

Changes in our operating assets and liabilities for the year ended March 31, 2021 consisted primarily of a $3.4 million increase in accrued expenses and other current liabilities, a net $2.5 million change in operating and financing right-of-use assets and lease liabilities, a $1.7 million decrease in prepaid expenses and other current assets, a $1.0 million decrease in accounts payable and a $0.3 million decrease in research and development incentives receivable from the United Kingdom government due to the timing and amount of our qualifying expenditures.

The changes in accounts payable were primarily due to the timing of vendor invoicing and payments.

Investing activities

During the year ended March 31, 2023, net cash used in investing activities was $142.5 million, consisting of $583.4 million in purchases of available for sale securities and $2.3 million in purchases of property, plant and equipment, offset by $443.2 million in proceeds from sales and maturities of short-term investments.

During the year ended March 31, 2021, net cash used in investing activities was $188.8 million, consisting of $392.4 million in purchases of available for sale securities which were primarily driven by the receipt of proceeds from two registered public offerings during the fiscal year ended March 31, 2021, as well as $2.4 million in purchases of property, plant and equipment, partially offset by $206.1 million in proceeds from sales and maturities of short-term investments.

During the year ended March 31, 2022, net cash used in investing activities was $1.8 million, consisting of $255.7 million in purchases of available for sale securities and $2.3 million in purchases of property, plant and equipment, offset by $256.3 million in proceeds from sales and maturities of short-term investments.

Financing Activities

During the year ended March 31, 2023, net cash provided by financing activities was $311.3 million, consisting primarily of $149.9 million in proceeds from the issuance of common stock, $92.8 million from the issuance of pre-funded warrants to purchase common stock, $37.4 million from the issuance of common stock through sales under our at-the-market facilities, $28.2 million in proceeds from the incurrence of debt under the Hercules Loan Agreement, as well as approximately $3.4 million in proceeds from the exercise of stock options.

During the year ended March 31, 2022, net cash provided by financing activities was $6.6 million, consisting primarily of $6.9 million in proceeds from the exercise of stock options.

During the year ended March 31, 2021, net cash provided by financing activities was $372.5 million, consisting of $286.1 million from the issuance of common stock, $91.7 million from the issuance of pre-funded warrants to purchase common stock, $5.7 million in proceeds from the exercise of stock options, partially offset by $10.0 million in debt payments under the Hercules Loan Agreement and $0.8 million of fees associated with the extinguishment of the obligations under the Hercules Loan Agreement.

Hercules Loan Agreement

On August 8, 2019 and as amended on June 1, 2020, we and certain of our affiliates entered into the Hercules Loan Agreement with Hercules, which provided for aggregate borrowings of up to $40 million in the form of term loans.

We borrowed $10.0 million at closing under the Hercules Loan Agreement in August 2019 and subject to the achievement of certain milestones, had the ability to borrow the unused $30.0 million available in three separate $10.0 million advances

between October 1, 2020 and December 15, 2020, July 1, 2020 and June 30, 2021, and July 1, 2021 and December 15, 2021, respectively.

On December 15, 2020, we entered into a Payoff Letter with respect to the Hercules Loan Agreement.

Pursuant to the Payoff Letter, we paid a total of $10.8 million to Hercules, representing the outstanding principal, accrued and unpaid interest, fees, costs and expenses due and owed to Hercules under the Hercules Loan Agreement.

Upon the execution of the Payoff Letter, in repayment of all of our outstanding obligations thereunder, the Hercules Loan Agreement and the related loan documents were terminated.

Borrowings under the Hercules Loan Agreement bore interest at a rate per annum equal to 8.75%.

Under the Hercules Loan Agreement, we were required to make monthly interest-only payments through September 1, 2022.

As of March 31, 2022, there was no amount outstanding under the Hercules Loan Agreement due and owing.

The Term Loan Facility with Hercules was secured by substantially all of our assets, excluding our intellectual property, and subject to certain exceptions and exclusions.

All liens on our assets held by Hercules were released in connection with the execution of the Payoff Letter.

Funding requirements

Our plan of operation is to continue implementing our business strategy, continue research and development of RP1 and our other product candidates and continue to expand our research pipeline and our internal research and development capabilities.

Our plan of operation is to continue implementing our business strategy, continue research and development of our RPx platform, and continue to expand our research pipeline and our internal research and development capabilities.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates and if and as we:

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• further preclinical development of our RPx platform;

• operate, qualify and maintain our own in-house manufacturing facility;

• operate, qualify and maintain our in-house manufacturing facility and qualify and maintain our product candidates made therein for use in our clinical trials;

• seek to identify and develop additional product candidates;

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• maintain, expand and protect our intellectual property portfolio;

• acquire or in-license other drugs and technologies;

• acquire or in-license other drugs, technologies or third-party intellectual property;

As of March 31, 2023, we had cash and cash equivalents and short-term investments of $583.4 million.

We believe that our existing cash, cash equivalents and short-term investments as of March 31, 2022, will enable us to fund our overall operations into the second half of calendar 2024, excluding any confirmatory trial required by the FDA or other regulatory body.

We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments as of March 31, 2023, will enable us to fund operations into the second half of calendar year 2025.

Because of the numerous risks and uncertainties associated with the development of RP1 and other product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

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In addition, our product candidates, if approved, may not achieve commercial success.

Our commercial revenues, if any, will be derived from sales of therapies that we do not expect to be commercially

available for many years, if ever.

Our commercial revenues, if any, will be derived from sales of therapies that we do not expect to be commercially available for many years, if ever.

Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

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We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.

Our contractual obligations primarily consist of our obligations under our operating and financing leases, as well as costs associated with contracts entered into in the normal course of business with CROs, CMOs and other third parties for clinical trials and preclinical research studies and testing.

Our contractual obligations include those related to our operating and financing leases, long-term debt, as well as costs associated with contracts entered into in the normal course of business with CROs, CMOs and other third parties for clinical trials and preclinical research studies and testing.

Lease Commitments

As of March 31, 2023, the aggregate amount of future lease payments is approximately $56.6 million, with $3.8 million due within one year.

For additional information on our leases and timing of future payments, see Note 13 Commitments and contingencies, of the "notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on Form 10-K.

Loan Agreement

Our commitments due for our term loan under our arrangement with Hercules include principal payments of $30.0 million as of March 31, 2023.

Borrowings under the term loan agreement are repayable in monthly interest-only payments through September 2026, and the agreement has a maturity date of October 2027.

Our remaining commitments, based on our current draws, are due through October 2027, and include principal and interest payments of $43.8 million, and an additional fee upon

maturity of the loan of $1.5 million.

See Note 7, Long term debt , of the "notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on Form 10-K for further discussion of the Hercules term loan.

Other Obligations

Manufacturing and research commitments include agreements that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased;

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In April 2019, we entered into a separate agreement with BMS on terms similar to the terms set forth in the agreement described above, pursuant to which BMS will provide, at no cost to us, nivolumab for use in our Phase 1 clinical trial of RP2 in combination with nivolumab.

In May 2018, we entered into a Master Clinical Trial Collaboration and Supply Agreement with Regeneron Pharmaceuticals, Inc., or Regeneron.

In May 2018, we entered into a Master Clinical Trial Collaboration and Supply Agreement with Regeneron.

Pursuant to the agreement we agreed to undertake one or more clinical trials with Regeneron for the administration of our product candidates in combination with cemiplimab, an anti-PD-1 therapy developed by Regeneron, across multiple solid tumor types, the first of which is our ongoing Phase 2 clinical trial testing RP1 in combination with cemiplimab versus cemiplimab alone in patients with CSCC.

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Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license of their respective intellectual property and agreed to contribute the necessary resources needed to fulfill their respective obligations, in each case, under the terms of agreed study plans.

Development costs of a particular clinical trial will be split equally.

Development costs of an agreed study plan will be split equally.

In July 2022, Regeneron informed the Company that the costs of the study have reached the initial budget for the initial study plan of June 2018 and that Regeneron's reimbursement of CERPASS study costs to the Company have completed in the period ending June 30, 2022 in relation to the initial study budget.

As a result of this notice from, and the ongoing communications with, Regeneron, we have not recorded any cost-sharing reimbursements from Regeneron in prepaid expenses and other current assets in the consolidated balance sheet or as an offset to research and development expense within the consolidated statement of operations since Regeneron informed us that Regeneron’s reimbursement of CERPASS study costs have completed.

The Company does not expect any further reimbursements from Regeneron related to the initial study plan of June 2018.

The agreement contains representations, warranties, undertakings and indemnities customary for a transaction of this nature.

The agreement also contains certain time-based covenants that restrict us from entering into a third-party arrangement with respect to the use of our product candidates in combination with an anti-PD-1 therapy and that restrict Regeneron from entering into a third-party arrangement with respect to the use of cemiplimab in combination with an HSV-1 virus, in each case, for the treatment of a tumor type that is the subject of a clinical trial to which the covenants apply.

tumor type that is the subject of a clinical trial to which the covenants apply.

Unless otherwise mutually agreed in a future study plan, these covenants are only applicable to our ongoing Phase 2 clinical trial in CSCC.

The agreement may be terminated by either party if (i) there is no active study plan for which a final study report has not been completed and the parties have not entered into a study plan for an additional clinical trial within a period of time after the delivery of the most recent final study report or (ii) in the event of a material breach.

In December 2022, we entered into a Master Clinical Trial Collaboration and Supply Agreement with Roche in relation to our RP2 and RP3 programs in colorectal cancer, or CRC, and hepatocellular carcinoma, or HCC.

Under the agreement, the companies will collaborate in 30 patient cohort signal finding studies in third-line, or 3L, CRC and in first- and second-line, or 1L and 2L, respectively, HCC.

Under the terms of the agreement, the companies will share costs and Roche will supply its currently approved drugs, atezolizumab and bevacizumab for 2L HCC and 3L CRC combined with RP3.

Roche will also supply atezolizumab and bevacizumab for 1L HCC combined with RP3, and for 3L CRC combined with RP2.

We have retained the responsibility of operating the clinical trials as well as retaining all the rights to the development and commercialization of our product candidates.

The agreement may be terminated by either party upon sixty (60) days prior written notice to the other party.

Critical accounting policies and estimates

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Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.

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.

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 the estimate, we adjust the accrual or the amount of prepaid expenses accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed and/or timing of receiving invoices for actual services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

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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