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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-02-08 · 85 added, 146 removed, 283 unchanged (45% of the section changed)

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We are conducting a number of clinical trials of RP1, both as a monotherapy and in combination with anti-PD-1 therapy, with a focus on establishing a major skin cancer franchise.

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Our leading clinical trial of RP1 is our IGNYTE trial, a multi-cohort Phase 1/2 clinical trial being conducted in collaboration with Bristol Myers Squibb Company, or BMS, under which BMS has granted us a non-exclusive, royalty-free license to, and is supplying at no cost, its anti-PD-1 therapy, nivolumab, for use in combination with RP1.

The leading tumor specific cohort in the IGNYTE trial is our registration directed Phase 2 expansion cohort enrolling patients with anti-PD-1 failed cutaneous melanoma who are being treated with RP1 in combination with nivolumab.

In December 2023, we reported the full data set of 156 patients (140 patients from the registration-directed expansion cohort and 16 anti-PD1 failed cutaneous melanoma patients from the prior phase 2 cohort) with an overall response rate (ORR) of 31.4% and a complete response rate (CR) of 12%.

The anti-PD1 failed melanoma cohort from the IGNYTE clinical trial includes 140 patients who received RP1 plus nivolumab after confirmed progression while being treated with at least 8 weeks of prior anti-PD1 therapy (+/- anti-CTLA-4).

The primary analysis by independent central review was triggered once all patients had been followed for at least 12 months.

The topline results showed the overall response rate was 33.6% by modified RECIST 1.1 criteria, the primary endpoint as defined in the protocol, and 32.9% by RECIST 1.1 criteria, an additional analysis requested by the U.S.

Food and Drug Administration, or FDA.

Responses from baseline were highly durable, with all responses lasting more than 6 months and median duration of response exceeding 35 months.

RP1 combined with nivolumab continues to be well-tolerated, with mainly Grade 1-2 “on target” side effects, observed.

Following a Type C meeting with the U.S.

Food and Drug Administration (FDA), a confirmatory study design concept consisting of a 2-arm randomized trial with physician’s choice of treatment as a comparator arm in anti-PD1 failed melanoma patients was agreed.

The Company plans to submit the full primary analysis data from the anti-PD1 failed melanoma cohort including key secondary endpoint data and subgroups for presentation at an upcoming medical congress.

Following a Type C meeting with the FDA, a confirmatory study design concept consisting of a 2-arm randomized trial with physician’s choice of treatment as a comparator arm in anti-PD1 failed melanoma patients was agreed.

The FDA requested that the Phase 3 confirmatory trial be underway at the time of a BLA submission under the accelerated approval pathway.

The FDA also indicated that all patients should be followed for at least 12 months and have undergone central review by RECIST v1.1.

A BLA submission for RP1 in combination with nivolumab in anti-PD1 failed melanoma is planned for 2H 2024.

In our non-melanoma skin cancer, or NMSC, cohort of the IGNYTE clinical trial, we provided a data update in December 2023 from the first 30 patients with at least 6 months of follow up including patients with CSCC, Merkel cell carcinoma (MCC), basal cell carcinoma, and angiosarcoma in this cohort.

In May 2024, we reported completing a successful Type C meeting with the FDA that confirmed alignment on our Chemistry, Manufacturing and Controls, or CMC, plans to support an IGNYTE anti-PD1 failed melanoma BLA submission.

A pre-BLA meeting with the FDA is planned for September 2024 and a BLA submission for RP1 in combination with nivolumab in anti-PD1 failed melanoma is planned for the second half of 2024.

In our non-melanoma skin cancer, or NMSC, cohort of the IGNYTE clinical trial, we provided a data update in December 2023 from the first 30 patients with at least 6 months of follow up including patients with cutaneous squamous cell carcinoma, or CSCC, Merkel cell carcinoma, or MCC, basal cell carcinoma, and angiosarcoma in this cohort.

The data showed that treatment with RP1 in combination with nivolumab led to an ORR of 30% which is consistent with data from the anti-PD1 failed melanoma cohort with approximately one-third of patients responding and 60% demonstrating clinical benefit.

The combination of RP1 and nivolumab was well tolerated in this patient population with a safety profile consistent with the overall experience seen with this treatment regimen to date.

Enrollment remains open in this cohort.

Furthering development of our RP1 clinical candidate, we have open for enrollment a Phase 1b/2 clinical trial of single agent RP1 in solid organ transplant recipients with skin cancers, including CSCC, which is referred to herein as ARTACUS or the ARTACUS trial, which we believe to be potentially registrational (in its own right or, subject to discussion with regulatory authorities, following enrollment of additional patients, including as a potential label expansion after an initial approval of RP1 in a different indication).

We are currently enrolling up to 65 patients in the ARTACUS trial to assess the safety and efficacy of RP1 in liver, kidney, heart, lung, and hematopoietic cell transplant patients transplant recipients with skin cancers.

We are currently enrolling up to 65 patients in the ARTACUS trial to assess the safety and efficacy of RP1 in liver, kidney, heart, lung, and hematopoietic cell transplant recipients with skin cancers.

In November 2023 we presented initial data from the ARTACUS clinical trial of RP1 monotherapy in solid organ transplant recipients with skin cancers at the Society for Immunotherapy of Cancer’s (SITC) 38th Annual Meeting.

The data included 23 evaluable patients with CSCC (n=20) and Merkel cell carcinoma (n=3), demonstrating an ORR of 34.5% and a CR of 21%.

The data included 23 evaluable patients with CSCC (n=20) and Merkel cell carcinoma (n=3), demonstrating an overall response rate, or ORR of 34.5% and a complete response, or CR of 21%.

RP1 monotherapy was well tolerated in these patients and the safety profile was similar to that observed in our other RP1 clinical trials in patients who are not immune suppressed.

No immune-mediated adverse events or evidence of allograft rejection were observed.

As reported in December, our randomized, controlled Phase-2 clinical trial of RP1 with cutaneous squamous cell carcinoma, or CSCC, referred to as CERPASS or the CERPASS trial, under agreement with our partner Regeneron did not meet either of the two primary endpoints.

RP1 in combination with cemiplimab increased the CRR versus cemiplimab alone (38.1% vs.

25%, p=0.040), which was just short of the required threshold for statistical significance in this study.

Notably, among the 83 patients with locally advanced disease, the complete response rate in the RP1 plus cemiplimab group was 48.1% versus 22.6% in the cemiplimab only group.

The ORR was comparable between the two study groups (52.5% for RP1 plus cemiplimab vs.

51.4% for cemiplimab alone, p=0.692).

RP1 in com-bination with cemiplimab also increased duration of response (DOR) as compared to cemiplimab alone.

The trial will continue as planned to assess DOR, progression free survival (PFS) and overall survival (OS) with greater maturity.

This data was also presented during oral presentation at the American Association of Cancer Research 2024 Annual Meeting in April 2024.

We continue to enroll patients into this trial.

As previously reported, the CERPASS clinical trial of RP1 in patients with CSCC continues as planned to assess duration of response, or DOR, progression free survival and overall survival with greater maturity.

We are also developing or have been developing additional product candidates, RP2 and RP3, that have been further engineered to enhance anti-tumor immune responses and are intended to address additional tumor types, including traditionally less immune responsive tumor types.

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In November 2023, we presented updated data from a cohort of metastatic uveal melanoma patients during a Plenary Session at the 20th Annual International Society for Melanoma Research Congress.

The updated data showed RP2 led to an ORR of 29.4 percent (5 of 17 patients;

The updated data showed RP2 led to an ORR of 29.4% (5 of 17 patients;

one of the responding patients was treated with RP2 monotherapy and four of the responding patients were treated with RP2 combined with nivolumab), including responses in patients with liver, lung, and bone metastases.

The median DOR at the data cutoff was 11.47 months (range of 2.78 to 21.22 with responses ongoing).

Nearly all patients (15 of 17, 88.2%) in the study had progressed on or after immunotherapy with 12 of 17 patients (70.6%) having previously received both anti-PD1 and anti-CTLA-4 therapies, including four of the responding

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Nearly all patients (15 of 17, or 88.2%) in the study had progressed on or after immunotherapy with

12 of 17 patients (70.6%) having previously received both anti-PD1 and anti-CTLA-4 therapies, including four of the responding patients.

RP2 was generally well tolerated both as monotherapy and in combination with nivolumab with no additive adverse events observed.

The most common grade 1 or 2 treatment related adverse events (TRAEs) overall in both cohorts were pyrexia, chills, fatigue, hypotension and pruritis.

The most common grade 1 or 2 treatment related adverse events, or TRAEs, overall in both cohorts were pyrexia, chills, fatigue, hypotension and pruritis.

Six patients had grade 3 TRAEs, including two cases of hypotension.

There were no grade 4 or 5 TRAEs.

Based on the data in this population, planning is underway for a potentially registration enabling study of RP2 in advanced uveal melanoma.

As previously announced, our RP2/3 development in squamous cell carcinoma of the head and neck (SCCHN) and colorectal cancer (CRC) have been discontinued, and the development program in hepatocellular carcinoma (HCC) has been limited to the 2L setting and will use RP2 rather than RP3.

Although we have discontinued or are modifying these trials, we are continuing to treat patients who were already in screening or enrolled in these trials before the trials were discontinued.

In June 2024, we presented that the disease control rate for this cohort of patients was 58.8%.

We have finalized the protocol based on FDA input and begun trial initiation activities for a registration-directed study of RP2 in metastatic uveal melanoma in patients who are immune checkpoints inhibitor-naïve.

The study is a randomized trial of RP2 in combination with nivolumab vs.

ipilimumab and nivolumab, or nivolumab for those ineligible for ipilimumab.

The Company continues its signal finding trial of RP2 in combination with atezolizumab and bevacizumab in the 2L setting of patients with hepatocellular carcinoma (HCC) in collaboration with Roche.

This Phase 2 clinical trial is expected to dose its first patient in the second half of 2024.

RP1, RP2 and RP3 are administered by direct injection into solid tumors, guided either visually or by ultrasound, computerized tomography or other imaging methods.

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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.

Our net losses were $51.1 million and $39.7 million for the three months ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had an accumulated deficit of $646.2 million.

Since our initial public offering, or IPO, on July 20, 2018, we have raised an aggregate of approximately $945.7 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, $96.7 million was from our private investment in a public entity in June 2024, 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, 5,668,937 shares of our common stock and pre-funded warrants to purchase 5,669,578 shares of common stock through our private investment in a public entity in June 2024, and 2,313,997 shares of common stock through our at-the-market facilities.

Our net losses were $53.8 million and $49.6 million for the three months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $755.1 million.

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

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• establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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• until our manufacturing facility is fully validated, continued limited manufacturing by third parties for clinical development;

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of December 31, 2023, we had cash and cash equivalents and short-term investments of $466.4 million.

As of June 30, 2024, we had cash and cash equivalents and short-term investments of $469.1 million.

Based on our current operating plan, w e believe that our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements through at least 12 months from the issuance of the consolidated financial statements included in this Quarterly Report.

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• the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

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• costs related to compliance with regulatory requirements in connection with the development of our product candidates;

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• the acceptance of our product candidates, if approved, by patients, the medical community, and third-party payors;

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• our ability to successfully develop our product candidates for use in combination with third-party products or product candidates;

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Interest expense on finance lease liability consists of amortization of finance charges under our financing lease.

Other (expense) income, net

Other income (expense), net

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

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During the nine months ended December 31, 2023, the Company recorded an income tax provision of $0.5 million primarily due to forecasted U.S.

taxable income for the year that is not fully offset by available net operating loss carryforwards.

During the nine months ended December 31, 2022, the Company did not recorded any income tax provision due to losses incurred and based upon the weight of available evidence, that it is more likely than not that the Company's loses will not be realized.

During the three months ended June 30, 2024 and 2023, the Company recorded no income tax benefits for the net operating losses incurred in the United Kingdom in each period due to its uncertainty of realizing a benefit from those items.

The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate (“AETR”), adjusted for the effect of discrete items arising in that quarter.

The impact of such inclusions could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections.

In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter.

For the three months ended June 30, 2024 and 2023, the Company excluded the United Kingdom from the calculation of the AETR as the Company anticipates an ordinary loss in this jurisdiction for which no tax benefit can be recognized.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets both in the United States and United Kingdom, which primarily consist of net operating loss carryforwards.

The Company has considered its history of cumulative net losses, future reversals of existing taxable temporary differences, estimated future taxable income as well as prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets.

As a result, as of December 31, 2023 and March 31, 2023, the Company has recorded a full valuation allowance against its net deferred tax assets.

The Company has considered its history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets.

As a result, as of June 30, 2024 and March 31, 2024, the Company has recorded a full valuation allowance against its net deferred tax assets.

Results of operations

Comparison of the three months ended December 31, 2023 and 2022

The following chart summarizes our results of operations for the three months ended December 31, 2023 and 2022:

Comparison of the three months ended June 30, 2024 and 2023

The following chart summarizes our results of operations for the three months ended June 30, 2024 and 2023:

Three Months Ended

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Research and development expenses

Research and development expenses for the three months ended December 31, 2023 were $42.8 million, compared to $30.3 million for the three months ended December 31, 2022.

The following table summarizes our research and development expenses for the three months ended December 31, 2023 and 2022:

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Research and development expenses for the three months ended June 30, 2024 were $43.0 million, compared to $40.4 million for the three months ended June 30, 2023.

The following table summarizes our research and development expenses for the three months ended June 30, 2024 and 2023:

Three Months Ended

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Total research and development expenses $ 42,972 $ 40,437 $ 2,535

The increase in our direct research and development expenses is primarily driven by increases in the number of clinical trial sites and patient enrollment in all of our clinical trials as compared the prior year, with CRO and investigator costs increasing by approximately $4.2 million vs.

the prior year.

In addition, during the third quarter of fiscal year 2024, the costs for RP1 increased vs.

the prior year as the Company focused on conducting the primary analysis and preparing for a potential BLA filing for CERPASS as well as the initial full data presentation for IGNYTE and an updated data presentation on the ARTACUS trial.

The Company continued to ramp up activities to develop RP2, specifically as it related to metastatic uveal melanoma patients.

The increase of $7.9 million in our unallocated expenses was due to a $6.9 million increase in personnel-related costs and $1.0 million increase in other expenses.

The increase in personnel-related costs included a $5.8 million increase in payroll and fringe benefits and a stock-based compensation increase of $1.2 million.

The increase in personnel-related costs largely reflected the hiring of additional personnel in our research and development functions as we continue to expand the development plan in multiple indications.

Personnel related costs for the three months ended December 31, 2023 and 2022 included stock-based compensation expense of $3.8 million and $2.6 million, respectively.

Furthermore, the change in other expenses is primarily driven by an increase of approximately $0.4 million in other outside services, a $0.4 million increase in other variable costs, a $0.3 million increase in conferences and exhibitions and a $0.1 million net increase in operating and lab supplies during the quarter as compared to the prior year.

These costs are somewhat offset by a decrease in consulting costs of approximately $0.2 million and a decrease of approximately $0.1 million in recruiting costs.

These changes are in line with increased overall clinical development costs and clinical trial activities.

Selling, general and administrative expenses

Selling, general and administrative expenses were $13.7 million for the three months ended December 31, 2023, compared to $11.4 million for the three months ended December 31, 2022.

The increase of $2.3 million is primarily the result of an increase of $1.1 million in personnel related costs and an increase of $1.0 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.

Additionally, there is a net increase of $0.8 million in sales and marketing and other variable costs, which is driven by external spend increases in building and preparation for sales and marketing programs, and market research.

Total other income (expense), net

Other income (expense), net was $5.9 million for the three months ended December 31, 2023, compared to a net income of $1.9 million for the three months ended December 31, 2022.

The net change of $4.0 million is primarily attributable to an increase in investment income of $3.0 million as a result of higher interest rates during the quarter, as well as a decrease in expense of $1.2 million in the current year compared to the prior year due to exchange rate fluctuations related to the changes in foreign exchange rates of the British Pound Sterling to the United States Dollar, specifically on intercompany and other non-functional currency transactions.

Income tax provision

The income tax provision for the nine months ended December 31, 2023 and December 31, 2022, was $0.5 million and $0.0 million, respectively.

The income tax provision booked during the nine months ended December 31, 2023 is primarily due to forecasted U.S.

taxable income for the year that is not fully offset by available net operating loss carryforwards.

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Comparison of the nine months ended December 31, 2023 and 2022

The following chart summarizes our results of operations for the nine months ended December 31, 2023 and 2022:

Nine Months Ended

2023 2022 Change

(Amounts in thousands)

Operating expenses:

Research and development $ 132,384 $ 88,573 $ 43,811

Selling, general and administrative 43,633 35,512 8,121

Total operating expenses 176,017 124,085 51,932

Loss from operations (176,017) (124,085) (51,932)

Other income (expense):

Research and development incentives 1,251 2,032 (781)

Investment income 17,922 4,130 13,792

Interest expense on finance lease liability (1,626) (1,650) 24

Interest expense on debt obligations (3,083) (941) (2,142)

Other income (expense) 1,307 (4,531) 5,838

Total other income (expense), net 15,771 (960) 16,731

Loss before income taxes (160,246) (125,045) (35,201)

Income tax provision 473 — 473

Net loss $ (160,719) $ (125,045) $ (35,674)

Research and development expenses

Nine Months Ended December 31,

2023 2022 Change

Direct research and development expenses by program:

RP1 41,444 25,669 15,775

RP2 6,489 3,008 3,481

RP3 11,196 10,006 1,190

Unallocated research and development expenses:

Personnel related (including stock-based compensation) 58,698 38,048 20,650

Other 14,557 11,842 2,715

Total research and development expenses $ 132,384 $ 88,573 $ 43,811

Research and development expenses for the nine months ended December 31, 2023 were $132.4 million, compared to $88.6 million for the nine months ended December 31, 2022.

The increase of $43.8 million was due to an increase of approximately $20.4 million in direct research costs related to our ongoing clinical trials and increased patient enrollment for RP1, RP2 and RP3, including an increase of approximately $14.6 million in the areas of CRO costs, investigator costs, and RP1 imaging costs.

In addition, the costs for RP1 increased vs.

the prior year as the Company prepared the primary analysis and preparations for a potential BLA filing for CERPASS as well as the initial full data presentation for IGNYTE and an updated data presentation on the ARTACUS trial.

The Company also continued to ramp up activities to develop RP2 and RP3 throughout the nine months ended December 31, 2023 as compared to the prior year.

In addition, there is an increase of approximately $23.4 million in unallocated research and development costs, mainly attributable to a $20.7 million increase in personnel-related costs, including a $16.9 million increase in payroll and fringe benefits and a stock-based compensation increase of $3.8 million.

The increase in personnel-related costs largely reflected the hiring of additional personnel in our research and development functions as we expanded the development plan in multiple indications.

Personnel related costs for the nine months ended December 31, 2023 and 2022 included stock-based compensation expense of $11.5 million and $7.7 million, respectively.

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The total increase of $2.5 million was driven by an increase of approximately $5.0 million in our unallocated expenses, including $3.8 million in personnel-related costs and $1.3 million in other costs.

The increase in personnel-related costs is attributable to a $2.8 million increase in payroll and fringe benefits and a stock-based compensation increase of $0.9 million.

The increase in personnel-related costs largely reflected the hiring of additional personnel in our research and development functions as we expand the development plan in multiple indications.

Personnel related costs for the three months ended June 30, 2024 and 2023 included stock-based compensation expense of $4.2 million and $3.3 million, respectively.

Furthermore, other costs increased primarily as a result of increased facility costs, consultants and other variable costs.

The overall decrease of $2.5 million in direct research costs is a result of the Company's reprioritization spending during the first quarter of the fiscal year.

The decrease of $2.6 million in costs related to RP3 is a reflection of the deprioritization of development efforts on this product candidate, which the Company began to taper in the second half of the prior fiscal year.

Spending for RP1 and RP2 remained relatively consistent during the first quarter, as the Company continued preparations for the primary data analysis and readout for the anti-PD-1 failed melanoma cohort of the IGNYTE trial and preparations for a potential BLA submission for this cohort in the second half of 2024.

Selling, general and administrative expenses

Selling, general and administrative expenses were $43.6 million for the nine months ended December 31, 2023, compared to $35.5 million for the nine months ended December 31, 2022.

The increase of $8.1 million is primarily the result of an increase of $4.9 million in personnel related costs, including a stock-based compensation increase of $1.2 million, and an increase of $3.7 million in payroll and fringe benefits.

The increase in personnel related costs was driven by the continued hiring of personnel within our selling, general and administrative functions, specifically focusing on commercial planning and building of the Company's initial commercial infrastructure.

Personnel related costs for the nine months ended December 31, 2023 and 2022 included stock-based compensation expense of $14.7 million and $13.5 million, respectively.

Selling, general and administrative expenses were $14.4 million for the three months ended June 30, 2024, compared to $15.2 million for the three months ended June 30, 2023.

The decrease of $0.8 million is primarily the result of a decrease of $0.8 million in personnel related costs, including a decrease of $0.5 million in payroll and fringe benefits and $0.3 million in stock compensation.

The decrease in personnel related costs during the quarter was driven by a slower hiring process as the Company was reprioritizing spending and managing the cash runway, coupled with lower stock prices decreasing stock-based compensation on a year over year basis.

Total other income (expense), net

Other income (expense) was $15.8 million for the nine months ended December 31, 2023, compared to $(1.0) million for the nine months ended December 31, 2022.

The net change of $16.7 million is primarily attributable to an increase in investment income of approximately $13.8 million as a result of higher interest rates during the first half of the year as compared to the prior year, as well as a decrease in expense of approximately $5.8 million compared to the prior year due to exchange rate fluctuations related to the changes in foreign exchange rates of the British Pound Sterling to the United States Dollar.

These increases in income are partially offset by approximately $2.1 million in expense for debt obligations related to the Hercules Loan Agreement which we entered in the third quarter of the prior year.

Other income (expense), net was $3.6 million for the three months ended June 30, 2024, compared to a net income of $6.3 million for the three months ended June 30, 2023.

The net change of $2.7 million is primarily attributable to an decrease in investment income of $1.5 million as a result of a lower investment balance year over year , as well as an increase in expense of $1.0 million in the current year compared to the prior year due to exchange rate fluctuations related to the changes in foreign exchange rates of the British Pound Sterling to the United States Dollar, specifically on intercompany and other non-functional currency transactions.

Income tax provision

The income tax provision for the nine months ended December 31, 2023 was $0.5 million compared to $0.0 million for the nine months ended December 31, 2022.

The income tax provision booked during the nine months ended December 31, 2023 is primarily related to the Company's interest income in the United States.

The income tax provision for the three months ended June 30, 2024 and June 30, 2023, was $0.0 million and $0.2 million, respectively.

There was no income tax provision booked during the three months ended June 30, 2024 as a result of a forecasted U.S.

loss for the year.

The income tax provision booked for the three months ended June 30, 2023 was primarily due to forecasted U.S.

taxable income for the year that was not fully offset by available net operating loss carryforwards.

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 borrowing under a secured loan facility.

Through December 31, 2023, we had received net proceeds of $935.9 million through the sale of shares of common stock and pre-funded warrants exercisable for common stock in public offerings and at-the-market offerings, as well as net $42.8 million from our incurrence of debt under the term loan agreement with Hercules.

As of December 31, 2023, we had cash and cash equivalents and short-term investments of $466.4 million.

Through June 30, 2024, we had received net proceeds of $945.7 million through the sale of shares of common stock and pre-funded warrants exercisable for common stock in public offerings, a private investment in a public entity, and at-the-market offerings, as well as net $42.8 million from our incurrence of debt under the term loan agreement with Hercules.

As of June 30, 2024, we had cash and cash equivalents and short-term investments of $469.1 million.

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

Nine Months Ended December 31, 2023

Three Months Ended June 30,

(Amounts in thousands)

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Net cash provided by investing activities

74,000 (119,750)

Net cash provided by financing activities 96,637 1,105

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Operating activities

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During the nine months ended December 31, 2023, net cash used in operating activities was $139.3 million, primarily resulting from our net loss of $160.2 million, partially offset by non-cash charges of $18.1 million, which primarily consist of stock-based compensation expense of $26.2 million, somewhat offset by net amortization of premiums and discounts on short-term investments of $9.5 million, and an increase in cash of $3.0 million related to changes in our operating assets and liabilities.

Changes in our operating assets and liabilities for the nine months ended December 31, 2023 consisted primarily of a $6.1 million increase in accrued expenses and other current liabilities, a $2.2 million increase in prepaid expenses and other current assets, a net $1.8 million change in operating and financing right-of-use assets and lease liabilities, a $1.5 million decrease in accounts payable, and a $1.2 million increase in research and development incentives receivable from the United Kingdom government due to the timing and amount of our qualifying expenditures.

During the nine months ended December 31, 2022, net cash used in operating activities was $95.3 million, primarily resulting from our net loss of $125.0 million, partially offset by non-cash charges of $21.6 million, primarily consisting of stock-based compensation expense of $21.2 million, and an increase in cash of $8.2 million related to changes in our operating assets and liabilities.

Changes in our operating assets and liabilities for the nine months ended December 31, 2022 consisted primarily of a $5.6 million increase in accrued expenses and other current liabilities, a $0.8 million decrease in research and development incentives receivable from the United Kingdom government due to the timing and amount of our qualifying expenditures, a net $1.8 million change in operating and financing right-of-use assets and lease liabilities, a $0.4 million decrease in accounts payable, as well as a $0.4 million increase in prepaid expenses and other current assets.

During the three months ended June 30, 2024, net cash used in operating activities was $49.2 million, primarily resulting from our net loss of $53.8 million partially offset by non-cash charges of $7.4 million, which primarily consist of stock-based compensation expense of $9.5 million, somewhat offset by net amortization of premiums and discounts on short-term investments of $2.8 million, and an increase in cash of $2.8 million related to changes in our operating assets and liabilities.

Changes in our operating assets and liabilities for the three months ended June 30, 2024 consisted primarily of a $3.2 million decrease in accrued expenses and other current liabilities, a $1.8 million increase in prepaid expenses and other current assets, a $1.6 million decrease in accounts payable, a net $0.6 million change in operating and financing right-of-use assets and lease liabilities, and a $0.4 million decrease in research and development incentives receivable from the United Kingdom government due to the timing and amount of our qualifying expenditures.

During the three months ended June 30, 2023, net cash used in operating activities was $48.6 million, primarily resulting from our net loss of $49.6 million, partially offset by non-cash charges of $4.3 million, which primarily consist of stock-based compensation expense of $8.8 million, and a decrease in cash of $3.4 million related to changes in our operating assets and liabilities.

Changes in our operating assets and liabilities for the three months ended June 30, 2023 consisted primarily of a $1.2 million decrease in accrued expenses and other current liabilities, a $1.6 million decrease in prepaid expenses and other current assets, a net $0.6 million change in operating and financing right-of-use assets and lease liabilities, a $0.8 million decrease in accounts payable, and a $0.4 million decrease in research and development incentives receivable from the United Kingdom government due to the timing and amount of our qualifying expenditures.

Investing activities

During the nine months ended December 31, 2023, net cash provided by investing activities was $74.0 million, consisting of $459.0 million in proceeds from sales and maturities of short-term investments, partially offset by $381.1 million in purchases of available for sale securities, and $3.9 million in purchases of property, plant and equipment and capitalized software.

During the nine months ended December 31, 2022, net cash used in investing activities was $119.8 million, consisting of $433.9 million in purchases of available for sale securities, partially offset by $316.2 million in proceeds from sales and maturities of short-term investments, and $2.0 million in purchases of property, plant and equipment.

During the three months ended June 30, 2024, net cash provided by investing activities was $29.8 million, consisting of $136.9 million in proceeds from sales and maturities of short-term investments, partially offset by $105.5 million in purchases of available for sale securities, and $1.7 million in purchases of property, plant and equipment and capitalized software.

During the three months ended June 30, 2023, net cash provided by investing activities was $7.4 million, consisting of $177.1 million in proceeds from sales and maturities of short-term investments, partially offset by $169.3 million in purchases of available for sale securities, and $0.4 million in purchases of property, plant and equipment.

Financing Activities

During the nine months ended December 31, 2023, net cash provided by financing activities was $16.4 million, consisting primarily of $15.0 million in proceeds from long-term debt, as well as $1.8 million in proceeds from the exercise of stock options.

During the nine months ended December 31, 2022, net cash provided by financing activities was $311.4 million, consisting primarily of $150.1 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, $30.0 million in proceeds from the issuance of debt under the Hercules Loan Agreement, as well as approximately $3.2 million in proceeds from the exercise of stock options.

During the three months ended June 30, 2024, net cash provided by financing activities was $96.6 million, consisting primarily of $96.7 million in proceeds from the Company's private investment in a public entity in June 2024.

During the three months ended June 30, 2023, net cash provided by financing activities was $1.1 million, consisting primarily of $1.2 million in proceeds from the exercise of stock options.

Funding requirements

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• seek marketing approvals for any of our product candidates that successfully complete clinical trials, if any;

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• establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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• 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.

As of December 31, 2023, we had cash and cash equivalents and short-term investments of $466.4 million.

Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments as of December 31, 2023, will enable us to fund operations into the second half of 2026.

As of June 30, 2024, we had cash and cash equivalents and short-term investments of $469.1 million.

Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments as of June 30, 2024, will enable us to fund operations into the second half of 2026 which includes scale up for the commercialization of RP1 in skin cancers and for working capital and general corporate purposes.

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.

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Contractual obligations and commitments

During the three months ended December 31, 2023, there were no material changes to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 18, 2023.

During the three months ended June 30, 2024, there were no material changes to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 18, 2023.

Collaborations

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In February 2018, we entered into a Clinical Trial Collaboration and Supply Agreement with BMS.

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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, agreed in June 2018, is our ongoing Phase 2 clinical trial testing RP1 in combination with cemiplimab versus cemiplimab alone in patients with CSCC.

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, agreed in June 2018, is our ongoing Phase 2 clinical trial testing RP1 in combination with cemiplimab versus cemiplimab alone in patients with CSCC.

Each clinical trial will be conducted pursuant to an agreed study plan which, among other things, will identify the name of the sponsor and which party will manage the particular study, and include the protocol, the budget and a schedule of clinical obligations.

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In December 2022, we announced entering 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.

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agreement, the companies will collaborate in two 30 patient cohort signal finding studies in third-line, or 3L, CRC and in two 15 patient cohort signal finding studies in second-line, or 2L, HCC.

Under the agreement, the companies will collaborate in two 30 patient cohort signal finding studies in third-line, or 3L, CRC and in two 15 patient cohort signal finding studies in second-line, or 2L, 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.

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In addition, the Company may terminate the agreement upon the inappropriate or unsafe use of the RP1 product candidate.

On July 30, 2024, Incyte announced it has discontinued further development of its oral small molecule PD-L1 inhibitor, which was the intended study drug in the Company's planned collaboration with Incyte.

On August 1, 2024, the Company received notice of termination of the Clinical Trial Collaboration and Supply Agreement from Incyte.

Critical accounting policies and estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements.

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• vendors related to product manufacturing and development and distribution of preclinical and clinical supplies.

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We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CMOs and CROs that supply, conduct and manage preclinical studies and clinical trials on our behalf.

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The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.

See Note 10 to our consolidated financial statements appearing elsewhere in this Quarterly Report for more information.

See Note 10 to our consolidated financial statements appearing elsewhere in this Quarterly Report for

more information.

Forfeitures are accounted for as they occur.

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A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report.

Emerging growth company status

As an “emerging growth company,” the Jumpstart Our Business Startups Act of 2012 permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.

We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.

Quantitative and Qualitative Disclosures about Market Risks.

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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-Q

Item 2. Management’s Discussion and Analysis