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Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-16 · 117 added, 127 removed, 216 unchanged (53% of the section changed)

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We are a late-stage clinical biopharmaceutical company focused on the development of novel therapeutics for a broad range of cancer indications.

Our product candidates currently include galinpepimut-S, or GPS, a peptide immunotherapy directed against the Wilms tumor 1, or WT1, antigen, and GFH009, a highly selective small molecule cyclin-dependent kinase 9, or CDK9, inhibitor.

Our product candidates currently include galinpepimut-S, or GPS, a peptide immunotherapy directed against the Wilms tumor 1, or WT1, antigen, and SLS009 (formerly GFH009), a highly selective small molecule cyclin-dependent kinase 9, or CDK9, inhibitor.

Galinpepimut-S, or GPS:

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Food and Drug Administration, or the FDA.

The primary endpoint of the clinical trial is overall survival.

We plan to enroll approximately 125 to 140 patients at approximately 95 clinical sites in North America, Europe and Asia with a planned interim safety, efficacy and futility analysis after 60 events (deaths).

Under our current assumptions with respect to completion of enrollment and the estimated survival times for both the treated and control groups in the study, we believe, after discussions with our external statisticians and experts, that the planned interim analysis after 60 events (deaths) per the protocol will occur by the end of 2023 or early 2024 and the final analysis after 80 events will occur by the end of 2024.

Because these analyses are event driven, they may occur at a different time than currently expected.

In December 2020, we entered into an exclusive license agreement, or 3DMed License Agreement, with 3D Medicines Inc., or 3D Medicines, a China-based biopharmaceutical company developing next-generation immuno-oncology drugs, for the development and commercialization of GPS, as well as the Company’s next generation heptavalent immunotherapeutic GPS+, which is at preclinical stage, across all therapeutic and diagnostic uses in mainland China, Hong Kong, Macau and Taiwan, which we refer to as Greater China.

The primary endpoint of the REGAL study is overall survival.

We planned to enroll approximately 125 to 140 patients at approximately 95 clinical sites in North America, Europe and Asia with a planned interim safety, efficacy and futility analysis after 60 events (deaths).

In March 2024, we announced the completion of enrollment.

Under our current assumptions with respect to enrollment and the estimated survival times for both the treated and control groups in the study, we believe, after discussions with our external statisticians and experts, that the planned interim analysis after 60 events (deaths) per the protocol will occur in the first half of 2024 and the final analysis after 80 events will occur by the end of 2024.

Because these analyses are event driven, they are difficult to predict with any certainty and may occur at a different time than currently expected.

In December 2020, we entered into an exclusive license agreement, or 3D Medicines Agreement, with 3D Medicines Inc., or 3D Medicines, a China-based biopharmaceutical company developing next-generation immuno-oncology drugs, for the development and commercialization of GPS, as well as the Company’s next generation heptavalent immunotherapeutic GPS+, which is at preclinical stage, across all therapeutic and diagnostic uses in mainland China, Hong Kong, Macau and Taiwan, which we collectively refer to as Greater China, or the 3DMed Territory.

We have retained sole rights to GPS and GPS+ outside of Greater China.

In November 2022, we announced that we have agreed with 3D Medicines for 3D Medicines to participate in the REGAL study through the inclusion of approximately 20 patients from mainland China.

Such participation by 3D Medicines will trigger two development milestone payments totaling $13.0 million, which we expect to receive in the first half of 2023.

If the REGAL study meets its primary endpoint for efficacy and the Chinese regulatory authorities determine that the REGAL data is sufficient for approval in China, GPS could potentially reach the market in Greater China much earlier than we and 3D Medicines had anticipated when we entered into the license agreement in December 2020.

As of March 15, 2023, we have received an aggregate of $10.5 million in upfront and milestone payments under our license agreement with 3D Medicines and a total of $191.5 million in potential future development, regulatory and sales milestones, not including future royalties, remains under the license agreement, which milestones are variable in nature and not under our control.

In November 2022, we announced that we had agreed with 3D Medicines for 3D Medicines to participate in the REGAL study through the inclusion of approximately 20 patients from mainland China.

Although the REGAL study has completed enrollment as announced in March 2024, in accordance with the predetermined statistical analysis plan, 3D Medicines may still enroll patients in mainland China.

The timing of such participation and patient enrollment by 3D Medicines, if at all, cannot be predicted with certainty.

As of December 31, 2023, we have received an aggregate of $10.5 million in upfront and milestone payments under the 3D Medicines Agreement and a total of $191.5 million in potential future development, regulatory and sales milestones, not including future royalties, remains under the license agreement, which milestones are variable in nature and not under our control.

In December 2023, we commenced an arbitration proceeding against 3D Medicines regarding, among other things, t he trigger and payment of $13.0 million in milestone payments due to us.

Legal Proceedings .

In December 2018, pursuant to a Clinical Trial Collaboration and Supply Agreement, we initiated a Phase 1/2 multi-arm "basket" type clinical study of GPS in combination with Merck & Co., Inc.’s anti-PD-1 therapy, pembrolizumab (Keytruda®).

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In November 2022, we reported topline clinical and initial immune response data from this study, which showed that treatment with the combination of GPS and pembrolizumab compared favorably to treatment with anti-PD-1 therapy alone in a similar patient population.

We plan to present final data from this study at a medical conference in the first half of 2023.

In November 2023, additional immunobiological and clinical data from the study was presented at the International Gynecologic Cancer Society 2023 Annual Global Meeting which showed a correlation between immune response and PFS.

In February 2020, a Phase 1 open-label investigator-sponsored clinical trial of GPS, in combination with Bristol-Myers Squibb’s anti-PD-1 therapy, nivolumab (Opdivo®), in patients with malignant pleural mesothelioma, or MPM, who harbor relapsed or refractory disease after having received frontline standard of care multimodality therapy was commenced at MSK.

Enrollment of a target total of 10 evaluable patients was completed at the end of 2022.

We expect to report topline data from this study in the first half of 2023.

GPS was granted Orphan Drug Product Designations from the FDA, as well as Orphan Medicinal Product Designations from the European Medicines Agency, or EMA, for GPS in AML, MPM, and multiple myeloma, or MM, as well as Fast Track Designation for AML, MPM, and MM from the FDA.

We reported positive topline safety and efficacy data from this study in June 2023 and positive follow-up immune response and survival data in December 2023.

GPS was granted Orphan Drug Product Designations, or ODD, from the FDA, as well as orphan medicines designations from the European Medicines Agency, or EMA, for GPS in AML, MPM, and multiple myeloma, or MM, as well as Fast Track designation for AML, MPM, and MM from the FDA.

Highly Selective Next Generation CDK9 Inhibitor

On March 31, 2022, we entered into an exclusive license agreement, or the GFH009 Agreement, with GenFleet Therapeutics (Shanghai), Inc., or GenFleet, a clinical-stage biotechnology company developing cutting-edge therapeutics in oncology and immunology, that grants rights to us for the development and commercialization of GFH009, a highly selective small molecule CDK9 inhibitor, across all therapeutic and diagnostic uses worldwide, except for Greater China.

On March 31, 2022, we entered into an exclusive license agreement, or the GenFleet Agreement, with GenFleet Therapeutics (Shanghai), Inc., or GenFleet, a clinical-stage biotechnology company developing cutting-edge therapeutics in oncology and immunology, that grants rights to us for the development and commercialization of SLS009, a highly selective small molecule CDK9 inhibitor, across all therapeutic and diagnostic uses worldwide, except for Greater China.

CDK9 activity has been shown to correlate negatively with overall survival in a number of cancer types, including hematologic cancers, such as AML and lymphomas, as well as solid cancers, such as osteosarcoma, pediatric soft tissue sarcomas, melanoma, endometrial, lung, prostate, breast and ovarian.

As demonstrated in preclinical and clinical data, to date, GFH009’s high selectivity has the potential to reduce toxicity as compared to older CDK9 inhibitors and other next-generation CDK9 inhibitors currently in clinical development and to potentially be more efficacious.

GFH009 is currently in a Phase 1 dose-escalating clinical trial in the United States and China.

We are evaluating both twice-a-week and once-a-week dosing, and the indications are relapsed/refractory AML, chronic lymphocytic leukemia, or CLL, small lymphocytic leukemia, or SLL, and lymphoma.

The primary goal of the trial is to establish the recommended Phase 2 dose and to assess safety.

We expect enrollment in this study to be completed in the first quarter of 2023 and we expect to determine the recommended Phase 2 dose and report analyzed data from the study early in the second quarter of 2023.

Following completion of the Phase 1 clinical trial and determination of the recommended Phase 2 dose, we intend to commence a Phase 2a clinical trial of GFH009 in combination with venetoclax and azacitidine in AML patients who failed or did not respond to treatment with venetoclax and azacitidine.

The primary endpoint of the Phase 2a clinical trial, which we expect to initiate during the second quarter of 2023, will likely be complete remission, or CR, rate and secondary endpoints will likely include progression free survival, OS and proportion of patients proceeding to transplant.

We are also planning to potentially commence a Phase 2 clinical trial of GFH009 in certain solid tumors and/or lymphoma in the third quarter of 2023 and are exploring various options with respect to clinical development for GFH009 in several pediatric indications.

Impact of COVID-19

Public health crises such as pandemics or similar outbreaks could adversely impact our business.

Notably, the COVID-19 pandemic continues to evolve.

The extent to which COVID-19 impacts our operations or those of our collaborators, contractors, suppliers, CROs, clinical sites, CMOs and other material business relations and governmental agencies will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the ultimate duration of the outbreak, new information that will emerge concerning the severity of the virus and the actions to contain it or treat its impact, among others.

Previously, our clinical trial operations were directly and indirectly adversely impacted, and could continue to be directly and indirectly adversely impacted, by the COVID-19 pandemic.

While the potential economic impact brought by, and the ultimate duration of, the COVID-19 pandemic, have been, and continue to be, difficult to assess or predict, the spread of COVID-19 has caused a broad impact globally.

The extent to which the COVID-19 pandemic may impact our business continues to be highly uncertain and cannot be predicted with confidence.

As demonstrated in preclinical and clinical data, to date, SLS009’s high selectivity has the potential to reduce toxicity as compared to older CDK9 inhibitors and other next-generation CDK9 inhibitors currently in clinical development and to potentially be more efficacious.

We completed a Phase 1 dose-escalating clinical trial in the United States and China for SLS009 in mid-2023 and reported positive safety and efficacy data for both patient cohorts, that is relapsed and/or refractory AML and refractory lymphoma.

We also established in the trial a recommended Phase 2 dose, or RP2D, of 60 mg for AML and 100 mg for lymphomas.

In the second quarter of 2023, we commenced an open label, single arm, multi-center Phase 2a clinical trial with SLS009 in combination with venetoclax and azacitidine, or aza/ven, in patients with AML who failed or did not respond to treatment with venetoclax-based therapies.

The trial is evaluating safety, tolerability, and efficacy at two dose levels of SLS009, 45 mg once weekly, and 60 mg once weekly or 30 mg twice a week, in combination with aza/ven.

In addition to safety and tolerability of SLS009 in combination with aza/ven, the primary endpoints are complete response composite rate and duration of response.

Additional endpoints include event free survival, overall survival, and pharmacokinetic and pharmacodynamic assessments.

The trial includes several sites in the United States, will enroll a minimum of 20 patients and, based on initial results, may be expanded into a registrational trial.

In the fourth quarter of 2023, we completed enrollment in the 45 mg (safety) dose cohort in the Phase 2a study and reported positive initial topline data.

We also commenced enrollment in the 60 mg dose cohort with patients randomized to one of two groups, 60 mg fixed dose once weekly or 30 mg fixed twice weekly.

Each group will enroll five to 10 patients.

In March 2024, we announced positive topline data from the Phase 2a clinical trial of SLS009 in combination with aza/ven in r/r/ AML.

A total of 21 patients were enrolled in the study as of March 15, 2024:

10 in the 45 mg safety cohort and 11 in the 60 mg cohort (30 mg twice a week or 60 mg once a week).

Response rates observed in the three cohorts were 10% in the 45 mg once a week safety dose cohort (dose level below the RP2D),

20% in the 60 mg once a week dose cohort, and 50% in the 30 mg twice a week dose cohort.

Additionally, we observed strong anti-leukemic activity, which is defined as 50% or more bone marrow blast reduction in 67% of patients across all dose levels.

Median OS has not been reached in any of the cohorts and the first patient enrolled in the study who achieved a CR continues on the study and remains leukemia-free 9 months after enrollment.

During the trial, we identified potential biomarkers currently undergoing testing as predictive markers in the most recent portion of the study.

Patients with the identified biomarkers exhibited significantly higher response rates:

100% response rate at the optimal dose level (30 mg twice a week) and 57% response rate across all dose levels.

Furthermore, we have clarified the proposed biological basis and mechanism of action for SLS009 activity in patients with these biomarkers.

The relevant biomarkers are present in multiple hematologic and solid cancer indications, with a substantial proportion of patients exhibiting them in additional indications, ranging up to ~50% of patients in some indications.

Additional topline data for the 60 mg dose cohort is expected in the second quarter of 2024.

In October 2023, we announced that our partner, GenFleet, dosed the first patient in a Phase Ib/II trial evaluating SLS009 in patients with relapsed/refractory, or r/r, peripheral T-cell lymphoma, or PTCL.

The open-label, single-arm trial will enroll up to 95 patients to evaluate safety and efficacy and, based on the results, may serve as a registrational study.

This initial PTCL study is fully funded by GenFleet and is being conducted in China.

We expect to report initial topline data from the study in the second quarter of 2024.

In March 2024, GenFleet announced that it entered into a collaboration and supply agreement with BeiGene Switzerland GmbH to initiate a combination study of SLS009 and Brukinsa (zanubrutinib), a BTK inhibitor, in r/r diffused large B-cell lypmhoma, or DLBCL, and the first patient was dosed in the trial.

The open-label, single-arm multi-center trial will be conducted in two parts.

In the Phase 1b portion, 6-18 patients will be enrolled.

In the Phase 2 portion, approximately 45 patients will be enrolled.

This study is funded by GenFleet and is being conducted in China.

SLS009 is also currently being evaluated in pediatric solid tumors and leukemia models through the NCI Pediatric Preclinical in Vivo Testing, or PIVOT, program.

Studies are supported through cooperative agreement grants from the NCI to the seven PIVOT research programs performing the PK and efficacy testing in pediatric tumors and a centralized coordinating center.

We expect to report relevant data from the program in the second half of 2024.

For SLS009, the FDA granted Orphan Drug Product designations in AML and PTCL and Fast Track designations for r/r AML and r/r PTCL.

Components of Results of Operations

License Revenue

License revenue consists of revenue recognized pursuant to the 3DMed License Agreement.

In the future, we may generate revenue from a combination of regulatory, development, and sales milestone payments and royalties in connection with the 3DMed License Agreement.

Licensing Revenue

Licensing revenue consists of revenue recognized pursuant to the 3D Medicines Agreement.

In the future, we may generate revenue from a combination of regulatory, development, and sales milestone payments and royalties in connection with the 3D Medicines Agreement.

Cost of Licensing Revenue

Cost of licensing revenue consists of sublicensing fees incurred under our license from MSK in connection with the 3D Medicines Agreement.

Research and Development

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These expenses include:

• expenses incurred under agreements with CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

• expenses incurred under agreements with clinical research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

• manufacturing and clinical drug supply expenses;

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Oncology product candidates in the later stages of clinical development generally have higher development costs than those in the earlier stages of clinical development, primarily due to the increased size and duration of the later-stage clinical trials.

We expect our research and development expenses to increase for the foreseeable future as we conduct and complete our ongoing early and late-stage clinical trials and initiate additional clinical trials.

We expect our research and development expenses to increase for the foreseeable future as we conduct and complete our ongoing early and late-stage clinical trials, initiate additional clinical trials, and expand regulatory activities associated with the preparation and submission of regulatory filings.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals.

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Other general and administrative expenses include facility related costs, patent filing and prosecution costs, professional fees for business development, accounting, consulting, legal and tax-related services associated with maintaining compliance with our Nasdaq listing and SEC reporting requirements, investor relations costs, and other expenses associated with being a public company.

If and when we believe that regulatory approval of a product candidate appears likely, we anticipate that an increase in general and administrative expenses will occur as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of such product candidate.

particularly as it relates to the sales and marketing of such product candidate.

Oncology product commercialization may take several years and millions of dollars in development costs.

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Acquired in-process research and development consists of costs to acquire or license product candidates from third parties for development with no alternative future use as the technology and know-how acquired are not currently commercially viable.

In-Process Research and Development Impairment Charge

Intangible assets are comprised of identifiable in-process research and development assets, or IPR&D, and are considered indefinite-lived assets and are assessed for impairment annually or more frequently if impairment indicators are present.

Our indefinite-lived intangible asset consisted of IPR&D of nelipepimut-S, or NPS, that was acquired as part of the merger with Galena Biopharma, Inc.

in 2017, or the Merger.

We are not currently engaging in any clinical development activities for NPS nor do we currently have any plans to do so in the future.

The impairment charge recognized during the year ended December 31, 2021 was a result of the determination that the carrying amount of the IPR&D was not recoverable and was measured by the amount the carrying value exceeded its fair value.

Non-Operating Income

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2023 2022 Change

License revenue $ 1,000 $ 7,600 $ (6,600)

Licensing revenue $ — $ 1,000 $ (1,000)

Operating expenses:

Cost of revenue 100 200 (100)

Cost of licensing revenue — 100 (100)

Research and development 24,007 20,268 3,739

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Acquired in-process research and development — 10,000 (10,000)

In-process research and development charge — 5,700 (5,700)

Total operating expenses 37,869 42,950 (5,081)

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Non-operating income 529 649 (120)

Loss before income taxes (41,301) (20,936) (20,365)

Income tax benefit — 237 (237)

Net loss $ (37,340) $ (41,301) 3,961

For the year ended December 31, 2022, our net loss was $41.3 million compared with a net loss of $20.7 million for the year ended December 31, 2021 .

The increase of $20.6 million in net loss was primarily attributable to an increase in operating expenses of $10.1 million, a decrease in licensing revenue of $6.6 million, a decrease of $3.7 million in non-operating income, and a $0.2 million decrease in income tax benefit.

The increase in operating expenses were driven by a $10.0 million charge for acquired in-process research and development, a $4.6 million increase in research and development expenses, and a $1.3 million increase in general and administrative expenses, which were partially offset by a $5.7 million decrease in non-cash IPR&D impairment charges and a $0.1 million decrease in costs of license revenue.

Further analysis of the changes and trends in our operating results are discussed below.

License Revenue

License revenue for the year ended December 31, 2022 was $1.0 million and related to approval by China's NMPA of an IND application filed by 3D Medicines for a small Phase 1 clinical trial investigating safety of GPS in China.

License revenue of $7.6 million for the year ended December 31, 2021 related to the out-licensing of intellectual property rights and transfer of technical know-how associated with the 3DMed License Agreement for the development and commercialization of GPS in Greater China.

Cost of License Revenue

We incurred $0.1 million and $0.2 million of sublicensing fees payable under our license from MSK in connection with the 3DMed License Agreement during the years ended December 31, 2022 and 2021, respectively.

Licensing Revenue

There was no licensing revenue for the year ended December 31, 2023 and $1.0 million in licensing revenue for the year ended December 31, 2022 related to approval by China's National Medical Products Administration, or NMPA, of an Investigational New Drug, or IND, application filed by 3D Medicines for a small Phase 1 clinical trial investigating safety of GPS in China.

Cost of Licensing Revenue

There was no cost of licensing revenue recognized during the year ended December 31, 2023, and $0.1 million of sublicensing fees payable under our license from MSK in connection with the 3D Medicines Agreement during the year ended December 31, 2022.

Research and Development

Research and development expenses were $24.0 million for the year ended December 31, 2023 compared to $20.3 million for the year ended December 31, 2022.

As compared to the prior period, the $4.6 million increase in research and development expenses was primarily attributable to a $2.6 million increase in clinical trial expenses primarily related to our ongoing Phase 3 REGAL clinical trial of GPS in AML, a $1.4 million increase in personnel related expenses due to increased headcount, a $0.8 million increase in clinical and regulatory consulting expenses, and a $0.2 million increase in other research and development expenses.

These increases were partially offset by a $0.4 million decrease in manufacturing and clinical drug supply costs due to the timing of registration batches and a technology transfer in the prior period.

We anticipate that our research and development expenses will increase in the future as we continue to advance the development of GPS, including our Phase 3 REGAL clinical trial of GPS in AML, and the ongoing and planned clinical trials of GFH009.

As compared to the prior period, the $3.7 million increase in research and development expenses was primarily attributable to a $1.9 million increase in clinical trial expenses primarily related to our ongoing Phase 3 REGAL clinical trial of GPS in AML and our Phase 2a and Phase 1 clinical trials of SLS009, a $1.3 million increase in clinical and regulatory consulting expenses due to the advancement of our clinical programs, and a $1.1 million increase in personnel related expenses primarily due to increased headcount.

These increases were partially offset by a $0.5 million decrease in manufacturing and clinical drug supply costs due to the timing of the manufacture of drug substance and drug product batches, and a $0.1 million decrease in licensing and other research and development costs.

We anticipate that our research and development expenses will increase in the future as we continue to advance the development of GPS and SLS009, including our Phase 3 REGAL clinical trial of GPS in AML and the ongoing and planned clinical trials of SLS009.

General and Administrative

General and administrative expenses were $13.9 million for the year ended December 31, 2023 compared to $12.6 million for the year ended December 31, 2022.

The $1.3 million increase was primarily driven by a $1.9 million increase in personnel related expenses due to increased headcount including a $0.6 million increase in non-cash stock-based compensation, a $0.7 million increase in outside services and public company costs, and a $0.2 million increase in office and other general and administrative costs.

These increases were partially offset by a $1.1 million decrease related to amortization expense of our contract asset associated with the 3DMed License Agreement, and a $0.4 million decrease in legal fees.

The $1.3 million increase was primarily driven by a $0.5 million increase in personnel related expenses primarily due to increased headcount, including a $0.3 million increase in non-cash stock-based compensation, a $0.6 million increase in intellectual property fees, a $0.1 million increase in outside services and public company costs, and a $0.1 million increase in other general and administrative costs.

Acquired In-Process Research and Development

During the year ended December 31, 2022, we recognized $10.0 million for the acquisition of in-process research and development related to the in-licensing of GFH009, a highly selective next generation CDK9 inhibitor, $4.5 million of which was paid in April 2022 and the remaining $5.5 million which is deemed probable to occur and expected to be paid by the end of the second quarter of 2023.

There was no acquired in-process research and development expense during the year ended December 31, 2023.

In-Process Research and Development Impairment Charge

There were no in-process research and development charges during the year ended December 31, 2022.

In the fourth quarter of 2021, we performed an annual impairment analysis of our IPR&D.

The impairment charge recognized during the year ended December 31, 2021 was in connection with our determination that consummating an out-licensing transaction of NPS for further development in breast cancer was unlikely and taking into account the deferred development timelines and a lower probability of success associated with earlier stages of clinical development for the potential development of NPS in other oncology indications.

The Company determined that the carrying amount of the IPR&D associated with NPS exceeded the fair value and recorded a $5.7 million impairment charge during the year ended December 31, 2021.

During the year ended December 31, 2022, we recognized $10.0 million for the acquisition of in-process research and development related to the in-licensing of SLS009.

Non-Operating Income

Non-operating income for the years ended December 31, 2022 and 2021, respectively, was as follows (in thousands):

Non-operating income for the years ended December 31, 2023 and 2022 was as follows (in thousands):

Year ended December 31,

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Total non-operating income $ 529 $ 649 $ (120)

The decrease in our non-operating income during the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to a $4.0 million decrease in the change in fair value of contingent consideration, partially offset by a $0.3 million increase in interest income earned from our cash and cash equivalents.

The $4.3 million change in estimated fair value of the contingent consideration during the year ended December 31, 2021 related to the inability to execute an out-licensing transaction of NPS for further development in breast cancer and reflected adjusted assumptions of deferred development timelines and a lower probability of success, associated with earlier stages of clinical development, for the potential development of NPS in other oncology indications.

During the year ended December 31, 2022, we ceased all development activity of NPS and effort to out-license the asset in any indication and reduced the probability of success of achieving certain regulatory and net sales milestones to zero.

Interest income for the years ended December 31, 2022 and 2021 consists of interest earned from our cash and cash equivalents.

Interest income increased during the year December 31, 2022 primarily due to higher interest rates.

The change in estimated fair value of liability-classified warrants to acquire shares of our common stock during the years ended December 31, 2022 and 2021 related to changes in our common stock price and less time to expiration.

The decrease in our non-operating income during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to a $0.3 million decrease in the change in fair value of contingent consideration in the prior period, partially offset by a $0.2 million increase in interest income earned from our cash and cash equivalents primarily due to higher interest rates.

The changes in fair value of warrant liability and changes in fair value of contingent consideration are all non-cash in nature.

Income Tax Benefit

There was no income tax benefit recognized for the year ended December 31, 2022.

For the year ended December 31, 2021, we recognized an income tax benefit of $0.2 million, primarily related to the intangible asset impairment charge.

Liquidity and Capital Resources

We did not generate any revenue from product sales in the years ended December 31, 2023 and 2022.

Through December 31, 2022, we have only generated licensing revenue from the 3DMed License Agreement.

Through December 31, 2023, we have only generated licensing revenue from the 3D Medicines Agreement.

Since inception, we have incurred net losses, used net cash in our operations, and have funded substantially all of our operations through proceeds of the sale of equity securities and convertible notes.

Sources of Liquidity

To date, we have received $10.5 million in upfront payments and certain technology transfer and regulatory milestones from 3DMed, pursuant to its Exclusive License Agreement for GPS.

The participation of 3DMed in the REGAL Phase 3 clinical trial in China will trigger two development milestone payments totaling $13.0 million to us, which we expect to receive in the first half of 2023.

A total of $191.5 million in potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3DMed License Agreement as of December 31, 2022, which milestones are all variable in nature and not under the Company's control.

On March 19, 2024, we consummated a registered direct offering, or the March 2024 Registered Direct Offering, in which we entered into a Securities Purchase Agreement with two institutional investors pursuant to which we agreed to issue and sell 11,000,000 shares of our common stock and 2,029,316 pre-funded warrants exercisable for shares of common stock.

Each share of common stock was sold together at a purchase price of $1.535 and each pre-funded warrant was sold at a purchase price of $1.5349.

The gross proceeds to us from the March 2024 Registered Direct Offering were approximately $20.0 million, before deducting the placement agent's fees and related offering expenses.

In a concurrent private placement, we agreed to issue to the two institutional investors exercisable for up to an aggregate of 13,029,316 shares of common stock warrants at an exercise price of $1.41 per share.

Subsequent to the closing of the March 2024 Registered Direct Offering, 1,014,658 pre-funded warrants were exercised for shares of common stock.

On January 8, 2024, we consummated a public offering on a "reasonable best efforts" basis, or the January 2024 Offering, issuing 10,130,000 shares of common stock and an aggregate of 1,870,000 pre-funded warrants exercisable for shares of common stock, together with accompanying warrants to purchase an aggregate of 12,000,000 shares of common stock.

Each share of common stock and accompanying common warrant were sold together at a combined offering price of $0.75, and each pre-funded warrant and accompanying common warrant were sold together at a combined offering price of $0.7499.

The aggregate gross proceeds to us from the January 2024 Offering were approximately $9.0 million, before deducting the placement agent's fees and related offering expenses.

On November 2, 2023, we consummated a registered direct offering, or the November 2023 Registered Direct Offering, in which we entered into a Securities Purchase Agreement with a single institutional investor pursuant to which we agreed to issue and sell 3,100,000 shares of our common stock and 552,300 pre-funded warrants exercisable for shares of common stock, together with accompanying warrants to purchase an aggregate of 3,652,300 shares of common stock.

Each share of common stock and accompanying warrant were sold together at a combined purchase price of $1.0952 and each pre-funded warrant and accompanying warrant were sold together at a combined purchase price of $1.0951.

The net proceeds to us from the November 2023 Registered Direct Offering were approximately $3.5 million, after deducting the placement agent's fees and related offering expenses.

On February 28, 2023, we consummated an underwritten public offering, or the February 2023 Offering, issuing 7,220,217 shares of common stock and accompanying common stock warrants to purchase an aggregate of 7,220,217 shares of common stock.

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The net proceeds from the February 2023 Offering were approximately $18.5 million, after deducting underwriting discounts and commissions and estimated offering expenses, and excluding the exercise of any warrants.

On April 5, 2022, we consummated an underwritten public offering, or the April 2022 Offering, issuing 4,629,630 shares of common stock and accompanying common stock warrants to purchase an aggregate of 4,629,630 shares of common stock.

The shares of common stock and accompanying common stock warrants were sold at a combined price of $5.40 per share and accompanying common stock warrant.

Each common stock warrant sold with the shares of common stock represents the right to purchase one share of our common stock at an exercise price of $5.40 per share.

The common stock warrants are exercisable immediately and will expire on April 5, 2027, five years from the date of issuance.

The net proceeds to us from the April 2022 Offering, after deducting the underwriting discounts and commissions and other offering expenses, and excluding the exercise of any warrants, were approximately $23.0 million.

On March 31, 2022, or the effective date of the GFH009 Agreement, we entered into the GFH009 Agreement with GenFleet pursuant to which GenFleet granted to us a sublicensable, royalty-bearing license to certain of its intellectual property to develop, manufacture, and commercialize GFH009 for the treatment, diagnosis or prevention of disease in humans and animals in all countries and territories of the world other than Greater China, or the GFH009 Territory.

GFH009 is currently in a Phase 1 clinical trial in the United States and China.

In consideration for the exclusive license, we agreed to pay GenFleet (i) an upfront and technology transfer fee of $10.0 million, of which $4.5 million was paid in April 2022, and $5.5 million is due upon the first day of the 15th calendar month following the effective date of the GFH009 Agreement, (ii) development and regulatory milestone payments for up to three indications totaling up to $48.0 million in the aggregate, and (iii) sales milestone payments totaling up to $92.0 million in the aggregate upon the achievement of certain net sales thresholds in a given calendar year.

We have also agreed to pay GenFleet single-digit tiered royalties based upon a percentage of annual net sales, with the royalty rate escalating based on the level of annual net sales of GFH009 in the GFH009 Territory ranging from the low to high single digits.

On April 16, 2021, the Company entered into a Controlled Equity Offering SM Sales Agreement, or the Sales Agreement, with Cantor Fitzgerald & Co., or the Agent.

From time to time during the term of the Sales Agreement, we may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds.

The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold.

Shares of common stock sold under the Sales Agreement are offered and sold pursuant to our registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and declared effective on April 29, 2021.

During the year ended December 31, 2022, we sold 415,005 shares of common stock pursuant to the Sales Agreement at an average price of $2.60 per share for aggregate net proceeds of approximately $1.0 million.

Subsequent to December 31, 2022, the Company sol d 76,882 shares of common stock pursuant to the Sales Agreement at an average price of $3.59 for aggregate net proceeds of approximately $0.3 million.

There remains approximately $39.2 million available for future sales of shares of common stock under the Sales Agreement.

Other than the Sales Agreement, we currently do not have any commitments to obtain additional funds.

From time to time during the term of the Sales Agreement, subject to certain restrictions, we could offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds.

The Agent was entitled to collect a fee equal to 3% of the gross sales price of all shares of common stock sold.

Shares of common stock sold under the Sales Agreement were offered and sold pursuant to our registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and declared effective on April 29, 2021.

During the year ended December 31, 2023, we sold a total of 92,882 shares of common stock pursuant to the Sales Agreement at an average price of $3.21 per share for aggregate net proceeds of approximately $0.3 million.

On January 2, 2024, we mutually agreed with the Agent to terminate the Sales Agreement.

In December 2020, together with our wholly-owned subsidiary, SLSG Limited, LLC, we entered into the 3D Medicines Agreement pursuant to which we granted 3D Medicines a sublicensable royalty-bearing license under certain intellectual property owned or controlled by us, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS product candidates for all therapeutic and other diagnostic uses in the 3DMed Territory.

As of December 31, 2023, we have received an aggregate of $10.5 million in upfront payments and certain technology transfer and regulatory milestone payments under our license agreement with 3D Medicines.

A total of $191.5 million in potential future development, regulatory, and sales milestones, not including future

royalties, remains under the 3D Medicines Agreement, which milestones are all variable in nature and not under our control.

Funding Requirements

During the year ended December 31, 2022, we incurred a net loss of $41.3 million, used $23.8 million of cash in operations, and had an accumulated deficit of $179.9 million as of December 31, 2022.

We continue to expect to generate operating losses and negative cash flows for the next few years and we will need additional funding to support our planned operating activities through profitability.

The transition to profitability is dependent upon the successful development, approval, and commercialization of our product candidates and the achievement of a level of revenues adequate to support our cost structure.

As of December 31, 2022, we had cash and cash equivalents of $17.1 million.

We expect that our cash and cash equivalents will not be sufficient to fund our current planned operations for at least the next twelve months from the date of issuance of these financial statements.

The $13.0 million of development milestone payments to us triggered by 3DMed's participation in the REGAL study are variable in nature and not under our control, and therefore are not included in our going concern assumption.

As of December 31, 2023, we had an accumulated deficit of $217.2 million, cash and cash equivalents of $2.5 million and restricted cash and cash equivalents of $0.1 million.

In addition, we had current liabilities of $13.7 million as of December 31, 2023.

We expect that our cash and cash equivalents, together with the net proceeds from the January 2024 Offering and March 2024 Registered Direct Offering, will not be sufficient to fund our current planned operations for at least the next twelve months from the date of issuance of these financial statements.

These conditions give rise to a substantial doubt over our ability to continue as a going concern.

This going concern assumption is based on management’s assessment of the sufficiency of our current and future sources of liquidity considering whether or not it is probable we will be able to meet our obligations as they become due for at least one year from the date our consolidated financial statements are available to be issued, and if not, whether our liquidation is imminent.

This going concern assumption is based on management’s assessment of the sufficiency of our current and future sources of liquidity and whether it is probable we will be able to meet our obligations as they become due for at least one year from the date our consolidated financial statements are available to be issued, and if not, whether our liquidation is imminent.

Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

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If we are unable to obtain additional funding on a timely basis, we will be required to scale back our plans and place certain activities on hold.

Other than the Sales Agreement, we currently do not have any commitments to obtain additional funds.

We currently do not have any commitments to obtain additional funds.

Our management continues to evaluate different strategies to obtain the required funding for future operations.

These strategies may include utilizing the Sales Agreement, public and private placements of equity and/or debt securities and payments from potential strategic research and development collaborations.

These strategies may include public and private placements of equity and/or debt securities, as well as payments from potential strategic research and development collaborations or licensing and/or marketing arrangements with pharmaceutical companies.

Additionally, we continue to pursue discussions with global and regional pharmaceutical companies for licensing and/or co-development rights to our product candidates.

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Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 2,630 $ 17,225

Restricted cash and cash equivalents of $0.1 million as of December 31, 2022 and 2021 related to certificates of deposit maintained on hand with our financial institutions as collateral for our corporate credit cards.

Restricted cash and cash equivalents of $0.1 million as of December 31, 2023 and 2022 relates to certificates of deposit maintained on hand with our financial institutions as collateral for our corporate credit cards.

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2023 and 2022 (in thousands):

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Net Cash Flow from Operating Activities

Net cash used in operating activities of $31.4 million during the year ended December 31, 2023 was primarily attributable to our net loss of $37.3 million, and partially offset by a change in our operating assets and liabilities of $3.3 million and various net non-cash charges of $2.6 million.

The net change in our operating assets and liabilities is due to an increase in accounts payable of $2.3 million, an increase in accrued expenses and other current liabilities of $1.4 million, and a decrease in prepaid expenses and other assets of $0.1 million, which was partially offset by a decrease in operating lease liabilities of $0.5 million.

Net non-cash charges were driven by $2.1 million in non-cash stock compensation expense and $0.5 million in non-cash lease expense.

Net cash used in operating activities of $23.8 million during the year ended December 31, 2022 was primarily attributable to our net loss of $41.3 million, and partially offset by various net non-cash charges of $11.9 million, and a change in our operating assets and liabilities of $5.6 million.

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The net change in our operating assets and liabilities is due to an increase in accrued expenses and other current liabilities of $3.6 million, an increase in accounts payable of $1.2 million and a decrease in prepaid expenses and other current assets of $1.3 million, which was partially offset by a decrease in operating lease liabilities of $0.5 million.

Net cash used in operating activities of $26.0 million during the year ended December 31, 2021 was primarily attributable to our net loss of $20.7 million and a change in our operating assets and liabilities of $7.6 million, which was partially offset by various net non-cash charges of $2.3 million.

The net change in our operating assets and liabilities was primarily attributable to a decrease in deferred revenue of $5.6 million, a decrease in accounts payable and accrued expenses and other current liabilities of $1.8 million, a $1.1 million increase in prepaid expenses and other assets primarily for clinical trial costs, and a $0.2 million decrease in operating lease liabilities, which were partially offset by a $1.1 million decrease in contract acquisition costs related to the out-licensing of intellectual property rights and transfer of technical know-how associated with the 3DMed License Agreement.

Net Cash Used in Investing Activities

Net cash used in investing activities of $4.5 million during the year ended December 31, 2022 related to license payments made for the acquisition of in-process research and development under the GFH009 Agreement.

There was no cash used in investing activities during the year ended December 31, 2021.

Net cash used in investing activities of $5.5 million and $4.5 million during the years ended December 31, 2023 and 2022, respectively, was related to license payments made for the acquisition of in-process research and development under the GenFleet Agreement.

Net Cash Flow from Financing Activities

We generated $22.3 million of net cash from financing activities for the year ended December 31, 2023, which was due to $21.9 million in aggregate net proceeds received from the February 2023 Offering and the November 2023 Offering, $0.3 million in aggregate net proceeds received from the issuance of common stock under the Sales Agreement, and a $0.1 million in aggregate net proceeds received from the issuance of common stock under our employee stock purchase plan.

We generated $24.1 million of net cash from financing activities for the year ended December 31, 2022, which was due to $23.0 million in aggregate net proceeds received from our underwritten public offering, which closed in April 2022, $1.0 million in aggregate net proceeds received from the issuance of common stock under the Sales Agreement, and $0.1 million in aggregate net proceeds received from the issuance of common stock under our employee stock purchase plan.

We generated $12.1 million of net cash from financing activities for the year ended December 31, 2021, which was primarily attributable to $9.0 million in net proceeds from the issuance of common stock under the Sales Agreement and $3.1 million in net proceeds from the exercise of warrants to acquire shares of common stock.

Contractual Obligations and Other Commitments

Our lease commitments reflect payments due under our lease agreement for our office space in New York, New York that expires in December 2024, including additional space which began in February 2022.

Our lease commitments reflect payments due under our lease agreement for our office space in New York, New York that expires in September 2025.

As of December 31, 2023, our contractual commitment for our lease was $1.0 million, which will be paid over the remaining term of the lease.

For additional information on our leases and timing of future payments, please read Note 8, Leases, to the consolidated financial statements included in this Form 10-K.

For additional information on our leases and

timing of future payments, please read Note 7, Leases, to the consolidated financial statements included in this Form 10-K.

Other Commitments

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We enter into contracts in the normal course of business with various third parties for clinical trials, manufacturing, and other services and products for operating purposes.

These contracts provide for termination

These contracts provide for termination upon notice.

Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.

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If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit’s goodwill is less than the carrying value of the reporting unit’s goodwill.

We did not recognize any impairment of goodwill during the years ended December 31, 2022 and 2021.

Accrued Research and Development Expenses

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

Valuation of Contingent Consideration

Acquisitions may include contingent consideration payments based on the achievement of certain future events.

Contingent consideration is required to be recognized at fair value as of the acquisition date.

The obligations for such contingent consideration payments are recorded at fair value on the acquisition date.

The contingent consideration obligations are then evaluated each reporting period.

Changes in the fair value of contingent consideration, other than changes due to payments, are recognized as a gain or loss and recorded within the change in the fair value of contingent consideration in the consolidated statements of operations.

The fair value of development and regulatory milestones are estimated utilizing a probability adjusted, discounted cash flow approach.

The fair value of net sales milestones is based on probability adjusted sales estimates and estimated discount rates and utilizes an option pricing model with Monte Carlo simulation to simulate a range of possible payment scenarios, and the average of the payments in these scenarios is then discounted to calculate present fair value.

The discount rates are an estimated measure of credit risk associated with the years of expected payments based on the current development stage of the product candidate, our specific development plan for that product candidate adjusted for the probability of completing the stages of development and when the contingent payments would be triggered.

In estimating the probability of success, we utilize data regarding similar milestone events from several sources, including industry studies and the Company's experience.

The fair value of the contingent consideration is classified as a Level 3 liability as the valuation requires substantial judgment and estimation of factors that are not currently observable in the market.

If different assumptions were used for the various inputs to the valuation, including but not limited to, assumptions involving the probability of success, estimated discount rate, and projected years of payment, the estimated fair value could be significantly higher or lower than the fair value determined.

Stock-Based Compensation

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As a result, if we revise our assumptions and estimates, our stock-based compensation expense could change.

Given our limited history as a publicly traded company following the Merger on December 29, 2017, we did not have sufficient trading data to calculate volatility based on our own common stock, and the expected volatility was calculated as of each grant date based on our own implied volatility in combination with a peer group of publicly traded companies.

traded companies.

The expected term of the stock options was determined based upon the simplified approach for employees and non-employee directors, allowed under SEC Staff Accounting Bulletin No.

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As a result, if we revise such assessment, our stock-based compensation expense could change.

Recent Accounting Pronouncements

See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our consolidated financial statements.

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