What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-29 compared with 2023-02-23 · 144 added, 120 removed, 471 unchanged (36% of the section changed)

15 unchanged sentences

We have audited the accompanying balance sheets of Shattuck Labs, Inc.

(the Company) as of December 31, 2022 and 2021, the related statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the years then ended, and the related notes (collectively, the financial statements).

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

(the Company) as of December 31, 2023 and December 31, 2022, the related statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended December 31, 2023, and the related notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and December 31, 2022, and the results of its operations and its cash flows for the years then ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases as of January 1, 2022 due to the adoption of Accounting Standards Update (ASU) 2016-02, “Leases” (Topic 842).

Basis for Opinion

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Non-current operating lease liabilities 3,406 4,202

Deferred rent — 2,213

Total liabilities 14,859 29,167

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Additional paid-in capital 451,006 396,041

Accumulated other comprehensive loss ( 877 ) ( 560 )

Accumulated other comprehensive income (loss)

Accumulated deficit ( 306,310 ) ( 219,012 )

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Net loss $ ( 87,298 ) $ ( 101,945 )

Unrealized loss on investments ( 317 ) ( 497 )

Unrealized gain (loss) on investments

Comprehensive loss $ ( 86,417 ) $ ( 102,262 )

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Common Stock Additional

Accumulated Other Comprehensive Loss Accumulated

Accumulated Other Comprehensive Income (Loss)

Total Stockholders’ Equity

1 unchanged sentence

Balance at December 31, 2021

42,338,898 $ 5 $ 389,408 $ ( 560 ) $ ( 117,067 ) $ 271,786

Exercise of stock options and purchases pursuant to employee stock purchase plan 51,688 — 171 — — 171

Vesting of common stock previously subject to vesting requirements 11,752 — — — — —

Stock-based compensation expense — — 6,462 — — 6,462

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Balance at December 31, 2022

Exercise of stock options and purchases pursuant to employee stock purchase plan 51,688 — 171 — — 171

42,390,586 $ 5 $ 396,041 $ ( 877 ) $ ( 219,012 ) $ 176,157

Proceeds from sale of common stock and pre-funded warrants, net of issuance cost 4,651,163 — — 47,580 — — — — — 47,580

Stock-based compensation expense — — — — 6,939 — — — — — 6,939

Unrealized loss on investments — — — ( 317 ) — ( 317 )

Proceeds from exercise of stock options and purchase of common stock pursuant to employee stock purchase plan 158,274 — — — 499 — — — — — 499

Issuance of common stock upon settlement of restricted stock units 77,312 — — — — — — — —

Taxes paid related to net share settlement of equity awards ( 17,227 ) — ( 53 ) — — ( 53 )

Unrealized gain on investments — — — — — — 881 — — — 881

Net loss — — — — — — — — ( 87,298 ) — ( 87,298 )

10 unchanged sentences

Depreciation 4,042 3,073

Net amortization of premium on investments 1,370 3,035

Loss on sale of assets 704 —

Amortization of (discount) premium on debt securities

( 1,483 ) 1,370

Non-cash operating lease expense 364 302

Loss on sale of assets 303 704

Changes in operating assets and liabilities:

5 unchanged sentences

Deferred revenue 343 —

Deferred rent — 1,524

Net cash used in operating activities ( 81,228 ) ( 94,498 )

Cash flows from investing activities:

Purchases of property and equipment ( 11,614 ) ( 7,926 )

Sale of property and equipment 104 —

Sale and maturities of investments 190,999 193,325

Purchases of investments ( 79,733 ) ( 132,377 )

Net cash provided by (used in) investing activities 49,438 ( 10,443 )

Purchases of property and equipment ( 407 ) ( 11,614 )

Sale of property and equipment

Net cash provided by investing activities

110,859 49,438

Cash flows from financing activities:

Proceeds from the exercises of stock options and purchases pursuant to employee stock purchase plan 171 1,929

Proceeds from sale of common stock and pre-funded warrants, net of issuance cost 48,170 —

Proceeds from the exercise of stock options and purchases of common stock pursuant to the employee stock purchase plan 499 171

Taxes paid related to net share settlement of equity awards ( 53 ) —

Net cash provided by financing activities 48,616 171

Net decrease in cash and cash equivalents ( 44,889 ) ( 65,630 )

Net increase (decrease) in cash and cash equivalents

78,247 ( 44,889 )

Cash and cash equivalents, beginning of period 47,379 92,268

Cash and cash equivalents, end of period $ 125,626 $ 47,379

Supplemental disclosures of non-cash financial activities:

Supplemental disclosures of non-cash investing and financing activities:

Unpaid amounts for direct offering costs $ 339 $ —

Deferred offering cost paid in prior period $ 251 $ —

Unpaid amounts related to purchase of property and equipment $ 71 $ —

Operating lease liabilities recognized for operating right-of-use assets $ — $ 5,447

Operating right-of-use assets exchanged for operating lease liabilities $ — $ 2,945

Unpaid amounts related to purchase of property and equipment $ — $ 392

See accompanying notes to financial statements

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Shattuck Labs, Inc.

(the “Company”) was incorporated in 2016 in the State of Delaware and is a clinical-stage biopharmaceutical company developing dual-sided fusion proteins, including its Agonist Redirected Checkpoint (“ARC ® ”) and gamma delta T cell engager (“GADLEN ™ ”) platforms, as novel classes of biologic medicines capable of multifunctional activity with potential applications in oncology and inflammatory diseases.

(the “Company”) was incorporated in 2016 in the State of Delaware and is a clinical-stage biotechnology company pioneering the development of dual-sided fusion proteins, including its Agonist Redirected Checkpoint (“ARC®”) platform, as an entirely new class of biologic medicine capable of multifunctional activity with potential applications in oncology and autoimmune and inflammatory diseases, and other therapeutic areas.

Using its proprietary technology, the Company is building a pipeline of therapeutics, initially focused on the treatment of solid tumors and hematologic malignancies.

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Management believes that the Company’s cash and cash equivalents and investments of $ 130.6 million as of December 31, 2023 are sufficient to fund projected operations of the Company for at least the next twelve months.

COVID-19 Pandemic

The COVID-19 pandemic has had, and may continue to have, a broad adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates and conducts its business and in which the Company’s partners operate and conduct their business.

The Company and its third-party vendors and consultants have experienced disruptions to their businesses as a result of the COVID-19 pandemic.

Specifically, the outbreak has caused disruptions in the Company’s ability to manufacture clinical trial materials, including the acquisition of raw materials needed for such manufacturing, enrollment and treatment of patients in clinical trials, and slowdowns and shutdowns of the laboratories and other service providers that are being relied upon in the development of the Company’s product candidates.

The extent to which the COVID-19 pandemic or any other health epidemic may impact the Company’s results will depend on future developments, which are uncertain and cannot be predicted.

Accordingly, the COVID-19 pandemic could have a material and adverse effect on the Company’s business, results of operations and financial condition.

Global Economic Considerations

In addition, the global macroeconomic environment is uncertain, and could be negatively affected by, among other things, increased U.S.

trade tariffs and trade disputes with other countries, instability in the global capital and credit markets, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine and other political tensions, and lingering effects of the COVID-19 pandemic.

The global macroeconomic environment is uncertain, and could be negatively affected by, among other things, increased U.S.

trade tariffs and trade disputes with other countries, instability in the global capital and credit markets, supply chain weaknesses, financial institution instability, instability in the geopolitical environment, and lingering effects of the COVID-19 pandemic.

Such challenges have caused, and may continue to cause, recession fears, rising interest rates, foreign exchange volatility and inflationary pressures.

At this time, we are unable to quantify the potential effects of this economic instability on our future operations.

At this time, we are unable to quantify the potential effects of this economic instability on the Company’s future operations.

Basis of Presentation and Summary of Significant Accounting Policies

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The Company invests in only highly-rated debt securities that management believes protects the Company from risk of default and impairment of value.

Substantially all of the Company’s revenue through 2021 was derived from its 2017 collaboration agreement (the “Collaboration Agreement”) with Millennium Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company Limited (“Takeda”), which was mutually terminated in 2021.

The Company is highly dependent on a limited number of contract manufacturing organizations (“CMOs”) to supply drug products for its research and development activities of its programs, including clinical trials and non-clinical studies.

All of the Company’s revenue in 2023 and 2022 was derived from a collaboration agreement with ImmunoGen, Inc.

(“ImmunoGen”) and a collaboration agreement with another third-party pharmaceutical company.

In February 2024, ImmunoGen was acquired by AbbVie, Inc.

The Company is highly dependent on a limited number of contract development and manufacturing organizations (“CDMOs”) to supply drug products for its research and development activities of its programs, including clinical trials and non-clinical studies.

These programs could be adversely affected by a significant interruption in the supply of such drug products.

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The Company considers all demand deposits with financial institutions and all highly liquid investments with original maturities of 90 days or less at the date of purchase to be cash and cash equivalents.

Cash and cash equivalents consisted of $ 3.5 million held in operating accounts and $ 43.9 million held in money market funds as of December 31, 2022 and $ 14.6 million held in operating accounts and $ 77.7 million held in money market funds as of December 31, 2021.

Cash and cash equivalents consisted of $ 4.8 million held in operating accounts, $ 81.1 million held in money market funds and $ 39.7 million in U.S.

Government Securities as of December 31, 2023 and $ 3.5 million held in operating accounts and $ 43.9 million held in money market funds as of December 31, 2022.

The Company's investments consist of highly-rated U.S.

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The Company reviews available-for-sale debt securities for impairments related to credit losses and other factors each quarter.

As of December 31, 2022, there were no impairments related to credit losses of investments.

As of December 31, 2023 and 2022, there were no impairments related to credit losses of investments.

Prepaid Expenses and Other Current Assets

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An impairment loss is recognized to the extent an asset group is not recoverable and the carrying amount exceeds the projected discounted future cash flows arising from these assets.

In the year ended December 31, 2022, the Company recorded $ 0.7 million of impairment losses related to lab equipment that was determined to no longer be needed, which is included in the Company's research and development costs.

There were no impairments of long-lived assets for the year ended December 31, 2021.

In the years ended December 31, 2023 and 2022, the Company recorded $ 0.3 million and $ 0.7 million, respectively, of impairment losses related to lab equipment that was determined to no longer be needed, which is included in the Company's research and development costs.

The Company determines if an arrangement is a lease at inception.

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Rent expense for the Company's operating leases is recognized on a straight-line basis over the lease term.

The Company has elected to not apply the recognition requirement of Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) of the Financial Accounting Standards Board (“FASB”) to leases with a term of 12 months or less for all classes of assets.

The Company has elected to not apply the recognition requirement of Accounting Standards Codification (“ASC”) 842, Leases of the Financial Accounting Standards Board (“FASB”) to leases with a term of 12 months or less for all classes of assets.

Commitments and Contingencies

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The Company evaluates the promised goods or services in the contract to determine which promises, or group of promises, represent performance obligations.

In contemplation of whether a promised good or service meets the criteria required of a performance obligation, the Company considers the stage of development of the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property and whether the promised goods or services are integral to or dependent on other promises in the contract.

to or dependent on other promises in the contract.

When accounting for an arrangement that contains multiple performance obligations, the Company must develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

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Research and development costs are expensed as incurred, and include salaries, stock-based compensation and other personnel-related costs, equipment and supplies, depreciation, nonclinical studies, clinical trials and manufacturing development activities.

A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers, including CROs and CMOs.

The Company accrues for expenses resulting from obligations under agreements with CROs, CMOs and other outside service providers for which payment flows do not match the periods over which materials or services are provided to the Company.

Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs and other outside service providers.

These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through an evaluation of the progress or

stage of completion of the services.

In the event advance payments are made to a CRO, CMO or outside service provider, the payments will be recorded as a prepaid asset which will be amortized as the contracted services are performed.

A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers, including CROs and CDMOs.

The Company accrues for expenses resulting from obligations under agreements with CROs, CDMOs and other outside service providers for which payment flows do not match the periods over which materials or services are provided to the Company.

Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CDMOs and other outside service providers.

These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through an evaluation of the progress or stage of completion of the services.

In the event advance payments are made to a CRO, CDMO or outside service provider, the payments will be recorded as a prepaid asset which will be amortized as the contracted services are performed.

As actual costs become known, the Company adjusts its accruals and prepaid assets accordingly.

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The Company makes significant judgments and estimates in determining the accrual and/or prepaid balance in each reporting period and changes in these estimates may result in material changes to the Company’s accruals that could materially affect the Company’s results of operations.

Pre-Funded Warrants

The Company’s pre-funded warrants are classified as a component of permanent stockholders’ equity within additional paid-in capital and were recorded at the issuance date using a relative fair value allocation method.

The pre-funded warrants are

equity classified because they (i) are freestanding financial instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria.

In addition, such pre-funded warrants do not provide any guarantee of value or return.

The Company valued the pre-funded warrants at issuance, concluding that their sales price approximated their fair value.

Stock-Based Compensation

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Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period.

Basic shares outstanding includes the weighted average effect of the Company’s outstanding pre-funded warrants, the exercise of which requires nominal consideration for the delivery of shares of common stock.

Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as redeemable convertible preferred stock, or convertible notes (if any), stock options and unvested shares of restricted stock, which would result in the issuance of incremental shares of common stock.

3 unchanged sentences

Stock options 4,942,164 4,209,255

Unvested restricted stock 309,477 —

Unvested restricted stock units

590,403 309,477

5,532,567 4,518,732

Other Comprehensive Income (Loss)

2 unchanged sentences

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASC 842, which requires a lessee to record a ROU asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

The FASB deferred the effective date of this Accounting Standards Update until the annual periods beginning after December 15, 2021.

The Company adopted this pronouncement effective January 1, 2022.

See Note 6 for the impact on the financial statements.

No prior period amounts were adjusted and such prior period amounts continue to be reported in accordance with previous lease guidance, ASC 840, Leases (“ASC 840”).

The Company elected to use all of the available practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company to carry forward the historical lease classification of those leases in place as of January 1, 2022.

The following table summarizes the impact of the adoption of ASC 842 on the accompanying balance sheet as of January 1, 2022 (in thousands):

December 31, 2021 Effect of the Adoption of ASC 842 January 1, 2022

Other assets (1) $ 381 $ 2,945 $ 3,326

Lease liabilities:

Accrued expenses and other current liabilities (2) $ 14,574 $ 255 $ 14,829

Non-current operating lease liabilities $ — $ 4,903 $ 4,903

Deferred rent (3) $ 2,213 $ ( 2,213 ) $ —

1 Operating lease right-of-use assets are classified within other assets.

2 Current operating lease liabilities are classified within accrued expenses and other current liabilities.

Current deferred rent was classified within accrued expenses as of December 31, 2021.

3 Non-current deferred rent was classified within deferred rent as of December 31, 2021.

There were no recently issued accounting statements expected to have a material impact on the Company.

The following table represents the Company’s available-for-sale investments by major security type (amounts in thousands):

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government securities $ 4,998 $ 1 $ 4,999

Total investments $ 114,778 $ ( 877 ) $ 113,901

Cash Equivalents:

government securities

39,657 3 39,660

Total level 1 debt securities

$ 44,655 $ 4 $ 44,659

December 31, 2022

1 unchanged sentence

government securities $ 114,778 $ ( 877 ) $ 113,901

Total investments $ 177,096 $ ( 560 ) $ 176,536

Cash Equivalents:

government securities

Total level 1 debt securities

$ 114,778 $ ( 877 ) $ 113,901

The Company’s investment instruments and cash and cash equivalents are classified using Level 1 inputs within the fair value hierarchy and are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

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Construction in progress 100 104

23,380 12,718

Property and equipment, gross 23,310 23,380

Accumulated depreciation and amortization ( 9,506 ) ( 5,709 )

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Compensation and related benefits 3,794 3,967

Lease liabilities 796 701

Litigation settlement — 1,400

1 unchanged sentence

Total accrued expenses and other current liabilities $ 9,866 $ 17,795

Commitments and Contingencies

Operating Leases

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The following table summarizes the Company’s recognition of its operating leases (in thousands):

Balance Sheet Classification December 31, 2022

Balance Sheet Classification 2023 2022

Other assets $ 2,271 $ 2,635

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The following table summarizes the weighted-average remaining lease term and discount rates for the Company’s operating leases:

December 31, 2022

Lease term (years) 4.5 5.5

Discount rate 8.6 % 8.6 %

The Company incurred rent expense for its operating leases of $ 0.8 million and $ 0.7 million during the years ended December 31, 2022 and 2021, respectively, included within operating expenses in the statements of operations and

comprehensive loss.

Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2022 was $ 1.0 million and was included in net cash used in operating activities in the statement of cash flows.

The Company incurred rent expense for its operating leases of $ 0.8 million for the years ended December 31, 2023 and 2022, respectively, which is included within operating expenses in the statements of operations and comprehensive loss.

Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2023 and 2022 was $ 1.0 million and was included in net cash used in operating activities in the statement of cash flows.

The maturities of the Company’s operating lease liabilities as of December 31, 2023 were as follows (in thousands):

Thereafter 873

Total lease payments $ 5,086

1 unchanged sentence

Total $ 4,202

As of December 31, 2021, future annual minimum lease payments, as defined under the previous lease accounting guidance of ASC 840, due under non-cancelable operating leases at December 31 of each year are as follows (in thousands):

Thereafter 1,722

Total minimum lease payments $ 7,162

Nighthawk Biosciences, Inc.

License Agreement

In connection with a license agreement with Nighthawk Biosciences, Inc.

(“Nighthawk”), the Company is required to make payments of up to $ 20.6 million in aggregate for the achievement of specified development, regulatory and commercial sales milestones for certain licensed products.

The Company is required to pay Nighthawk a percentage of upfront fees or other non-royalty payments not tied to milestone events that it receives in connection with certain sublicenses of the licensed patents.

The Company is also required to pay Nighthawk a royalty on all of its worldwide net sales, those of its affiliates, and sublicenses of certain licensed patents in the low single digits.

Commitments and Contingencies

Kopfkino License Agreement

The Company is party to an Exclusive License Agreement (“the Kopfkino License Agreement”), with Kopfkino IP, LLC (“Kopfkino”).

Under terms of the Kopfkino License Agreement the Company is required to make payments of up to $ 20.5 million in aggregate for the achievement of specified development, regulatory and commercial sales milestones for certain licensed products.

The Company is required to pay Kopfkino a percentage of upfront fees or other non-royalty payments not tied to milestone events that it receives in connection with certain sublicenses of the licensed patents.

The Company is also required to pay Kopfkino a royalty on all of its worldwide net sales, those of its affiliates, and sublicenses of certain licensed patents in the low single digits.

The Company has no t recorded a liability for the aforementioned payments given the achievement of specified development, regulatory and commercial sales milestones for certain licensed products is not probable as of the balance sheet date.

The Company originally entered into the Kopfkino License Agreement in June 2016 with Scorpius Holdings, Inc., (“Scorpius”) (f/k/a Nighthawk Biosciences, Inc., f/k/a Heat Biologics Inc.).

In January 2024, Scorpius assigned the rights, title, and interest in and under the agreement, along with the underlying patents and patent applications, to Kopfkino.

From time to time, the Company may become involved in various legal actions arising in the ordinary course of business.

On January 31, 2022 and February 11, 2022, putative class action lawsuits were filed in the U.S.

District Court for the Eastern District of New York against us and certain of the Company’s officers and directors.

District Court for the Eastern District of New York against the Company and certain of the Company’s officers and directors.

The cases were consolidated on June 2, 2022, and the plaintiffs filed an amended complaint on July 1, 2022.

The amended complaint cites the volatility in the Company’s common stock and alleges that the defendants made or are responsible for misleading omissions regarding the Company’s clinical trial results and the Collaboration Agreement with Takeda.

The parties reached a settlement in principle of the plaintiffs’ claims in the amount of $ 1.4 million on November 2, 2022.

The settlement is subject to a definitive settlement agreement, notice to stockholders and court approval.

The parties filed their motion for preliminary approval of the settlement agreement with the court on December 14, 2022, and, as of February 22, 2023, that motion is pending.

The Company has accrued the settlement amount in accrued expenses and other current liabilities as of December 31, 2022.

The amended complaint cited the volatility in the Company’s common stock and alleged that the defendants made or were responsible for misleading omissions regarding the Company’s clinical trial results and the collaboration agreement with Millennium Pharmaceuticals, Inc., a wholly-owned subsidiary of Takeda Pharmaceutical Company, Ltd.

The court approved the parties’ settlement of the plaintiffs’ claims in the amount of $ 1.4 million and entered a final judgment dismissing the class action claims with prejudice on November 6, 2023.

The Company paid the amount to the escrow agent for the settlement on June 19, 2023.

Contractual Obligations

Contractual obligations represent future cash commitments and liabilities under agreements with third parties, and exclude contingent liabilities for which the Company cannot reasonably predict future payment.

The Company’s contractual obligations result primarily from obligations for various CMOs and CROs, which include potential payments that may be required under its agreements.

The Company’s contractual obligations result primarily from obligations for various CDMOs and CROs, which include potential payments that may be required under its agreements.

The contracts also contain variable costs and milestones that are hard to predict, as they are based on such things as patients enrolled and clinical trial sites.

The timing of payments and actual amounts paid under CMO

and CRO agreements may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts for some obligations.

The timing of payments and actual amounts paid under CDMO and CRO agreements may be different depending on the timing of receipt of goods or services or changes to agreed-upon terms or amounts for some obligations.

Such agreements are cancellable upon written notice by the Company and, therefore, are not long-term liabilities.

Collaboration Agreements

The Company recognizes revenue for the allocated up-front payments using a cost-based input measure.

In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs expected to be incurred.

In the second quarter of 2022, the Company executed a collaboration agreement with a third party and completed the work in the fourth quarter of 2022.

The company recognized $ 0.7 million, which represents all of the revenue associated with this agreement, in the year ended December 31, 2022.

Collaboration Agreement - Takeda

In August 2017, the Company entered into a Collaboration Agreement with Takeda related to the development of certain ARC molecules, as amended in April 2018, October 2018 and March 2020.

The Collaboration Agreement was mutually terminated pursuant to a termination agreement dated November 8, 2021 (the “Termination Agreement”).

Under the terms of the Termination Agreement, the Company is not required to satisfy any remaining performance obligations, the Company will not make any payments to or receive any future milestone or royalty payments from Takeda, and all options to license and rights of first negotiation held by Takeda under the Collaboration Agreement were terminated.

Stock-Based Compensation

The Company recognizes revenue for collaboration agreements using a cost-based input measure.

In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs expected to be incurred, and any upfront payments are deferred accordingly.

In 2022 the Company entered into a collaboration agreement with ImmunoGen.

Pursuant to the collaboration agreement, ImmunoGen will reimburse the Company for $ 2.0 million of the costs we incur in the Phase 1B combination cohort evaluating SL-172154 in combination with mirvetuximab soravtansine in patients with platinum-resistant ovarian cancer.

The Company dosed its first patient with mirvetuximab soravtansine in 2023 and recognized $ 1.7 million of revenue under the collaboration agreement in 2023.

In February 2024, ImmunoGen was acquired by AbbVie, Inc.

In 2022, the Company also executed and completed a collaboration agreement with a third party and recognized $ 0.7 million in revenue.

On February 13, 2024, we entered into a collaboration and license agreement (the “Ono Agreement”) with Ono Pharmaceutical Co., Ltd (“Ono”) pursuant to which the parties will collaborate in the research and preclinical development of certain prespecified compounds directed toward a pair of targets selected by Ono from our pipeline of bifunctional fusion proteins.

Pursuant to the Ono Agreement, the Company granted to Ono an exclusive option (the “Option”) to enter into an exclusive license to further develop, manufacture and sell products containing these bifunctional fusion proteins.

Pursuant to the Ono Agreement, the Company and Ono developed a nonclinical research plan (the “Research Plan”).

The Company is primarily responsible for carrying out the research activities in accordance with the Research Plan, subject to the oversight of a joint research committee consisting of representatives from each party.

Ono is responsible for all research costs incurred under the Research Plan.

Pursuant to the Ono Agreement, Ono will pay the Company $ 5.4 million to secure the Option and to cover the first six months of expected research costs under the Research Plan.

In addition to further Research Plan funding, the Company is entitled to receive from Ono up to $ 224.5 million in aggregate consisting of license fees and milestone payments based on the achievement of specified development, regulatory, and sales milestones.

The company may receive tiered royalties on product sales, ranging from mid-single digit to low-double digit percentages.

Ono may terminate the Collaboration Agreement at any time upon 90 days’ written notice to us.

If Ono exercises such termination right, Ono will pay all of our costs up through the date of termination.

The Company is authorized to issue up to 300,000,000 shares of common stock and 10,000,000 shares of preferred stock, all with a par value of $ 0.0001 per share.

The holders of the Company’s common stock are entitled to one vote per share on all matters submitted to a vote of stockholders.

The Company’s common stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.

Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of the Company’s common stock will receive ratably any dividends declared by the Company’s board of directors (“Board”) out of funds legally available.

In the event of the Company’s liquidation, dissolution or winding-up, the holders of the Company’s common stock will be entitled to share ratably in all assets remaining after payment of or provision for any liabilities.

As of the periods presented, no common stock dividends had been declared by the Board.

At December 31, 2023, none of the 10,000,000 shares of preferred stock were outstanding, and the Company has no present plans to issue any shares of preferred stock.

On December 26, 2023, the Company sold 4,651,163 shares of common stock through an underwritten public offering, and concurrently completed a private placement of 3,100,823 pre-funded warrants for net proceeds of $ 47.6 million.

The purchase price per share of common stock was $ 6.45 , and the purchase price per pre-funded warrant was $ 6.4499 which was the purchase price per share of common stock, minus the $ 0.0001 per share exercise price of such pre-funded warrant.

Each pre-funded warrant may be exercised for one share of common stock, is immediately exercisable, does not expire, and is subject to a beneficial ownership limitation of 9.99 % post-exercise.

As of December 31, 2023, no pre-funded warrants have been exercised, and 3,100,823 pre-funded warrants remain outstanding.

In July 2022, the Company entered into a sales agreement (the “Sales Agreement”) with SVB Securities LLC (the “Sales Agent”), pursuant to which it may offer and sell up to $ 75.0 million of shares of its common stock from time to time (the “ATM Facility”).

The Sales Agent is generally entitled to compensation at a commission equal to 3.0 % of the aggregate gross sales price per share sold under the Sales Agreement.

As of December 31, 2023, there were no sales pursuant to the ATM Facility .

Stock-Based Compensation and Employee Benefit Plans

2020 Equity Incentive Plan

In September 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”) which, as of the adoption date, replaced the 2016 Stock Incentive Plan.

Under the 2020 Plan, the share reserve automatically increases on January 1st of each year beginning in 2021 and ending with a final increase on January 1, 2030 in an amount equal to 4 % of the Company’s outstanding common shares on December 31st of the preceding calendar year.

The Board of Directors (the “Board”) may provide that there will be no increase in the share reserve for any such year or that the increase in the share reserve may be smaller than would otherwise occur.

Under the 2020 Plan, the share reserve automatically increases on January 1st of each year beginning in 2021 and ending with a final increase on January 1, 2030 in an amount equal to 4 % of the Company’s outstanding common stock on December 31st of the preceding calendar year.

The Board may provide that there will be no increase in the share reserve for any such year or that the increase in the share reserve may be smaller than would otherwise occur.

As of December 31, 2023, there were 3,983,756 shares of common stock available for future grants.

On January 1, 2024, the share reserve automatically increased by 1,890,404 shares.

As of December 31, 2022, there were 3,497,307 shares available for future grants.

The 2020 Plan permits the granting of options, stock appreciation rights, RSUs, performance stock, and performance cash awards.

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The Company’s awards generally vest over four years and have a term of 10 years.

In 2022, the Company granted 178,150 awards that vest based on the Company achieving a closing share price of equal to or greater than $ 18.00 for 30 consecutive trading days on or before the four th anniversary of the grant date, and 226,543 awards that vest over two years .

In 2023, the Company granted 165,050 options that vest in equal tranches based on the Company achieving a closing share price of equal to or greater than $ 4.00 , $ 5.00 , and $ 6.00 for 30 consecutive trading days on or before the four th anniversary of the grant date.

In 2022, the Company granted 178,150 options that vest based on the Company achieving a closing share price of equal to or greater than $ 18.00 for 30 consecutive trading days on or before the four th anniversary of the grant date.

2020 Employee Stock Purchase Plan

The 2020 Employee Stock Purchase Plan (“2020 ESPP”) became effective in connection with the Company’s initial public offering (“IPO”).

A total of 395,795 shares of common stock were reserved for issuance under the 2020 ESPP.

The 2020 Employee Stock Purchase Plan (the“2020 ESPP”) became effective in connection with the Company’s initial public offering (“IPO”) and as of December 31, 2023, a total of 1,204,874 shares of common stock are reserved for issuance under the 2020 ESPP.

Eligible employees may purchase shares of common stock under the 2020 ESPP at 85 % of the lower of the fair market value of the Company’s common stock as of the first or the last day of each offering period.

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The Board may act prior to January 1st of a given year to provide that there will be no January 1st increase of the share reserve for such year or that the increase in the share reserve for such year will be a smaller number of shares of common stock than would otherwise occur pursuant to the preceding sentence.

On January 1, 2023, the share reserve increased by 423,905 shares.

On January 1, 2024, the share reserve increased by 472,601 shares of common stock.

During the years ended December 31, 2023 and 2022, the Company issued 23,020 and 13,088 shares of common stock for aggregate cash proceeds of $ 0.1 million and $ 0.1 million, respectively.

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Balance at December 31, 2022

4,209,255 $ 8.29 8.07

Granted 1,462,535 3.41

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Balance at December 31, 2023

4,942,164 $ 7.21 7.62

Vested and expected to vest 4,787,518 $ 7.27 7.47

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As of December 31, 2023, the unrecognized compensation cost for options issued was $ 8.0 million and will be recognized over an estimated weighted-average amortization period of 1.94 years.

The total intrinsic value of options exercised during the years ended December 31, 2022 and 2021 was $ 0.1 million and $ 11.8 million, respectively.

The total intrinsic

value of options exercised during the years ended December 31, 2023 and 2022 was $ 0.40 million and $ 0.1 million, respectively.

The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2023 was $ 6.6 million.

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Grant Date Fair Value

Unvested RSUs as of December 31, 2021 — $ —

Unvested RSUs at December 31, 2022

309,477 $ 7.22

Granted 460,925 3.54

Vested ( 77,312 ) 7.22

Forfeited ( 102,687 ) 4.62

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590,403 $ 4.80

The Company recognized $ 0.6 million of stock-based compensation related to RSUs as of December 31, 2022.

The Company recognized $ 0.8 million and $ 0.6 million of stock-based compensation related to RSUs as of December 31, 2023 and December 31, 2022.

As of December 31, 2023, the unrecognized compensation cost for RSUs issued was $ 2.0 million and will be recognized over an estimated weighted-average amortization period of 2.70 years.

The fair values of RSUs are based on the fair value of the Company's common stock on the date of the grant.

The fair values of RSUs is based on the fair value of the Company's common stock on the date of the grant.

Fair Value of Stock Options and Shares Issued

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Expected dividends — —

There were no options granted that have market-based conditions during the year ended December 31, 2021.

The grant-date fair value of shares issued calculated using the Black-Scholes option pricing model under the Company’s 2020 ESPP were estimated using the following weighted-average assumptions:

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Expected dividends — —

Employee Benefit Plans

The Company sponsors a 401(k) retirement plan in which substantially all of its full-time employees are eligible to participate.

Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations.

The Company made matching contributions of $ 0.7 million and $ 0.5 million to the plan for the years ended December 31, 2023 and 2022, respectively.

The Company recorded no federal provision for income taxes as of December 31, 2023 and 2022 due to reported net losses since inception.

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Stock compensation 486 602

Section 162(m) limitation — 809

Change in uncertain tax position 878 977

Income tax benefit $ — $ —

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows (amounts in thousands):

Significant components of the Company’s deferred tax assets and liabilities are as follows (amounts in thousands):

Deferred tax asset:

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The Company has established a valuation allowance equal to the net deferred tax asset due to uncertainties regarding the realization of the deferred tax asset based on the Company’s lack of earnings history.

The valuation allowance increased by

$ 24.7 million and $ 13.0 million during the years ended December 31, 2022 and 2021, respectively, primarily due to continuing loss from operations, general business credit carryforwards, and accrued expenses.

The valuation allowance increased by $ 21.3 million and $ 24.7 million during the years ended December 31, 2023 and 2022, respectively, primarily due to continuing loss from operations, general business credit carryforwards, and accrued expenses.

As of December 31, 2023 and 2022, the Company had gross U.S.

net operating loss (“NOL”) carryforwards of $ 149.5 million and $ 118.4 million, respectively.

Additionally, as of December 31, 2022 and 2021, the Company had capital loss carryforwards of $ 2.8 million and $ 2.3 million, respectively.

As of December 31, 2022 and 2021, the Company had gross state NOL carryforwards of $ 0.2 million and $ 0.2 million, respectively.

Additionally, as of December 31, 2023 and 2022, the Company had capital loss carryforwards of $ 2.8 million.

As of December 31, 2023 and 2022, the Company had gross state NOL carryforwards of $ 0.2 million.

As of December 31, 2023 and 2022, the Company had gross U.S.

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Although an ownership change occurred during 2020, no deferred tax assets were impacted by the limitation.

A reconciliation of our liability for unrecognized tax benefits is as follows:

A reconciliation of the Company’s liability for unrecognized tax benefits is as follows (amounts in thousands):

Year Ended December 31,

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Subsequent Events

See Note 8 regarding the Ono Agreement entered into on February 13, 2024.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk