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Item 7. Management’s Discussion and Analysis

2025-03-27 compared with 2024-02-29 · 92 added, 80 removed, 179 unchanged (49% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors.” You should carefully read the “Cautionary Note About Forward-Looking Statements” and “Risk Factors” sections of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from the results described below.

We are an innovative clinical-stage biotechnology company pioneering the development of dual-sided fusion proteins as an entirely new class of biologic medicine.

We have created a novel approach to immune modulation by designing biologics with structural characteristics that may not be achievable by existing therapeutic modalities, including monoclonal or bispecific antibodies.

Our ARC® platform was designed to simultaneously inhibit checkpoint molecules and activate costimulatory molecules with a single therapeutic as a potential treatment for cancer.

We also have at varying stages of preclinical development, dual-sided fusion proteins, distinct from our ARC platform, that have therapeutic potential in autoimmune and inflammatory diseases, among other therapeutic areas.

Our lead product candidate, SL-172154, is designed to simultaneously inhibit the CD47/SIRPα macrophage checkpoint interaction and activate the CD40 costimulatory receptor to induce an antitumor immune response.

Coupling CD40 activation with CD47 inhibition differentiates SL-172154 from all other clinical-stage CD47/SIRPα inhibitors in development, and in our published preclinical studies, SL-172154 resulted in superior antitumor immunity as compared to certain CD47/SIRPα inhibitors.

We are pursuing a broad clinical development strategy in both solid and hematologic tumors, with multiple ongoing clinical trials.

SL-172154 is in an ongoing Phase 1B clinical trial for the treatment of patients with ovarian cancer.

W e are also evaluating SL-172154 in an ongoing Phase 1B clinical trial for the treatment of patients with certa in hematologic malignancies, including AML and HR-MDS.

We believe our clinical development plan may provide both first-in-class and best-in-class development opportunities for SL-172154.

We believe that data shared to date in human cancer patients demonstrate that the unique protein engineering and physical properties of the ARC platform have led to a differentiated profile in terms of safety and on-target immune activation, demonstrated by unique pharmacodynamic findings, as compared to monoclonal or bispecific antibodies.

Further, clinical data generated with our ARC platform has guided our preclinical research efforts to further expand our pipeline, and we are advancing certain potential product candidates through preclinical development.

We expect to nominate one or more additional product candidates to our clinical pipeline in the future, potentially for indications outside of oncology, by selecting product candidates where there is an expectation of monotherapy efficacy and where our scientific and protein engineering expertise has led to a product candidate with advantages over current treatment modalities.

In February 2024, we entered into the Ono Agreement in which we will lead research and preclinical development of certain compounds selected by Ono from our pipeline of bifunctional fusion proteins to a pair of prespecified targets for potential treatment of autoimmune and inflammatory diseases.

Overview of Operations

Since our inception in 2016, we have devoted substantially all of our resources to conducting research and development activities, including undertaking nonclinical studies of our product candidates, conducting clinical trials of our most advanced product candidates, manufacturing our product candidates, developing and perfecting our intellectual property rights, organizing and staffing our company, business planning, and raising capital.

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

We have funded our operations as of the filing date of this Annual Report on Form 10-K through the net proceeds from the sale of our common stock and pre-funded warrants for approximately $261.1 million, the sale of redeemable convertible preferred stock for approximately $152.9 million, the issuance of convertible notes for approximately $10.5 million and payments received pursuant to our collaboration agreements for approximately $84.2 million.

We are a biotechnology company specializing in the development of potential treatments for inflammatory and immune-mediated diseases.

We are developing a potentially first-in-class antibody for the treatment of inflammatory bowel disease ("IBD") and other inflammatory and immune-mediated diseases.

Our expertise in protein engineering and the development of novel tumor necrosis factor ("TNF") receptor therapeutics come together in our lead program, SL-325, which we believe could be a first-in-class death receptor 3 ("DR3") antagonist antibody.

SL-325 is a high-affinity DR3 blocking monoclonal antibody.

In our head-to-head preclinical studies, SL-325 blocked TL1A binding to DR3 better than sequence equivalents of leading TL1A blocking antibodies.

We believe that the underlying biological differences in the expression of DR3 and TL1A, and the design characteristics of SL-325, may allow SL-325 to achieve best-in-class clinical remission rates in patients with IBD due to a more complete and durable blockade of the clinically validated DR3/TL1A pathway.

TL1A is the sole known signaling ligand for DR3, and TL1A does not signal through any other receptors.

Thus, we believe that the clinical safety profile of TL1A blocking antibodies generated to date in clinical trials conducted by other parties derisks the clinical safety profile for DR3 blockade.

The lack of toxicity of SL-325 in our recently completed non-human primate (“NHP”) toxicology study also suggests a potentially favorable clinical safety profile.

We engineered SL-325 to lack any Fc gamma receptor binding function, and SL-325 has not shown any evidence to date of antibody dependent cellular cytotoxicity or cellular phagocytosis, which further supports a potentially derisked safety profile.

We have demonstrated that SL-325 binds an epitope on DR3 that does not trigger receptor-mediated endocytosis, and the binding of SL-325 to DR3 was

shown to be highly durable in our preclinical assays.

Because DR3 is expressed on circulating, peripheral blood lymphocytes, we are able to directly measure DR3 receptor occupancy (“RO”), and our preclinical studies suggest that blockade may last for at least one month as a result of the properties of SL-325 and the stable expression of DR3.

The RO and pharmacokinetic (“PK”) profile of SL-325 suggests extended dosing intervals, which we intend to further characterize in our upcoming Phase 1 clinical trial.

Finally, the human protein decoy receptor 3 (“DcR3”) neutralizes soluble TL1A, Fas Ligand and LIGHT, which all induce a proinflammatory immune response.

DcR3 serves as a sink for these proteins, tempering the proinflammatory immune signaling.

Thus, it is desirable to block DR3, but not DcR3, to preserve the natural anti-inflammatory role of DcR3.

SL-325 binds to DR3 but not to DcR3.

DR3 has a distinct expression pattern from TL1A, and, consequently, blocking the receptor may allow a more complete and durable blockade of the axis, which we believe will translate to improved efficacy in patients with IBD.

DR3 and TL1A have distinct expression patterns within the gastrointestinal tract (“GI”) of patients with IBD, including both ulcerative colitis (“UC”) and Crohn’s disease (“CD”).

The cells within the GI tract that are capable of expressing TL1A include tissue resident antigen presenting cells and other non-hematopoietic cells.

While TL1A is not usually expressed, when antigen presenting cells are exposed to inflammatory signals, a wave of TL1A mRNA expression begins, which peaks within 12 hours and ceases within 24 hours.

In contrast, DR3 is stably expressed, primarily by lymphocytes both in the peripheral blood and in tissues.

Direct comparison of TL1A and DR3 expression in the GI tracts of patients with IBD shows that TL1A is only upregulated in the actively inflamed areas of the GI tract.

In contrast, DR3 is more abundant than TL1A and is upregulated in both actively inflamed parts of the GI tissue and in the adjacent non-inflamed tissue.

The absence of TL1A in the non-inflamed areas of the bowel eliminates the mechanism through which TL1A blocking antibodies would be retained in non-inflamed areas of the GI tract.

Because inflammation observed in UC and CD can wax and wane in different areas of the bowel over time, stable blockade of DR3 may reduce the spread of inflammation and may contribute to higher rates of clinical and endoscopic remission than what TL1A blocking antibodies have achieved to date.

We are planning initial clinical development of SL-325 for patients with IBD, including UC and CD.

The clinical success of several TL1A blocking antibodies to date suggests that SL-325 may have monotherapy disease modifying activity early in clinical development.

As described above, we believe that targeting DR3 may be more efficacious than targeting TL1A in patients with IBD.

We expect to file an Investigational New Drug ("IND") application for SL-325 in the third quarter of 2025, and we expect to complete enrollment in the full Phase 1 clinical trial in the second quarter of 2026.

Future clinical trials may explore the efficacy of SL-325 in other inflammatory and immune-mediated diseases where the DR3/TL1A axis is implicated.

For the years ended December 31, 2024 and 2023, our net loss was $75.4 million and $87.3 million, respectively.

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We expect to continue to incur significant expenses and operating losses in the near term in connection with our ongoing activities, as we:

• continue to advance the nonclinical and clinical development of our clinical-stage product candidate, SL-172154;

• continue to advance the preclinical development and initiate Phase 1 clinical development of our product candidate, SL-325;

• initiate nonclinical studies and clinical trials for additional product candidates that we may identify in the future, including potential bispecific DR3 antagonist antibody product candidates;

• manufacture sufficient quantities of bulk drug substance and drug product to support our ongoing and planned nonclinical studies and clinical trials;

• continue our process development efforts for our current and future product candidates, including scale up of our Phase 3 and commercial manufacturing process;

• initiate nonclinical studies and clinical trials for additional product candidates that we may identify in the future;

• maintain our operational, financial, and management systems;

• retain key personnel and infrastructure to support our clinical development, research and manufacturing efforts;

• retain key personnel and infrastructure to support our nonclinical development, research and manufacturing, and future clinical development efforts;

• utilize our in-house process development and manufacturing capabilities;

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We may never succeed in achieving regulatory and marketing approval for our product candidates.

We may obtain unexpected results from our nonclinical studies and clinical trials.

We may obtain unexpected

results from our nonclinical studies and clinical trials.

We may elect to discontinue, delay, or modify nonclinical studies and clinical trials of our product candidates.

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There can be no assurance that such funding may be available to us on acceptable terms, or at all, or that we will be able to commercialize our product candidates.

In addition, we may not be profitable even if we commercialize one or more of our product candidates.

In addition, we may not be profitable even if we commercialize any of our product candidates.

Global Economic Considerations

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.

The global macroeconomic environment is uncertain, and could be negatively affected by, among other things, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, instability in the global capital and credit markets, supply chain weaknesses, financial institution instability, and instability in the geopolitical environment.

Such challenges have caused, and may continue to cause, recession fears, high 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.

Components of our Results of Operation

Components of our Results of Operations

Collaboration Revenue

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Our total revenue to date has been generated from our collaboration and research agreements with various third parties.

Revenue recognized in 2023 was a result of a clinical trial collaboration agreement with ImmunoGen in which activities began in 2023 and will continue in 2024.

We expect to recognize a total of $2 million of revenue under this collaboration agreement.

In February 2024, ImmunoGen was acquired by AbbVie.

In February 2024, we entered into the Ono Agreement in which we will lead research and preclinical development of certain compounds selected from our pipeline of bifunctional fusion proteins directed to a pair of prespecified targets for potential treatment of autoimmune and inflammatory diseases.

We are primarily responsible for carrying out the research activities in accordance with a mutually agreed upon research plan, which we expect to start in 2024.

In connection with entry into the Ono Agreement, we are entitled to receive up to $9 million consisting of an initial upfront payment and additional payments upon the achievement of certain specified milestones in the Research Plan.

Additionally, Ono has agreed to pay for all of our costs and expenses incurred in conducting the Research Plan.

We expect to begin recognizing revenue associated with the conduct of the Research Plan in 2024.

In the event Ono exercises its Option to further development their specified Development Compounds, we are entitled to receive licensing and development, regulatory and commercial milestone payments of up to $217.5 million, in the aggregate, and a tiered royalty on sales upon commercialization.

We continue to explore other potential collaborations and expect that collaboration revenue we may generate, if any, will fluctuate from period to period.

Revenue recognized in 2024 was a result of collaboration agreements with Ono Pharmaceutical Co., Ltd ("Ono") and ImmunoGen, Inc.

(“ImmunoGen”).

In February 2024, we entered into a collaboration and license agreement with Ono (the "Ono Agreement") pursuant to which we and Ono collaborated in the research and preclinical development of certain compounds selected by Ono from our pipeline of bifunctional fusion proteins directed toward a pair of prespecified targets for potential treatment of autoimmune and inflammatory diseases.

Under the terms of the Ono Agreement, we were primarily responsible for carrying out research activities in accordance with a mutually agreed upon research plan.

Pursuant to the Ono Agreement, we granted Ono an exclusive option (the “Option”) to obtain an exclusive, sublicensable license to further research, develop, manufacture and commercialize products containing these specified bifunctional fusion proteins in any therapeutic area worldwide.

On September 30, 2024, we and Ono mutually agreed to terminate the Ono Agreement and Option pursuant to the terms of the agreement.

We have completed all obligations under the agreement and have accordingly recognized $5.4 million in revenue pursuant to terms of the Ono Agreement including the $2.0 million paid for the Option.

As of December 31, 2024, we completed our obligations under the collaboration agreement with ImmunoGen (the “ImmunoGen Agreement”), and have recognized all revenue pursuant to the terms of that agreement.

Operating Expense

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These expenses include:

• expenses incurred to conduct our clinical trials, including SL-172154 and any potential product candidates we may advance in the future;

• expenses incurred to conduct our clinical trials, including expenses associated with clinical trials of SL-325 and any potential product candidates we may advance in the future, as well as the expenses associated with prior clinical trials of SL-172154 and the associated wind-down activities;

• costs of manufacturing nonclinical study and clinical trial materials, including the costs of raw materials required for manufacturing;

• process development activities to optimize manufacturing processes, including the development and validation of Phase 3 and commercial manufacturing processes and analytical methods;

• expenses incurred to conduct our nonclinical studies, including research conducted on our wholly-owned compounds and those subject to the Ono Agreement;

• expenses incurred to conduct our nonclinical studies;

• employee-related expenses, including salaries, benefits, and stock-based compensation;

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Internal costs, including personnel related benefits, facilities, and depreciation 25,106 27,396

$ 74,310 $ 82,899

Total research and development costs $ 67,211 $ 74,310

1 Expenses for SL-325 that were incurred prior to it being nominated a product candidate are included

in other pipeline compounds” in the table above.

Research and development activities are central to our business model.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials, including increased demand for clinical trial material.

We expect to incur significant research and development expenses throughout 2024, including expenses associated with the conduct of the Research Plan pursuant to the Ono Agreement.

While it is difficult for us to predict with certainty, we expect increasing year-over-year operating expense over the next several years in the event that we conduct additional nonclinical studies and clinical trials, which may include a material expansion of our existing clinical trials or the initiation of planned, later-stage clinical trials for our current and/or future product candidates, pursue regulatory approval of our product candidates, or advance additional product candidates from our preclinical pipeline.

Product candidates in earlier stages of development generally have lower development costs than those in later stages of development.

We have discontinued clinical development of SL-172154 and are no longer conducting research activities performed under the Ono Agreement.

We are now focused on the preclinical development and future clinical trials of SL-325 and other DR3 targeted assets and conducting additional research on other potential product candidates.

As a result of our discontinuing the clinical development of SL-172154 and resulting organizational changes, we expect a decrease in operating expense year-over-year, primarily associated with a reduction in clinical development, manufacturing, process development, and headcount-related costs.

The process of conducting the necessary nonclinical and clinical research to obtain regulatory approval is costly and time consuming.

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• the safety and efficacy of our product candidates;

• clinical data for our product candidates;

• investment in our clinical programs;

• nonclinical data for our product candidates;

• investment in our pipeline;

• competition;

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General and administrative expense also includes corporate facility costs, including rent, utilities, depreciation, and maintenance, not otherwise included in research and development expense, as well as legal fees related to intellectual property, corporate, and litigation matters and fees for accounting and tax services.

We expect that our general and administrative expense may increase in the future to support our ongoing research and development activities and as a result of the costs of operating as a public company.

These increases may include increased costs related to the retention of personnel and fees paid to outside consultants, lawyers, and accountants, among other expenses.

Additionally, we anticipate that we will continue to incur significant costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of Nasdaq and the SEC, insurance, and investor relations costs.

If any of our current or future product candidates advances to later-stage clinical development or obtains regulatory approval, we expect that we would incur significantly increased expenses associated with building the appropriate general and administrative support for our increased research and development activities, or building a sales and marketing team, respectively.

Other income consists of interest earned on our cash, cash equivalents and investments, which consists of amounts held in a money market fund and at various times in government and corporate obligations as well as investment fees and realized gain or losses on investments (if any).

Since our inception, we have not recorded any income tax benefits for the NOLs we have incurred or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized.

Our NOLs and tax credit carryforwards will begin to expire in 2024.

We expect that our general and administrative expense may decrease in the future due to workforce reductions that occurred as a result of our discontinuing the clinical development of SL-172154.

If any of our current or future product candidates advances to clinical development or obtains regulatory approval, we expect that we would incur increased expenses associated with building out the appropriate general and administrative support for our increased research and development activities, or building out a sales and marketing team.

Other income consists of interest earned on our cash, cash equivalents and investments, which consists of amounts held in a money market fund and government obligations as well as investment fees and realized gain or losses on investments (if any).

Since our inception, we have not recorded any income tax benefits for the net operating losses ("NOLs") we have incurred or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized.

Our NOLs and tax credit carryforwards began to expire in 2024.

We have recorded a full valuation allowance against our deferred tax assets at each balance sheet date.

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Collaboration revenue increased by $4.1 million, or 245.3%, to $5.7 million for the year ended December 31, 2024 from $1.7 million for the year ended December 31, 2023.

The increase in collaboration revenue was primarily attributable to an increase in clinical activity associated with our clinical trial collaboration agreement with ImmunoGen.

In the second quarter of 2022, we executed a collaboration agreement with another third party and completed the work in the fourth quarter of 2022 and have recognized all of the revenue associated with that agreement.

The increase in collaboration revenue was attributable to the research activities conducted pursuant to the Ono Agreement of $3.4 million, recognition of the $2.0 million Option pursuant to the termination of the Ono Agreement, offset by a decrease in revenue recognized pursuant to the Immunogen Agreement of $1.3 million in 2024.

As of December 31, 2024 we have completed our obligations under the Ono and Immunogen Agreements and do not expect to recognize additional revenue pursuant to those agreements.

Research and Development Expense

Research and development expenses decreased by $7.1 million, or 9.6%, to $67.2 million for the year ended December 31, 2024 from $74.3 million for the year ended December 31, 2023.

The decrease in research and development expense was primarily a result of a decrease in the cGMP manufacture of clinical trial material of $13.8 million and a decrease in materials consumed in our lab of $1.2 million, offset primarily by increases in costs associated with the conduct of clinical trials for SL-172154 of $4.2 million, depreciation of fixed assets of $1.0 million and facility costs of $0.8 million related to the expansion of our in-house manufacturing and development capabilities.

The decrease in research and development expense was primarily due to a decrease in the cGMP manufacture of clinical trial material and other manufacturing related charges of $4.3 million, a decrease in materials consumed in our lab of $2.4 million and a decrease of $2.3 million associated with our reduction in headcount, partially offset by an increase of $2.1 million in preclinical costs associated with our development of SL-325 and other potential pipeline product candidates in 2024.

General and Administrative Expense

General and administrative expenses decreased by $1.8 million, or 8.4%, to $19.3 million for the year ended December 31, 2023 from $21.1 million for the year ended December 31, 2022.

The decrease in general and administrative expenses was primarily a result of recognizing the litigation settlement of $1.4 million in 2022 and a $1.0 million decrease in company insurance costs, primarily related to directors and officers insurance, offset by an increase in stock-based compensation of $0.6 million.

General and administrative expenses decreased by $0.2 million, or 1.2%, to $19.1 million for the year ended December 31, 2024 from $19.3 million for the year ended December 31, 2023 and remained relatively flat between periods.

Liquidity and Capital Resources

Since our inception, our primary sources of liquidity have been generated by sales of our common stock, pre-funded warrants, convertible preferred stock, convertible notes, and collaboration agreements.

Since our inception, our primary sources of liquidity have been generated by sales of our common stock, pre-funded warrants, convertible preferred stock, and convertible notes, and through collaboration agreements.

As of December 31, 2024, we had an accumulated deficit of $381.7 million and $73.0 million of cash and cash equivalents and investments.

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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.

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, 2024, no pre-funded warrants have been exercised and 3,100,823 pre-funded warrants remain outstanding.

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

market offering facility (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 February 29, 2024 there were no sales pursuant to the ATM Facility.

As of December 31, 2024 there were no sales pursuant to the ATM Facility.

Capital Resources and Funding Requirements

Our primary uses of cash and cash equivalents and investments are to fund our operations, which consist primarily of research and development expenditures related to our programs, product development costs, research expenses, administrative support, capital expenditures related to bringing in-house certain process development and manufacturing capabilities, and working capital requirements.

We anticipate continuing to incur additional net losses and negative cash flows from operations in the near future until such time, if ever, that we can generate significant sales of our product candidates currently in development.

We anticipate that we will continue to incur additional net losses and negative cash flows from operations in the near future until such time, if ever, that we can generate significant sales of our product candidates currently in development.

Our future funding requirements will depend on many factors, including:

• the scope, timing, progress and results of discovery, nonclinical development, laboratory testing, and clinical trials for our product candidates;

• the costs of process development and scale up of a commercially ready manufacturing process to support registrational clinical trials;

• the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;

• the costs of process development and manufacturing our product candidates for preclinical studies and clinical trials, and in preparation for marketing approval and commercialization;

• the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;

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Net cash used in operating activities $ (60,515) $ (81,228)

Net cash provided by investing activities

110,859 49,438

Net cash (used in) provided by investing activities (8,511) 110,859

Net cash provided by financing activities 787 48,616

Net increase (decrease) in cash and cash equivalents

$ 78,247 $ (44,889)

Net (decrease) increase in cash and cash equivalents $ (68,239) $ 78,247

Net Cash Used in Operating Activities

During the year ended December 31, 2023, net cash used in operating activities was $81.2 million and primarily reflected our net loss of $87.3 million and $4.1 million net change in our operating assets and liabilities, and was offset by noncash charges of $6.9 million in stock-based compensation, $2.9 million in depreciation expense, amortization of investments and non-cash operating lease expense and $0.3 million in losses on sale of assets.

We expect to continue to use cash in our operating activities as we conduct our clinical trials and nonclinical studies, incur costs of manufacturing clinical trial and nonclinical study materials and continue process development activities to optimize our manufacturing processes.

During the year ended December 31, 2022, net cash used in operating activities was $94.5 million and primarily reflected by our net loss of $101.9 million and a $4.5 million net change in our operating assets and liabilities, and was offset by noncash charges of $6.5 million in stock-based compensation, $4.7 million in depreciation expense, amortization of investments and non-cash operating lease expense, and $0.7 million in losses on sale of assets.

During the year ended December 31, 2024, net cash used in operating activities was $60.5 million and primarily reflected our net loss of $75.4 million, partially offset by noncash charges of $11.9 million and a net change in our operating assets and liabilities of $3.0 million.

We expect to continue to use cash in our operating activities as we conduct our clinical trials and

nonclinical studies, incur costs of manufacturing clinical trial and nonclinical study materials and continue process development activities to optimize our manufacturing processes.

During the year ended December 31, 2023, net cash used in operating activities was $81.2 million and primarily reflected by our net loss of $87.3 million and a $4.1 million net change in our operating assets and liabilities, and was offset by noncash charges of $10.2 million related to stock-based compensation expense, depreciation expense, amortization of investments, non-cash operating lease expense and impairment losses.

Net Cash Provided by Investing Activities

During the year ended December 31, 2023, net cash provided by investing activities was $110.9 million due to a $111.3 million increase in cash due to maturities of investments net of purchases, offset by $0.4 million in fixed asset purchases.

During the year ended December 31, 2022, net cash provided by investing activities was $49.4 million, of which $60.9 million represents the net change in investments and $11.6 million was used to purchase property and equipment, primarily attributable to our continued efforts to bring certain process development, manufacturing and laboratory capabilities in-house.

During the year ended December 31, 2024, net cash used investing activities was $8.5 million, due primarily to purchases of government securities, net of maturities.

During the year ended December 31, 2023, net cash provided by investing activities was $110.9 million, due to a $111.3 million increase of cash due to maturities of investments, net of purchases, offset by $0.4 million in purchases of equipment.

Net Cash Provided by Financing Activities

During the year ended December 31, 2023, net cash provided by financing activities was $48.6 million and was from the sale of common stock and pre-funded warrants for net cash proceeds of $48.2 million and the exercise of stock options and purchases pursuant to our employee stock purchase plan of $0.5 million.

During the year ended December 31, 2022, net cash provided by financing activities was $0.2 million and was from the exercise of stock options and purchases pursuant to our employee stock purchase plan.

During the year ended December 31, 2024, net cash provided by financing activities was $0.8 million, due to the exercise of stock options and purchases pursuant to our employee stock purchase plan.

During the year ended December 31, 2023, net cash provided by financing activities was $48.6 million and was from the sale of common stock and pre-funded warrants, the exercise of stock options and purchases pursuant to our employee stock purchase plan.

Contractual Obligations and Other Commitments

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When accounting for an arrangement that contains multiple performance obligations, we 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.

Upon the amendment of an existing agreement, we evaluate whether the amendment represents a modification to an existing contract that would be recorded through a cumulative catch-up to revenue, or a separate contract.

If it is determined that it is a separate contract, we will evaluate the necessary revenue recognition through the five-step process described below.

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We determine the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.

However, actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.

However, actual

costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.

We make estimates of our prepaid and accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time.

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Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for (1) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (2) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.

We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year

(i) following the fifth anniversary of the completion of our IPO, (ii) in which we have total annual gross revenues of at least $1.235 billion or (iii) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We will remain an emerging growth company until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of the completion of our IPO, (ii) in which we have total annual gross revenues of at least $1.235 billion or (iii) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company” as defined under the Exchange Act.

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Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934.

as amended, and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

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