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Item 7. Management’s Discussion and Analysis

2024-03-14 compared with 2023-03-14 · 62 added, 197 removed, 218 unchanged (54% of the section changed)

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Our pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/MEK inhibition and FAK inhibition.

Our most advanced product candidates, avutometinib (VS-6766) and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, but not limited to low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), colorectal cancer (“CRC”), pancreatic cancer, and melanoma.

Our most advanced product candidates, avutometinib and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, but not limited to LGSOC, NSCLC, pancreatic cancer, CRC, and melanoma.

We believe that avutometinib may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors, or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies.

On August 10, 2020, we and Secura Bio, Inc.

(“Secura”) signed an Asset Purchase Agreement (“Secura APA”) and on September 30, 2020, the transaction closed.

Pursuant to the Secura APA, we sold our exclusive worldwide license for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib.

On August 10, 2020, we and Secura signed the Secura APA and on September 30, 2020, the transaction closed.

Pursuant to the Secura APA, we sold to Secura our exclusive worldwide license for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib.

Refer to Note 13.

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commercial operations following the approval of COPIKTRA through our ownership period ending in September 2020.

We have financed our operations to date primarily through public offerings of our common stock, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules Capital, Inc.

(“Hercules”) in March 2017, as amended, the upfront payments and milestone payments under our license and collaboration agreements with Sanofi, CSPC Pharmaceutical Group Limited (“CSPC”), and Yakult Honsha Co., Ltd.

(“Yakult”), the upfront payment and milestone payments received under the Secura APA, the issuance of the 2018 Notes (defined herein) in October 2018, the proceeds in connection with the private investment in public equity (the “PIPE”), and our loan and security agreement executed with Oxford Finance LLC (“Oxford”) in March 2022.

We have financed our operations to date primarily through public offerings of our common stock and pre-funded warrants, offerings of convertible notes, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments and milestone payments under our license and collaboration agreements with Sanofi, CSPC, and Yakult, the upfront payment and milestone payments received under the Secura APA, the proceeds in connection with the private investment in public equity (the “PIPE”), and our loan and security agreement executed with Oxford in March 2022, sales of Series B Convertible Preferred Stock.

Additionally, from our U.S.

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Our net loss was $87.4 million, $73.8 million, and $71.2 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

We expect to incur significant expenses and may continue to incur operating losses for the foreseeable future as a result of the continued research and development of avutometinib and defactinib.

As of December 31, 2023, we had cash, cash equivalents, and investments of $137.1 million.

We expect our existing cash resources, $30.0 million gross proceeds from our Series B Preferred Stock issuance in January 2023, and expected $15.0 million debt drawdown through our loan and security agreement with Oxford expected in March 2023 will be sufficient to fund our planned operations through at least 12 months from the date of issuance of these consolidated financial statements.

Subsequent events located in this Annual Report on Form 10-K for further discussion of the Series B Preferred Stock issuance.

We expect to finance the future development costs of our clinical product portfolio with our existing cash, cash equivalents and investments, through future milestones and royalties received pursuant to the Secura APA, through our loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to, collaboration agreements, future offerings of our equity, or the incurrence of debt.

However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders.

In accordance with applicable accounting standards, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within 12 months after the date of the issuance of the consolidated financial statements.

We anticipate operating losses may continue for the foreseeable future since we do not yet have regulatory approval to sell any of our product candidates, and we continue to incur operating costs to execute our strategic plan, including costs related to research and development of our product candidates and commercial readiness activities.

These conditions raise substantial doubt about our ability to continue as a going concern for 12 months after the date the consolidated financial statements are issued.

We expect to finance our operations with our existing cash, cash equivalents and investments, through potential future milestones and royalties received pursuant to the Secura APA, through the loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of our equity, or the incurrence of debt.

However, given the risk associated with these potential strategic or financing opportunities, they are not deemed probable for purposes of the going concern assessment.

If we fail to obtain additional future capital, we may be unable to complete our planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.

COVID-19 pandemic

The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S.

economy and financial markets.

We have been carefully monitoring the COVID-19 pandemic and its impact on our operations.

Our corporate headquarters remains open and we have adopted a hybrid work program allowing our employees the option to primarily work from home.

Shortages in personnel in clinics and hospitals have caused some United States sites to institute limits on new clinical trials which could impact our ability to open new sites for our clinical trials.

In addition, clinics in Europe and the United States continue to have delays in startup activities due to the ongoing pandemic and the increase in COVID-19 variant infections.

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

For additional information on the various risks posed by the COVID-19 pandemic, please read Item 1A.

Risk Factors included within.

Therefore, there is substantial doubt about our ability to continue as a going concern.

FINANCIAL OPERATIONS OVERVIEW

From our U.S.

commercial launch of COPIKTRA on September 24, 2018 through our ownership period ending in September 2020 product revenue, net represented the gross sales of COPIKTRA in the United States less provisions for product sales allowances and accruals.

These provisions included trade allowances, rebates, chargebacks and discounts, product returns and other incentives.

We sold COPIKTRA to a limited number of specialty pharmacies and specialty distributors.

The provisions for product sales and allowances fluctuated based on the mix of sales to either specialty pharmacy or specialty distributor customers.

See “Critical Accounting Policies and Significant Judgements and Estimates” below and Note 2.

Significant Accounting Policies located within the notes to the financial statements included within for more information on the components of net U.S.

product sales of COPIKTRA.

License and collaboration revenue to date has been generated through our license and collaboration agreements for the development and commercialization of duvelisib with Sanofi in the Sanofi Territory, CSPC in China, and Yakult in Japan.

The terms of these agreements contain multiple deliverables which may include (i) licenses, (ii) research and development activities, and (iii) the manufacture of finished drug product, active pharmaceutical ingredient (“API”), or development materials for a partner, which are reimbursed at a contractually determined rate.

Payments to us may include (i) up‑front license fees, (ii) payments for research and development activities, (iii) payments for the manufacture of finished drug product, API or development materials, (iv) payments based upon the achievement of certain milestones, and (v) royalties on product sales.

Sale of licenses and related assets revenue to date have been generated through our sale of our duvelisib license and related assets to Secura.

The sale included intellectual property related to duvelisib in oncology indications, certain existing duvelisib inventory, certain manufacturing equipment and, claims and rights under certain contracts pertaining to duvelisib including net contract prepaid balances.

Costs of sales - product

Cost of sales - product consisted of costs of COPIKTRA on which product revenue was recognized, royalties owed to Healthcare Royalty Partners (“HCR”) and Infinity we incurred as a result of such sales of COPIKTRA, and certain period costs.

Certain of the costs of COPIKTRA units recognized as revenue during 2020 were expensed prior to the September 2018 FDA marketing approval and, therefore, are not included in cost of sales during 2020.

There were no cost of sales – product in 2022 and 2021.

Costs of sales - sale of COPIKTRA license and related assets

Cost of sales - sale of COPIKTRA license and related assets represent assets delivered to Secura as part of the sale pursuant to the Secura APA.

This included our intangible assets, certain duvelisib inventory, net duvelisib contract prepaid balances, and manufacturing equipment.

There were no cost of sales –sale of COPIKTRA license and related assets in 2022 and 2021.

Research and development expenses

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The successful development of our product candidates is highly uncertain.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete

development of our product candidates or the period, if any, in which material net cash inflows from our product candidates may commence.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete development of our product candidates or the period, if any, in which material net cash inflows from our product candidates may commence.

This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

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Other income, other expense, interest income and interest expense

Other income for the year ended December 31, 2022 was comprised of a gain on the sale of fixed assets and changes in foreign currency exchange rates.

Other expense for the year ended December 31, 2023 was comprised of transaction losses due to changes in foreign currency exchange rates.

Other income for the year ended December 31, 2022 was comprised of a gain on the sale of fixed assets and transaction gains due to changes in foreign currency exchange rates.

There was no other income or other expense for the year ended December 31, 2021.

Other expense for the year ended December 31, 2020, c onsists entirely of the mark-to-market adjustment of the bifurcated make-whole interest provision derivative liability related to the 2019 Notes .

Interest income reflects interest earned on our cash, cash equivalents and available-for-sale securities.

Interest expense reflects interest expense due on our Loan Agreement with Oxford, our term loan facility executed with Hercules and the Notes, as well as non-cash interest related to the amortization of debt discount and issuance costs.

Interest expense reflects interest expense due on our Loan Agreement with Oxford and our convertible notes, as well as non-cash interest related to the amortization of debt discount and issuance costs.

Change in fair value of preferred stock tranche liability

The change in fair value of preferred stock tranche liability for the year ended December 31, 2023, was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement (the “Series B Preferred Stock Securities Purchase Agreement”), dated January 24, 2023 with certain purchasers pursuant to which the Company agreed to sell and issue to the purchasers in a private placement up to 2,144,160 shares of its Series B Convertible Preferred Stock in two tranches.

There was no preferred stock tranche liability outstanding during the years ended December 31, 2022 and December 31, 2021.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

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The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued and prepaid research and development expenses, leases, stock-based compensation, revenue recognition, and collaborative agreements, described in greater detail below.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued and prepaid research and development expenses, stock-based compensation, revenue recognition, and collaborative agreements, described in greater detail below.

We base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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Revenue recognition

We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services in accordance with Accounting Standards Codification (“ASC”) Topic 606 Revenue from Contracts with Customers (ASC 606).

Product revenue, net

Product Revenue, Net – From September 24, 2018 (the date of our U.S.

commercial launch of COPIKTRA) through September 30, 2020 (the date we sold COPIKTRA to Secura), we sold COPIKTRA to a limited number of specialty pharmacies and specialty distributors in the United States.

We recognized revenue on sales of COPIKTRA when a customer obtains control of the product, which occurs at a point in time (typically upon delivery).

Product revenues are recorded at the wholesale acquisition costs, net of applicable reserves for variable consideration.

Components of variable consideration include trade discounts and allowances, Third-Party Payer chargebacks and discounts, government rebates, other incentives, such as voluntary co-pay assistance, product returns, and other allowances that are offered within contracts between us and customers, payors, and other indirect customers relating to our sale of COPIKTRA.

These reserves, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable or a current liability.

These estimates take into consideration a range of possible outcomes based upon relevant factors such as customer contract terms, information received from third parties regarding the anticipated payor mix for COPIKTRA, known market events and trends, industry data, and forecasted customer buying and payment patterns.

Overall, these reserves reflect our best estimates of the amount of consideration to which it is entitled with respect to sales made.

The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under contracts will not occur in a future period.

Our analyses contemplate the application of the constraint in accordance with ASC 606.

For the year ended December 31, 2020, we determined a material reversal of revenue would not occur in a future period for variable consideration, and the transaction price was not reduced further.

There was not any product revenue, net recorded for the years ended December 31, 2022 and 2021.

Actual amounts of consideration ultimately received could differ from our estimates.

However, as of December 31, 2022, we do not have any reserve balances associated with product revenue, net.

Licenses and sales of intellectual property

Licenses of Intellectual Property - We may enter into collaboration and licensing arrangements for research and development, manufacturing, and commercialization activities with collaboration partners for the development and commercialization of our product candidates, which have components within the scope of ASC 606.

The arrangements generally contain multiple elements or deliverables, which may include (i) licenses, or options to obtain licenses, to our intellectual property or sale of our license, (ii) research and development activities performed for the collaboration partner, (iii) participation on joint steering committees, and (iv) the manufacturing of commercial, clinical or preclinical material.

Payments pursuant to these arrangements typically include non-refundable, upfront payments, milestone payments upon the achievement of significant development events, research and development reimbursements, sales milestones, and royalties on product sales.

The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period.

The contracts into which we enter generally do not include significant financing components.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our collaboration and license agreements, we perform the following steps:

(i) identification of the promised goods or services in the contract within the scope of ASC 606;

(ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including the constraint on variable consideration;

(iv) allocation of the

transaction price to the performance obligations;

and (v) recognition of revenue when (or as) we satisfy each performance obligation.

As part of the accounting for these arrangements, we must use significant judgment to determine:

a) the number of performance obligations based on the determination under step (ii) above;

b) the transaction price under step (iii) above;

c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above;

and d) the measure of progress in step (v) above.

We use judgment to determine whether milestones or other variable consideration, except for royalties on license arrangements, should be included in the transaction price.

Sales of intellectual property

For sales of license and intellectual property, that include sale-based royalties, including milestone payments based on a level of sales, we evaluate whether the royalties and sales-based milestones are considered probable of being achieved and estimate the amount of royalties to include over the contractual term using the expected value method and estimate the sales-based milestones using the most likely amount method.

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Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

At December 31, 2022, we determined $0.1 million of future potential royalties, we expect to receive pursuant to the Secura APA, were not constrained and have been recorded in the transaction price.

At December 31, 2023, we determined less than $0.1 million of future potential royalties, we expect to receive pursuant to the Secura APA, were not constrained and have been recorded in the transaction price.

As the consideration for future royalties is conditional, we recorded a corresponding contract asset for the expected future royalties.

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Refer to Note 2.

Significant Accounting Policies , Note 6.

Product revenue reserves and allowances and Note 13.

Significant Accounting Policies and Note 13.

License, collaboration and commercial agreements t o our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of revenue.

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Collaborative Arrangements:

Contracts are considered to be collaborative arrangements pursuant to GAAP when they satisfy the following criteria defined in ASC Topic 808, Collaborative Arrangements (ASC 808):

Contracts are considered to be collaborative arrangements pursuant to GAAP when they satisfy the following criteria defined in ASC Topic 808, Collaborative Arrangements:

(i) the parties to the contract must actively participate in the joint operating activity and (ii) the joint operating activity must expose the parties to the possibility of significant risk and rewards, based on whether or not the activity is successful.

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The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments made to our vendors will exceed the level of services

provided and result in a prepayment of the research and development expense.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense.

In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

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

To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

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Stock-based compensation to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of stock-based compensation.

Leases are accounted for in accordance with ASC Topic 842, Leases (“ ASC 842 ”).

This standard requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases.

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances within the arrangement.

A lease is identified where an arrangement conveys the right to control the use of identified property, plant, and equipment for a period of time in exchange for consideration.

Leases which are identified within the scope of ASC 842 and which have a term greater than one year are recognized on our consolidated balance sheets as right-of-use assets, lease liabilities and, if applicable, long-term

lease liabilities.

We have elected not to recognize leases with terms of one year or less on our consolidated balance sheets.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term.

However, certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

The interest rate implicit in lease contracts is typically not readily determinable.

As a result, we utilize our incremental borrowing rates to calculate the present value of lease payments.

Incremental borrowing rates are the rates we incur to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

As of December 31, 2022, we have a right-of-use asset of $1.8 million and lease liability of $2.3 million which reflected on the consolidated balance sheets.

Significant accounting policies and Note 6.

Leases to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of leases.

RESULTS OF OPERATIONS

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Year Ended December 31,

Product revenue, net

License and collaboration revenue

Sale of COPIKTRA license and related assets

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Operating expenses:

Cost of sales - product

Cost of sales - intangible amortization

Cost of sales - sale of COPIKTRA license and related assets

Research and development

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Interest expense

Loss on debt extinguishment

Net loss before income taxes

Income tax expense

Change in fair value of preferred stock tranche liability

Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

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Sale of COPIKTRA license and related assets revenue for the 2022 Period was comprised of one regulatory milestone for $2.5 million achieved by Secura’s sublicensee, CSPC, and $0.1 million related to royalties on COPIKTRA sales in the 2022 Period and future royalties expected to be received pursuant to the Secura APA that are not constrained.

Sale of COPIKTRA license and related assets revenue for the 2021 Period primarily related to two regulatory milestones for $1.3 million achieved by Secura’s sublicensee and $0.2 million related to royalties we received and expected to be received pursuant to the Secura APA.

Transition services revenue.

Transition services revenue for the 2022 Period was $0.0 million compared to $0.6 million for the 2021 Period.

Transition services revenue was comprised of the revenue recognized for us providing certain support functions to Secura pursuant to the transition services agreement, which was entered into

in connection with the Secura APA (“Secura TSA”).

The services were provided at a mutually agreed upon rate.

The services were substantially completed in 2021 and there will not be revenue recorded in the future pursuant to the Secura TSA.

Research and development expense.

Research and development expense for the 2023 Period was $61.4 million compared to $50.6 million for the 2022 Period.

The $11.3 million increase from the 2021 Period to the 2022 Period was primarily related to an increase of $4.1 million in drug substance and drug product costs, an increase of $4.1 million in CRO costs, an increase of $1.5 million in consulting costs, an increase of $0.9 million in investigator fees, an increase of $0.5 million in personnel related costs, including non-cash stock-based compensation, an increase of $0.4 million in clinical supply costs and an increase of $0.8 million in other costs.

The increase was partially offset by a decrease of $1.0 million in investigator sponsored trial costs.

The $10.8 million increase from the 2022 Period to the 2023 Period was primarily related to an increase of $6.1 million in CRO costs, a $2.0 million upfront payment made in September 2023 pursuant to the GenFleet Agreement, an increase of $1.8 million in personnel related costs, including non-cash stock-based compensation, an increase of $1.5 million in IST costs, an increase of $0.9 million in consulting costs, and an increase of $0.7 million in investigator fees.

The increase is partially offset by a decrease of $2.2 million in drug substance and drug manufacturing costs.

Selling, general and administrative expense.

Selling, general and administrative expense for the 2023 Period was $30.7 million compared to $25.0 million for the 2022 Period.

The increase of $0.9 million from the 2021 Period to the 2022 Period primarily resulted from an increase of $1.1 million of commercial operations costs, an increase of $0.4 million in personnel related costs, including non-cash stock-based compensation and an increase of $0.4 million of other costs.

The increase was partially offset by a decrease of $1.0 million of consulting and professional fees.

Other Income.

Other income for the 2022 Period was less than $0.1 million compared to $0.0 million in the 2021 Period.

Other income for the 2022 Period was comprised of a gain on the sale of fixed assets and changes in foreign currency exchange rates.

The increase of $5.7 million from the 2022 Period to the 2023 Period primarily resulted from an increase of $1.7 million in personnel related costs, including non-cash stock-based compensation, an increase of $1.4 million of costs in anticipation of the potential launch of avutometinib and defactinib in LGSOC, an increase of $1.2 million in consulting and professional fees, an increase of $0.6 million in costs associated with financing activities, and an increase of $0.8 million in travel and other costs.

Other Income (expense).

Other expense of $0.1 million for the 2023 Period was comprised of transaction losses due to changes in foreign currency exchange rates compared to other income of less than $0.1 million for the 2022 Period comprised of a gain on the sale of fixed assets and transaction gains due to changes in foreign currency exchange rates.

Interest income.

Interest income for the 2023 Period was $6.2 million compared to $1.2 million for the 2022 Period.

The increase of $1.0 million in interest income was primarily driven by an increase in interest rates on debt securities.

The increase of $5.0 million in interest income was primarily driven by an increase in interest rates and investment balances on short-term investments and cash equivalents.

Interest expense.

Interest expense for the 2023 Period was $4.1 million compared to $2.1 million for the 2022 Period.

The decrease of $7.9 million from the 2021 Period to the 2022 Period was primarily driven by $ 7.8 million of non-cash interest expense recorded in the 2021 Period upon conversion of the 2020 Notes into common stock in July 2021.

In addition, as a result of the conversion, there were no interest charges recorded for the 2020 Notes in the 2022 Period.

The decrease is partially offset by the interest expense recorded pursuant to the Loan Agreement entered into with Oxford.

The increase of $2.0 million from the 2022 Period to the 2023 Period was primarily driven by increased expense on the Loan Agreement as a result of the additional $15.0 million debt drawdown on March 22, 2023.

Change in fair value of preferred stock tranche liability.

The change in fair value of the preferred stock tranche liability of $2.8 million for the 2023 Period was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Series B Convertible Preferred Stock Securities Purchase Agreement.

There was no preferred stock tranche liability outstanding during the 2022 Period.

LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity

We have financed our operations to date primarily through public and private offerings of our common stock, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments under our license and collaboration agreements with Sanofi, Yakult, and CSPC, the upfront payment under the Secura APA, the issuance of 2018 Notes in October 2018, the proceeds in connection with the PIPE, the Loan Agreement with Oxford, and issuance of our Series B Preferred Stock in January 2023.

We have financed our operations to date primarily through public and private offerings of our common stock and pre-funded warrants, offerings of convertible notes, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments under our license and collaboration agreements with Sanofi, Yakult, and CSPC, the upfront payment under the Secura APA, the proceeds in connection with the PIPE, the Loan Agreement with Oxford, and the issuance of Series B Convertible Preferred Stock.

With the commercial launch of COPIKTRA in the United States in September 2018 through our ownership period ending in September 2020, we financed a portion of our operations through product revenue.

As of September 30, 2020, we have sold our COPIKTRA license and no longer sell COPIKTRA in the United States.

We expect to finance a portion of our business through potential future milestones and royalties received pursuant to the Secura APA.

We expect to finance a portion of our business through future potential milestones and royalties received pursuant to the Secura APA.

As of December 31, 2023, we had $137.1 million in cash, cash equivalents, and investments.

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Government money market funds, government bonds, corporate bonds and commercial paper of publicly traded companies.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

On March 12, 2023, the Department of the Treasury, the Federal Reserve,

and the FDIC announced that all depositors of SVB will be fully protected and have access to all their money starting March 13, 2023.

As of March 13, 2023, our deposit balance at SVB was approximately $2 million.

We are continually monitoring developments related to the recovery of uninsured funds at SVB.

Risks and uncertainties include those identified under Item 1A.

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Operating activities.

The use of cash in operating activities in the 2022 Period and 2021 Period resulted primarily from our net losses adjusted for non-cash charges and changes in the components of working capital.

Our cash outflow from net losses adjusted for non-cash charges was $67.6 million and $54.1 million for the 2022 Period and 2021 Period, respectively.

Non-cash charges were primarily related to stock-based compensation expense in the 2022 Period and stock-based compensation expense and non-cash interest, net in the 2021 Period.

Our cash inflow from operating activities due to changes in operating assets and liabilities was $3.9 million and $0.6 million for the 2022 Period and 2021 Period, respectively.

Cash inflow due to changes in operating assets and liabilities for the 2022 Period was primarily driven by an increase of $2.6 million in accounts payable, an increase of $0.7 million in deferred liabilities, a decrease of $0.7 million of prepaid expenses, other current assets and other assets, and a decrease of $0.5 million in accounts receivable.

The decrease in prepaid expenses, other current assets, and other assets is exclusive of the cash received from PanCAN.

Cash inflow due to changes in operating assets and liabilities for the 2021 Period was primarily driven by an increase of $1.8 million in accrued expenses, an increase of $0.6 million in accounts payable, partially offset by an increase in $1.6 million in prepaid expenses, other current assets, and other assets.

Cash used in operating activities was $63.7 million and $53.5 million for the 2022 Period and 2021 Period, respectively.

The use of cash in operating activities in the 2023 Period and 2022 Period resulted primarily from our net losses adjusted for non-cash adjustments and changes in the components of working capital.

Our cash outflow from net losses adjusted for non-cash adjustments was $85.5 million and $67.6 million for the 2023 Period and 2022 Period, respectively.

Non-cash adjustments were primarily related to stock-based compensation expense, non-cash interest, net, and change in fair value on preferred stock tranche liability in the 2023 Period and stock-based compensation expense in the 2022 Period.

Our cash outflow for the 2023 Period from operating activities due to changes in operating assets and liabilities was $1.0 million for the 2023 Period primarily driven by an increase of $5.8 million in prepaid expenses, other current assets and other assets, and a decrease of $0.4 million in deferred liabilities, partially offset by an increase of $2.9 million in accrued expenses and other liabilities, and an increase of $2.3 million in accounts payable.

Our cash inflow for the 2022 Period from operating activities due to changes in operating assets and liabilities was $3.9 million primarily driven by an increase of $2.6

million in accounts payable, an increase of $0.7 million in deferred liabilities, a decrease of $0.7 million of prepaid expenses, other current assets and other assets, and a decrease of $0.5 million in accounts receivable, partially offset by a $0.6 million decrease in accrued expenses and other liabilities.

The changes in prepaid expenses, other current assets, and other assets in both periods are exclusive of cash received from PanCAN and used in the RAMP 205 study.

Cash used in operating activities was $86.5 million and $63.7 million for the 2023 Period and the 2022 Period, respectively.

Investing activities.

The cash used in investing activities for the 2023 Period primarily relates to the net purchases of investments of $44.4 million.

The cash provided by investing activities for the 2022 Period primarily relates to the net maturities of investments of $66.2 million.

The cash provided by investing activities for the 2021 Period primarily relates to the net maturities of investments of $0.3 million, partially offset by purchases of fixed assets of $0.2 million.

Financing activities.

The cash provided by financing activities for the 2022 Period primarily represents $27.4 million of net proceeds received under our at-the market equity offering program, $24.1 million of net proceeds received from the Loan Agreement with Oxford, and $0.3 million of proceeds received related to exercise of stock options and employee stock purchase plan .

The cash provided by financing activities for the 2021 Period primarily represents $6.7 million in net proceeds received under our at-the-market equity offering program, and $1.1 million of proceeds received related to exercise of stock options and employee stock purchase plan.

This is partially offset by $0.9 million of payments for settlement of restricted stock for tax withholdings.

On March 25, 2022 (the “Closing Date”) we entered into a loan and security agreement (the “Loan Agreement”), with Oxford as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”) pursuant to which the Lenders have agreed to lend us up to an aggregate principal amount of $150.0 million in a series of term loans (the “Term Loans”).

The initial Term Loan of $25.0 million was funded at the Closing Date of the Loan Agreement, an additional $75.0 million will be available at our option upon achievement of certain milestones as outlined in Note 5.

Debt to our consolidated financial statements included in this Annual Report on Form 10-K, and $50.0 million is subject to the Lenders’ sole

In January 2023, we met the Term B Milestone as outlined in Note 5.

Deb t to our consolidated financial statements included in this Annual Report on Form 10-K and we expect to draw down an additional $15.0 million Term Loan in March 2023.

The Term Loans bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap.

Interest is payable monthly in arrears on the first calendar day of each calendar month.

Beginning (i) April 1, 2024, if the Term B Loan (as defined in Note 5.

Debt to our consolidated financial statements included in this Annual Report on Form 10-K) is not made, (ii) April 1, 2025, if the Term B Loan is made, or (iii) April 1, 2026, if the Term B Loan is made and either (A) avutometinib has received FDA approval for the treatment of LGSOC or (B) COPIKTRA has received FDA approval for the treatment of peripheral T-cell lymphoma (“PTCL”), we shall repay the Term Loans in consecutive equal monthly payments of principal, together with applicable interest, in arrears.

All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on March 1, 2027.

As we have drawn the Term B Milestone, principal repayments will not be required to commence until at least April 1, 2025.

We are required to make a final payment of 5.0% of the original principal amount of the Term Loans that were drawn, payable at maturity or upon any earlier acceleration or prepayment of the Term Loans.

We may prepay all, but not less than all, of the Term Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount of the applicable Term Loan if prepaid on or before the first anniversary date of the funding date of such Term Loan, (ii) 2.0% of the principal amount of the applicable Term Loan if prepaid after the first anniversary and on or before the second anniversary of the funding date of such Term Loan, and (iii) 1.0% of the principal amount of the applicable Term Loan if prepaid after the second anniversary of the applicable funding date of such Term Loan.

All Term Loans are subject to a facility fee of 0.5% of the principal amount.

The Loan Agreement contains no financial covenants.

The Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warrants, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and a material adverse change.

The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations.

During the existence of an event of default, the Term Loans will accrue interest at a rate per annum equal to 5.0% above the otherwise applicable interest rate.

In connection with the Loan Agreement, we granted Oxford a security interest in all of our personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property.

In August 2021, we entered into a sales agreement with Cantor Fitzgerald & Co.

(“Cantor”) pursuant to which we can offer and sell up to $100.0 million of our common stock at the current market prices from time to time through Cantor as sales agent (“August 2021 ATM”).

During the 2022 Period and 2021 Period, we sold 23,573,403 shares and 2,930,585 shares, respectively, under the August 2021 ATM for net proceeds of approximately $27.4 million, and $6.8 million, respectively (after deducting commissions and other offering expenses).

As of December 31, 2022, we can issue an aggregate amount of $65.1 million of common stock under this program.

On October 17, 2018, we closed a registered direct public offering of $150.0 million aggregate principal amount of our 2018 issued 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”), for net proceeds of approximately $145.3 million.

The 2018 Notes are governed by the terms of a base indenture for senior debt securities (the “Base Indenture”), as supplemented by the first supplemental indenture thereto (the “2018 Notes Supplemental Indenture” and together with the Base Indenture, the “2018 Indenture”), each dated October 17, 2018, by and between us and Wilmington Trust, National Association (“Wilmington”), as trustee.

The 2018 Notes are senior unsecured obligations of us and bear interest at a rate of 5.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year.

The 2018 Notes will mature on November 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms.

The 2018 Notes are convertible into shares of our common stock, par value $0.0001 per share, together, if applicable, with cash in lieu of any fractional share, at an initial conversion rate of 139.5771 shares of common

stock per $1,000 principal amount of the 2018 Notes, which corresponds to an initial conversion price of approximately $7.16 per share of common stock.

Upon conversion, converting noteholders will be entitled to receive accrued interest on their converted 2018 Notes.

We will have the right, exercisable at our option, to cause all 2018 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2018 Indenture) per share of our common stock equals or exceeds 130% of the conversion price, which equates to approximately $9.31 per share, on each of at least 20 “VWAP Trading Days” (as defined in the 2018 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date we first issued the 2018 Notes.

In the fourth quarter of 2019, we entered into privately negotiated agreements to exchange approximately $121.7 million aggregate principal amount of the 2018 Notes for (i) approximately $66.9 million aggregate principal amount of 5.00% Convertible Senior Second Lien Notes due 2048 (the “2019 Notes”), (ii) an aggregate of approximately $12.1 million in 2018 Notes principal repayment and (iii) accrued interest on the 2018 Notes through the exchange date.

As of March 31, 2020, all 2019 Notes have converted into shares of common stock and are no longer outstanding.

On November 6, 2020, we entered into a privately negotiated agreement with an investor who is a holder of our 2018 Notes to exchange approximately $28.0 million aggregate principal amount of 2018 Notes for approximately $28.0 million aggregate principal amount of newly issued 5.00% Convertible Senior Notes due 2048 (the “2020 Notes”).

The issuance of the 2020 Notes closed on November 13, 2020.

The 2020 Notes were governed pursuant to the Base Indenture between us and Wilmington dated as of October 17, 2018 as supplemented by the second supplemental indenture thereto dated as of November 13, 2020 (the “2020 Notes Supplemental Indenture” and together with the Base Indenture, the “2020 Indenture”).

We had the right, exercisable at our option, to cause all 2020 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2020 Indenture) per share of our common stock equals or exceeds 123.08% of the conversion price on each of at least 20 “VWAP Trading Days” (as defined in the 2020 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date we first issued the 2020 Notes (“2020 Notes Mandatory Conversion Option”).

On July 1, 2021, we exercised our 2020 Notes Mandatory Conversion Option for the aggregate principal amount of $28.0 million of the 2020 Notes.

On July 16, 2021, the aggregate principal of $28.0 million of 2020 Notes was converted into 8,615,384 shares of common stock.

Upon conversion of the 2020 Notes, holders received a cash payment equal to the accrued and unpaid interest on the converted 2020 Notes.

As a result, as of September 30, 2021, all 2020 Notes have converted into shares of common stock.

As of December 31, 2022 and 2021 there was $0.3 million aggregate principal amount outstanding of 2018 Notes.

The cash provided by financing activities for the 2023 Period primarily represents $91.4 million of proceeds from our previously disclosed public offering in June 2023 of common stock and pre-funded warrants to purchase shares of our common stock, net of issuance costs, $28.1 million of proceeds received from issuance of Series B Convertible Preferred Stock, net of issuance costs, $14.9 million of proceeds received pursuant to the loan and security agreement with Oxford, $1.4 million of proceeds received from insurance premium financing and $0.1 million of proceeds received related to our employee stock purchase plan, partially offset by $1.4 million of payments on insurance premium financing, and $0.3 million of repayment of our 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”).

The cash provided by financing activities for the 2022 Period primarily represents $27.4 million of net proceeds received under our at-the market equity offering program, $24.1 million of net proceeds received from the loan and security agreement with Oxford, and $0.3 million of proceeds received related to exercise of stock options and our employee stock purchase plan.

Refer to Note 11.

Capital Stock to our consolidated financial statements located in this Annual Report on Form 10-K for additional details on the January 2023 offering of our Series B Convertible Preferred Stock, the June 2023 offering of our common stock and pre-funded warrants to purchase shares of our common stock, and our at-the-market equity offering program;

Debt to our consolidated financial statements located in this Annual Report on Form 10-K for additional details on the Loan Agreement;

Notes Payable to our consolidated financial statements located in this Annual Report on Form 10-K for additional details on the finance agreement with AFCO Premium Credit LLC related to insurance premium financing and the monthly payments of principal and interest related thereto;

Convertible Senior Notes to our consolidated financial statements located in this Annual Report on Form 10-K for details on the 2018 Notes.

Funding requirements

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● receipt of milestone payments and royalties pursuant to the Secura APA including timing of such receipt.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and through future milestones and royalties received pursuant to the Secura APA.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and through future potential milestones and royalties received pursuant to the Secura APA.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

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If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Without additional funding we do not believe that we have sufficient funds to meet our obligations within the next 12 months from the date of issuance of these consolidated financial statements.

While we believe that we may have sufficient funds to meet our obligations within the next 12 months from the date of the issuance of the consolidated financial statements for the year ended December 31, 2023, in performing this analysis under the applicable accounting standards management excluded certain elements of our operating plan that cannot be considered probable of occurring.

Accordingly, management has concluded that substantial doubt exists about our ability to continue as a going concern for 12 months from the date the consolidated financial statements are issued.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

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The Amended Lease Agreement extends the expiration date of the lease from September 2019 through June 2025.

Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $0.7 million, which increases during the lease term to $1.1 million for the last twelve-month period.

Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $0.7 million, which increases during the lease term to $1.1 million for the last 12-month period.

As of December 31, 2023, the total future minimum lease payments under the agreement are $1.6 million through June 2025.

As discussed in Note 13.

License, collaboration and commercial agreements to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we are party to several agreements to license intellectual property.

License, collaboration and commercial agreements to the consolidated financial statements located in this Annual Report on Form 10-K, we are party to several agreements to license intellectual property.

The license agreements may require us to pay upfront license fees, ongoing annual license maintenance fees, milestone payments, minimum royalty payments, as well as reimbursement of certain patent costs incurred by the licensors, as applicable.

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The net operating loss and tax credit carryforwards will expire at various dates through 2043, except for $277.9 million of federal net operating loss carryforwards which may be carried forward indefinitely.

Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax

authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions.

Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions.

This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

1 unchanged sentence

Subsequent ownership changes may further affect the limitation in future years.

At December 31, 2022, we recorded a 100% valuation allowance against our NOL and tax credit carryforwards of $133.9 million, as we believe it is more likely than not that the tax benefits will not be fully realized.

At December 31, 2023, we recorded a 100% valuation allowance against our NOL and tax credit carryforwards, as we believe it is more likely than not that the tax benefits will not be fully realized.

In the future, if we determine that a portion or all of the tax benefits associated with our tax carryforwards will be realized, net income would increase in the period of determination.

7 unchanged sentences

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