What changed in this filing

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Item 1. Financial Statements

2024-11-06 compared with 2024-08-07 · 137 added, 117 removed, 606 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands, except share data and par value)

September 30,

2024 December 31,

18 unchanged sentences

Operating lease liabilities, net of current portion 624 833

Other liabilities 393 —

Total liabilities 16,830 27,228

2 unchanged sentences

Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized;

issued and outstanding as of June 30, 2024 and December 31, 2023

issued and outstanding as of September 30, 2024 and December 31, 2023

Common stock, $ 0.0001 par value;

300,000,000 shares authorized;

and 24,554,205 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

and 24,554,205 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 383,208 374,129

Accumulated other comprehensive (loss) income ( 27 ) 27

Accumulated other comprehensive income 39 27

Accumulated deficit ( 314,381 ) ( 268,963 )

5 unchanged sentences

(In thousands, except share data and earnings per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

4 unchanged sentences

Research and development 9,997 11,890 36,683 36,161

Restructuring charges 2,638 — 2,638 —

Cost of goods sold 804 697 2,234 1,882

8 unchanged sentences

Other comprehensive loss:

Unrealized (loss) income on available-for-sale debt securities ( 19 ) ( 12 ) ( 54 ) 71

Unrealized gain on available-for-sale debt securities 66 28 12 99

Comprehensive loss $ ( 12,480 ) $ ( 16,274 ) $ ( 45,406 ) $ ( 49,397 )

5 unchanged sentences

(In thousands, including share amounts)

For the Three and Six Months Ended June 30, 2024

For the Three and Nine Months Ended September 30, 2024

Stockholders' Equity

Common Stock Additional Paid-In

Capital Accumulated Other Comprehensive Loss Accumulated

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Deficit Total

10 unchanged sentences

Balance at June 30, 2024 24,615 $ 2 $ 380,651 $ ( 27 ) $ ( 301,835 ) $ 78,791

For the Three and Six Months Ended June 30, 2023

Share-based compensation expense — — 2,557 — — 2,557

Unrealized gain on investments, net of tax — — — 66 — 66

Net loss — — — — ( 12,546 ) ( 12,546 )

Balance at September 30, 2024 24,615 $ 2 $ 383,208 $ 39 $ ( 314,381 ) $ 68,868

For the Three and Nine Months Ended September 30, 2023

Stockholders' Equity

15 unchanged sentences

Balance at June 30, 2023 24,520 $ 2 $ 367,853 $ ( 44 ) $ ( 236,392 ) $ 131,419

Share-based compensation expense — — 3,049 — — 3,049

Issuance of common stock upon exercise of stock options 6 — 2 — — 2

Unrealized gain on investments, net of tax — — — 28 — 28

Net loss — — — — ( 16,302 ) ( 16,302 )

Balance at September 30, 2023 24,526 $ 2 $ 370,904 $ ( 16 ) $ ( 252,694 ) $ 118,196

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

5 unchanged sentences

Non-cash lease expense 345 346

Depreciation 99 81

Depreciation expense 146 125

Changes in operating assets and liabilities:

4 unchanged sentences

Operating lease liabilities ( 383 ) ( 375 )

Accounts payable and accrued liabilities ( 4,266 ) ( 6,670 )

Accounts payable, accrued liabilities, and other current liabilities ( 10,365 ) ( 4,947 )

Other liabilities 394 —

Net cash used in operating activities ( 44,497 ) ( 50,019 )

15 unchanged sentences

Supplemental disclosure of non-cash activities:

Deferred transaction costs included in accounts payable and accrued liabilities $ — $ 9

Accrued property and equipment $ 428 $ 122

18 unchanged sentences

The Company has experienced net losses since its inception and expects to continue to incur net losses into the foreseeable future.

The Company had an accumulated deficit of $ 301.8 million as of June 30, 2024.

For the three months ended June 30, 2024 and 2023 , the Company had a net loss of $ 14.6 million and $ 18.0 million, respectively.

For the six months ended June 30, 2024 and 2023 , the Company had a net loss of $ 32.9 million and $ 33.2 million, respectively.

The Company had an accumulated deficit of $ 314.4 million as of September 30, 2024.

For the three months ended September 30, 2024 and 2023 , the Company had a net loss of $ 12.5 million and $ 16.3 million, respectively.

For the nine months ended September 30, 2024 and 2023 , the Company had a net loss of $ 45.4 million and $ 49.5 million, respectively.

To date, these operating losses have been funded primarily from outside sources of invested capital through the issuance of convertible promissory notes, grant funding, the sale of securities, and proceeds from license agreements.

The Company had cash, cash equivalents and short-term investments of $ 78.6 million at June 30, 2024.

The Company had cash, cash equivalents and short-term investments of $ 62.6 million at September 30, 2024.

Management believes the Company’s current cash, cash equivalents and short-term investments will provide sufficient funds to enable the Company to meet its obligations for at least twelve months from the filing date of this report.

If the Company is unable to achieve and maintain profitability, it will need additional financing to support its continuing operations and pursue its strategic objectives.

Additional financing may be achieved through a combination of equity offerings and debt financings.

Additional financing may be achieved through a combination of equity offerings and debt financing.

The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all.

On March 17, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may offer and sell, from time to time at the Company’s sole discretion, shares of its common stock having an aggregate offering price of up to $ 75.0 million through Cowen as its sales agent for an at-the-marketing-offering.

On March 17, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which the Company may offer and sell, from time to time at the Company’s sole discretion, subject to limitations under applicable securities laws, shares of its common stock having an aggregate offering price of up to $ 75.0 million through Cowen as its sales agent for an at-the-marketing-offering.

Any sales under the Sales Agreement may result in dilution to existing shareholders.

As of June 30, 2024 , no shares of common stock had been sold under this Sales Agreement.

As of September 30, 2024 , no shares of common stock had been sold under this Sales Agreement.

Summary of Significant Accounting Policies

1 unchanged sentence

The unaudited condensed consolidated financial statements, and the related disclosures, have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and U.S.

Securities and Exchange

Commission ("SEC") regulations and, in the opinion of management include all adjustments necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity and cash flows for each period presented.

Securities and Exchange Commission ("SEC") regulations and, in the opinion of management include all adjustments necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity and cash flows for each period presented.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

16 unchanged sentences

Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions.

Restructuring Charges

Restructuring charges consist primarily of employee severance, contract termination costs and other costs.

Liabilities for costs associated with a restructuring activity are recognized when the liability is incurred and are measured at fair value.

For one-time employee terminations benefits, the Company recognizes the liability in full on the communication date when future services are not required or amortizes the liability ratably over the service period, if required.

The fair value of termination benefits reflects the Company’s estimate of expected utilization of certain Company-funded post-employment benefits.

One-time termination benefits include severance and continuation of health insurance coverage for certain employees.

Concentration of Credit Risk

2 unchanged sentences

Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

While the Company has not experienced any losses in such deposits, the recent failure of Silicon Valley Bank, at which the Company holds cash and cash equivalents in multiple accounts, exposed the Company to credit risk prior to the resolution by the Federal Deposit Insurance Corporation in a manner that fully protected all depositors.

While the Company has not experienced any losses in such deposits, the 2023 failure of Silicon Valley Bank, at which the Company holds cash and cash equivalents in multiple accounts, exposed the Company to credit risk prior to the resolution by the

Federal Deposit Insurance Corporation in a manner that fully protected all depositors.

The Company has not experienced any losses on deposits since inception.

5 unchanged sentences

Customer Concentration

For the three months ended June 30, 2024 and 2023, two customers represented 58 % and 41 %, and 55 % and 45 % of the Company's revenue, respectively.

For the six months ended June 30, 2024 and 2023, two customers represented 55 % and 44 % , and 53 % and 46 % of the Company’s revenue, respectively.

Additionally, two customers accounted for 38 % and 62 % of net accounts receivable as of June 30, 2024.

For the three months ended September 30, 2024 and 2023, two customers represented 54 % and 44 %, and 56 % and 44 % of the Company's revenue, respectively.

For the nine months ended September 30, 2024 and 2023, two customers represented 55 % and 44 % , and 54 % and 46 % of the Company’s revenue, respectively.

Additionally, two customers accounted for 60 % and 40 % of net accounts receivable as of September 30, 2024.

Cash, Cash Equivalents and Restricted Cash

1 unchanged sentence

Restricted cash consists of a letter of credit secured by restricted cash in connection with one of the Company's office leases and is included in other assets on the condensed consolidated balance sheets.

Refer to Note 6 for further information over the Company's leases.

Refer to Note 6 for further information on the Company's leases.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets (in thousands):

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and cash equivalents $ 30,537 $ 62,888

21 unchanged sentences

Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of investments sold.

The Company classifies

short-term investments with remaining maturities greater than one year as current assets because such short-term investments are available to fund the Company’s current operations.

The Company classifies short-term investments with remaining maturities greater than one year as current assets because such short-term investments are available to fund the Company’s current operations.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the decline in fair value below amortized cost is a result of credit losses or other factors, whether the Company expects to recover the amortized cost of the security, the Company's intent to sell and if it is more likely than not that the Company will be required to sell the securities before the recovery of amortized cost.

7 unchanged sentences

Receivables are recorded to an allowance for credit loss when it is probable that amounts will not be collected based on terms of the customer contracts.

As of June 30, 2024 and December 31, 2023, recorded customer allowances for chargebacks were $ 0.1 million and $ 0.2 million, respectively.

There were no allowances for credit losses and no receivables were written off for the periods ended June 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, recorded customer allowances for chargebacks were $ 32,000 and $ 0.2 million, respectively.

There were no allowances for credit losses and no receivables were written off for the periods ended September 30, 2024 and December 31, 2023, respectively.

Inventory is stated at the lower of cost or estimated net realizable value.

3 unchanged sentences

Details of inventory are presented as follows (in thousands):

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Raw materials $ 3,547 $ 4,640

7 unchanged sentences

Details of property and equipment are presented as follows (in thousands):

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Computers and software $ 471 $ 464

7 unchanged sentences

Construction in process mainly consists of lab, production, and testing equipment.

Depreciation expense on property, plant, and equipment amounted to $ 50,000 and $ 43,000 for the three months ended June 30, 2024 and 2023, respectively.

Depreciation expense on property, plant, and equipment amounted to $ 99,000 and 81,000 for the six months ended June 30, 2024 and 2023, respectively

Depreciation expense on property, plant, and equipment amounted to $ 47,000 and $ 44,000 for the three months ended September 30, 2024 and 2023, respectively.

Depreciation expense on property, plant, and equipment amounted to $ 0.1 million and $ 0.1 million for the nine months ended September 30, 2024 and 2023, respectively.

At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time.

17 unchanged sentences

When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range.

The Company has not recorded any such liabilities as of June 30, 2024 and December 31, 2023 .

The Company has no t recorded any such liabilities as of September 30, 2024 and December 31, 2023 .

Revenue Recognition and Related Allowances

12 unchanged sentences

On February 22, 2022, the Company launched sales of FYARRO to specialty distributors (“SDs”) and a specialty pharmacy (“SP”).

The Company recognizes product sales when the SDs

and SP obtain control of the product.

The Company recognizes product sales when the SDs and SP obtain control of the product.

Product sales are recorded at the net sales price, which includes provisions for the following allowances which are reflected either as a reduction to the related account receivable or as an accrued liability, depending on how the allowance is settled:

21 unchanged sentences

In arriving at its estimate, the Company also considers historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry.

The total amount deducted from gross product sales for the allowances described above for the three months ended June 30, 2024, and 2023, was $ 1.9 million and $ 1.1 million, respectively, and for the six months ended June 30, 2024 and 2023 was $ 3.0 million and $ 2.1 million, respectively.

The total amount deducted from gross product sales for the allowances described above for the three months ended September 30, 2024, and 2023, was $ 1.7 million and $ 1.3 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $ 4.7 million and $ 3.4 million, respectively.

The following table sets forth the changes in the accrued revenue allowances (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

7 unchanged sentences

The Company is required to estimate the amount of services provided but not yet invoiced and include these expenses in accrued expenses on the condensed consolidated balance sheets and within research and development expenses in the condensed consolidated statements of operations and comprehensive loss.

These expenses are a significant component of the Company’s research and development expenses

and require significant estimates and judgments.

These expenses are a significant component of the Company’s research and development expenses and require significant estimates and judgments.

The Company accrues for these expenses based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers.

6 unchanged sentences

Employee Stock Purchase Plan

Stock-based compensation expense for employee stock purchases under the Company’s 2021 Employee Stock Purchase Plan (the “2021 ESPP”) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as an expense on a straight-line basis over the applicable six-month 2021 ESPP offering period.

Share-based compensation expense for employee stock purchases under the Company’s 2021 Employee Stock Purchase Plan (the “2021 ESPP”) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as an expense on a straight-line basis over the applicable six-month 2021 ESPP offering period.

Income taxes have been accounted for using the asset and liability method.

8 unchanged sentences

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Basic and diluted weighted average shares of common stock outstanding for the three and six months ended June 30, 2024, includes the weighted average effect of 2,426,493 Pre-Funded Warrants, which were issued in September 2022, for the purchase of shares of common stock, for which the remaining unfunded exercise price is $ 0.0001 per share.

Basic and diluted weighted average shares of common stock outstanding for the three and nine months ended September 30, 2024, includes the weighted average effect of 2,426,493 Pre-Funded Warrants (as defined below), which were issued in September 2022, for the purchase of shares of common stock, for which the remaining unfunded exercise price is $ 0.0001 per share.

See Note 8 for more information on the Pre-Funded Warrants.

3 unchanged sentences

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

Six Months Ended June 30,

Nine Months Ended September 30,

Options to purchase common stock 5,256,229 4,116,510

2 unchanged sentences

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.

The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker.

The standard is effective for the Company beginning in fiscal year 2024 and interim periods

within fiscal year 2025, with early adoption permitted.

The standard does not have an impact to the Company's condensed consolidated financial statements.

In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.

In November 2023, the Financial Accounting Standards Board, or FASB, issued ASU 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures”, which requires enhanced disclosures about significant segment expenses.

The amendments are effective retrospectively to all prior periods presented in the financial statements, for fiscal years beginning after December 15, 2023.

The new guidance is not expected to have a material impact on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.

The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid.

5 unchanged sentences

The following table sets forth the recurring fair value of the Company’s financial assets and liabilities, allocated into the Level 1, Level 2 and Level 3 hierarchy that were measured at fair value on a recurring basis (in thousands):

Fair Value Measurements as of June 30, 2024

Fair Value Measurements as of September 30, 2024

Level 1 Level 2 Level 3 Total

14 unchanged sentences

(2) Includes investments classified as cash and cash equivalents in the accompanying consolidated balance sheets.

All marketable securities had a contractual maturity of less than one year as of June 30, 2024.

All marketable securities had a contractual maturity of less than one year as of September 30, 2024.

Short-Term Investments and Cash Equivalents

The following table summarizes the Company's short-term investments (in thousands):

As of June 30, 2024

As of September 30, 2024

Maturity (In Years) Amortized Cost Unrealized Gains Unrealized Losses Fair Value

14 unchanged sentences

Details of accrued liabilities are presented as follows (in thousands):

September 30,

2024 December 31,

1 unchanged sentence

Accrued salaries and payroll 1,652 1,590

Accrued restructuring charges 1,777 —

Accrued bonus 1,250 3,081

14 unchanged sentences

The following table summarizes information related to the Company’s leases (in thousands):

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Operating lease right-of-use assets $ 886 $ 1,169

2 unchanged sentences

Total operating lease liabilities $ 946 $ 1,267

Rent expense for the three and six months ended June 30, 2024 and 2023 is presented on the following table (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Rent expense for the three and nine months ended September 30, 2024 and 2023 is presented on the following table (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Operating leases rent expense $ 115 $ 115 $ 345 $ 346

Cash paid for leases and included in operating cash flows for the six months ended June 30, 2024 and 2023 is presented on the following table (in thousands):

Six Months Ended June 30,

Cash paid for leases and included in operating cash flows for the nine months ended September 30, 2024 and 2023 is presented on the following table (in thousands):

Nine Months Ended September 30,

Cash paid included in operating cash flows $ 383 $ 375

The future minimum lease payments required under the operating leases as of June 30, 2024, are summarized below (in thousands):

The future minimum lease payments required under the operating leases as of September 30, 2024, are summarized below (in thousands):

Future Minimum Lease Payments:

11 unchanged sentences

On April 9, 2014, the Company entered into a license agreement (as amended, the “BMS License Agreement”) with BMS for exclusive rights for certain patents and a non-exclusive license for certain technology and know-how pertaining to FYARRO.

The BMS License Agreement will remain in effect from the effective date of April 9, 2014 until expiration of all milestone and royalty payment obligations under the agreement, unless terminated by either of the parties upon giving advance notice as specified in the BMS License Agreement.

as specified in the BMS License Agreement.

Under the terms of the BMS License Agreement, BMS agreed to supply the Company with licensed products of FYARRO necessary for clinical or non-clinical development.

Under the terms of the BMS License Agreement, BMS is entitled to receive certain development milestone payments, royalties on net sales from licensed products under the agreement and any sublicense fees.

During the three months ended June 30, 2024 and 2023, royalties on net product sales were $ 0.5 million and $ 0.5 million, respectively.

During the six months ended June 30, 2024 and 2023, royalties on net product sales were $ 0.9 million and $ 0.9 million, respectively.

No payments related to sublicense fees were paid during the three and six months ended June 30, 2024 or 2023.

During the three months ended September 30, 2024 and 2023, royalties on net product sales were $ 0.5 million and $ 0.4 million, respectively.

During the nine months ended September 30, 2024 and 2023, royalties on net product sales were $ 1.4 million and $ 1.3 million, respectively.

No payments related to sublicense fees were paid during the three and nine months ended September 30, 2024 or 2023.

On August 30, 2021, the Company and BMS entered into Amendment No.

2 unchanged sentences

Pursuant to the terms of the Amendment, the remaining previously outstanding payment obligation of $ 5.8 million, is due on the third anniversary of the effective time of the 2021 PIPE Financing, or August 26, 2024 plus any accrued and unpaid interest due thereon (the “Balloon Payment”).

The Balloon Payment shall accrue interest, beginning August 26, 2021 until paid in full, at a rate equal to 4.00 % per annum based on the weighted average amount outstanding during the applicable calendar quarter, and interest is payable quarterly in arrears.

In addition, the parties agreed to amend the royalty rates payable to BMS based on net sales of products subject to the BMS License Agreement.

The Balloon Payment accrued interest, beginning August 26, 2021 until paid in full, at a rate equal to 4.00 % per annum based on the weighted average amount outstanding during the applicable calendar quarter, with interest payable quarterly in arrears.

In accordance with the terms of the Amendment, the Company paid the outstanding payment obligation of $ 5.8 million by the due date.

In addition, under the Amendment the parties agreed to amend the royalty rates payable to BMS based on net sales of products subject to the BMS License Agreement.

EOC License Agreement

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On June 27, 2022, the Company received written notice from EOC that EOC elected to terminate the EOC License Agreement, effective immediately, due to alleged material breaches by the Company under such agreement.

The Company disagrees with, and continues to dispute, EOC’s allegations of material breach and does not believe that EOC had a right to terminate the EOC License Agreement for material breach, and accordingly believes that the termination of the EOC License Agreement is a termination for convenience.

EOC had the right to terminate the agreement for convenience upon 120 days advance written notice.

The Company waived such notice period in connection with EOC's termination notice and, as a result, the EOC License Agreement was terminated effective June 27, 2022.

Either party had the right to terminate the EOC License Agreement in the event that the other party breaches the agreement and fails to cure the breach, becomes insolvent or challenges certain of the intellectual property rights licensed under the agreement.

The Company disputed EOC’s allegations of material breach.

See Note 12 for information regarding the subsequent arbitration between EOC and the Company regarding this dispute.

Stockholders’ Equity

Preferred Stock

As of June 30, 2024 and December 31, 2023 , under the Company’s certificate of incorporation, as amended and restated, the Company has 10,000,000 shares of authorized preferred stock, par value $ 0.0001 per share, with no shares outstanding.

As of September 30, 2024 and December 31, 2023 , under the Company’s certificate of incorporation, as amended and restated, the Company has 10,000,000 shares of authorized preferred stock, par value $ 0.0001 per share, with no shares outstanding.

Common Stock and Pre-Funded Warrants

As of June 30, 2024 and December 31, 2023, the Company had 300,000,000 shares of authorized common stock, par value of $ 0.0001 per share under the Company's certificate of incorporation, as amended and restated.

As of June 30, 2024 and December 31, 2023, the shares of common stock outstanding were 24,614,834 and 24,554,205 , respectively.

In March 2022, the Company entered into a Sales Agreement (the "Sales Agreement") with Cowen and Company LLC (“Cowen”) , with respect to an “at the market offering” program pursuant to which the Company may offer and sell, from time to time at its sole discretion, shares of common stock having aggregate gross proceeds of up to $ 75.0 million through Cowen as its sales agent .

As of September 30, 2024 and December 31, 2023, the Company had 300,000,000 shares of authorized common stock, par value of $ 0.0001 per share, under the Company's certificate of incorporation, as amended and restated.

As of September 30, 2024 and December 31, 2023, the shares of common stock outstanding were 24,614,834 and 24,554,205 , respectively.

In March 2022, the Company entered into a Sales Agreement (the "Sales Agreement") with Cowen , with respect to an “at the market offering” program pursuant to which the Company may offer and sell, from time to time at its sole discretion, subject to limitations under applicable securities laws, shares of common stock having aggregate gross proceeds of up to $ 75.0 million through Cowen as its sales agent .

The Company will pay Cowen 3.0 % of the aggregate gross proceeds from each sale of shares of common stock under the Sales Agreement.

As of June 30, 2024 , no shares of common stock had been sold pursuant to the Sales Agreement.

As of September 30, 2024 , no shares of common stock had been sold pursuant to the Sales Agreement.

On September 22, 2022, the Company entered into a securities purchase agreement (the “Purchase Agreement”) for a private investment in public equity financing (the “2022 PIPE Financing”) with certain investors (the “2022 PIPE Investors”) for the sale by the Company of (i) 3,373,526 shares of the Company’s common stock for a price of $ 12.50 per share and (ii) pre-funded warrants to purchase an aggregate of 2,426,493 shares of the Company's common stock (the "Pre-Funded Warrants") at a purchase price of $ 12.4999 per Pre-Funded Warrant.

7 unchanged sentences

The Pre-Funded Warrants meet the criteria to be classified within stockholders’ equity.

As of June 30, 2024, all Pre-Funded Warrants are still outstanding.

As of September 30, 2024, all Pre-Funded Warrants are still outstanding.

The holders of common stock are entitled to receive cash dividends, if and when declared by the board of directors of the Company (the “board of directors”).

27 unchanged sentences

The only persons eligible to receive awards under the Inducement Plan are individuals who are new employees and satisfy the standards for inducement grants under applicable Nasdaq listing rules.

As of June 30, 2024, 256,456 , 37,921 , 5,000,804 , and 490,000 shares were outstanding 2014 Private Aadi Plan, 2017 Plan , 2021 Plan, and 2023 Inducement Plan, respectively.

As of June 30, 2024, no shares were outstanding under the 2011 Plan.

The following table summarizes the stock option activity during the six months ended June 30, 2024:

As of September 30, 2024, 255,029 , 37,921 , 4,790,687 and 490,000 shares were outstanding under the 2014 Private Aadi Plan, 2017 Plan, 2021 Plan, and 2023 Inducement Plan, respectively.

As of September 30, 2024, no shares were outstanding under the 2011 Plan.

The following table summarizes the stock option activity during the nine months ended September 30, 2024:

Shares Weighted Average

6 unchanged sentences

Expired/cancelled ( 785,145 ) 11.79

Outstanding as of June 30, 2024 5,451,333 $ 11.05 8.40 $ 16

Options exercisable as of June 30, 2024 2,478,035 $ 13.97 7.81 $ 16

Vested and expected to vest as of June 30, 2024 5,451,333 $ 11.05 8.40 $ 16

As of June 30, 2024, there was $ 18.3 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 2.1 years.

The total intrinsic value of the options exercised during the three months ended June 30, 2024, and 2023, was $ 0 and $ 0.2 million, respectively.

The total intrinsic value of the options exercised during the six months ended June 30, 2024 and 2023 was $ 0 and $ 0.2 million, respectively.

As of June 30, 2024, and December 31, 2023, 466,938 and 657,734 shares were reserved for issuance under the 2021 Plan, respectively.

As of June 30, 2024 and December 31, 2023, 110,000 shares were reserved for issuance under the 2023 Inducement Plan.

Outstanding as of September 30, 2024 5,256,229 $ 10.99 8.15 $ 290

Options exercisable as of September 30, 2024 2,629,899 $ 14.04 7.57 $ 78

Vested and expected to vest as of September 30, 2024 5,256,229 $ 10.99 8.15 $ 290

As of September 30, 2024, there was $ 14.5 million of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 1.9 years.

The total intrinsic value of the options exercised during the three months ended September 30, 2024 and 2023, was $ 0 and $ 31,000 , respectively.

The total intrinsic value of the options exercised during the nine months ended September 30, 2024 and 2023 was $ 0 and $ 0.2 million, respectively.

As of September 30, 2024, and December 31, 2023, 678,482 and 657,734 shares were reserved for issuance under the 2021 Plan, respectively.

As of September 30, 2024, and December 31, 2023, 110,000 shares were reserved for issuance under the 2023 Inducement Plan.

Restricted Stock Units

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Upon vesting, each RSU converts into one share of the Company’s common stock.

Activity with respect to the Company’s restricted stock units during the six months ended June 30, 2024 is as follows:

Activity with respect to the Company’s restricted stock units during the nine months ended September 30, 2024 is as follows:

Shares Weighted Average

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Granted 308,700 1.92

Vested/Issued — —

Forfeited ( 23,850 ) 1.92

Nonvested shares at current period end 317,408 $ 2.16

As of June 30, 2024 there was $ 0.6 million of unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted average period of 3.45 years.

As of September 30, 2024 there was $ 0.5 million of unrecognized compensation cost related to restricted stock units, which is expected to be recognized over a weighted average period of 3.4 years.

Compensation Expense Summary

The Company recognized the following compensation cost related to employee and non-employee share-based compensation activity for the periods presented (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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The calculation was based on the following assumptions:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, (1) Nine Months Ended September 30,

2023 2024 2023

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3.42 % - 4.33 %

3.42 % - 4.17 %

Expected volatility 97.58 % - 101.03 %

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89.94 % - 101.03 %

89.94 % - 99.29 %

Expected term (in years) 5.15 - 6.08

Expected dividend yield — — —

(1) No awards were granted during the three months ended September 30, 2024

The Company determines the assumptions used in the option pricing model in the following manner:

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Merger Warrants to Purchase Common Stock

The Company had warrants outstanding for the purchase of 29,167 shares of the Company’s common stock at both June 30, 2024, and December 31, 2023.

The Company had warrants outstanding for the purchase of 29,167 shares of the Company’s common stock at both September 30, 2024, and December 31, 2023.

These warrants were assumed in the Merger and were issued by Aerpio in October 2019, for the purchase of 40,000 shares (after taking into account the reverse stock split of the Company’s common stock at a ratio of 15:1 effected on August 26, 2021 immediately prior to the closing of the Merger (the "Reverse Stock Split")) of the Company’s common stock at an exercise price of $ 7.29 per share (after taking into account the Reverse Stock Split).

These warrants were fully vested as of the date of the Merger and expire on October 24, 2024.

No warrants were exercised during the six months ended June 30, 2024.

No warrants were exercised during the nine months ended September 30, 2024.

At the grant date, the fair value of these awards was determined using a Black-Scholes option pricing model.

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An aggregate of 519,563 shares of common stock was initially reserved for issuance under the 2021 ESPP.

The number of shares of common stock available for issuance under the 2021 ESPP is increased on the first day of each fiscal year beginning with the 2022 fiscal year in an amount equal to the least of (i) 310,617 shares of common stock, (ii) one percent ( 1 %) of the outstanding shares of all classes of common stock on the last day of the immediately preceding fiscal year, or

(iii) an amount to be determined by the board of directors or its designated committee no later than the last day of the immediately preceding fiscal year.

( 1 %) of the outstanding shares of all classes of common stock on the last day of the immediately preceding fiscal year, or (iii) an amount to be determined by the board of directors or its designated committee no later than the last day of the immediately preceding fiscal year.

On January 1, 2024, 245,542 shares of common stock were added to the 2021 ESPP.

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The calculation was based on the following assumptions:

Three and Six Months Ended June 30, 2024 Three and Six Months Ended June 30, 2023

Three and Nine Months Ended September 30, 2024 Three and Nine Months Ended September 30, 2023

Strike price (per share) $ 1.56 - $ 4.00

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Expected term (in years) 0.5 0.5

Expected dividend yield — —

As of June 30, 2024, and December 31, 2023, 844,059 and 659,146 shares of common stock were available for issuance under the 2021 ESPP, respectively.

The Company had an outstanding liability of $ 43,000 and $ 0.1 million as of June 30, 2024, and December 31, 2023, respectively, which will be recognized over six months .

For the six months ended June 30, 2024 and December 31, 2023, 60,629 and 77,565 shares were issued under the 2021 ESPP, respectively.

The Company recorde d no income tax expense for the three and six months ended June 30, 2024 and June 30, 2023.

As of September 30, 2024, and December 31, 2023, 844,059 and 659,146 shares of common stock were available for issuance under the 2021 ESPP, respectively.

The Company had an outstanding liability of $ 0.1 million and $ 0.1 million as of September 30, 2024, and December 31, 2023, respectively, which will be recognized over six months .

As of September 30, 2024 and December 31, 2023, 60,629 and 77,565 shares were issued under the 2021 ESPP, respectively.

The Company recorde d no income tax expense for the three months ended September 30, 2024 and 2023.

The Company recorded no income tax expense for the nine months ended September 30, 2024 and 2023.

The Company continues to maintain a full valuation allowance.

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On June 27, 2022, EOC filed a Request for Arbitration with the International Chamber of Commerce’s International Court of Arbitration against the Company.

In the Request for Arbitration, EOC claims that the Company breached certain provisions of the EOC License Agreement, including failing to provide certain manufacturing information to EOC.

As a result, EOC is seeking monetary damages.

The arbitration process is ongoing and the Company expects a decision in the second half of 2024.

The Company is defending itself vigorously in this matter and pursuing all relief to which the Company is entitled.

The Company is unable to estimate the possible loss or range of loss, therefore no amounts have been accrued as of June 30, 2024.

In the Request for Arbitration, EOC claimed that the Company breached certain provisions of the EOC License Agreement, including failing to provide certain manufacturing information to EOC.

As a result, EOC was seeking monetary damages.

On September 26, 2024, the arbitration panel issued a Final Award which concluded that the Company did not breach the EOC License Agreement and accordingly is not liable for any damages to EOC.

See Note 7 for more information about the EOC License Agreement and its termination.

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These contracts are generally cancellable, with notice, at the Company’s option.

The Company recorded accrued expenses of $ 6.5 million and $ 5.7 million for expenditures incurred by clinical and contract manufacturing vendors as of June 30, 2024, and December 31, 2023, respectively.

At June 30, 2024, the Company was party to a Negotiated Purchase Order Terms and Conditions for Clinical and Commercial Product, as amended effective as of August 1, 2022 and March 31, 2024 (the "Fresenius Agreement"), with Fresenius Kabi that contains specific activities including non-cancellable commitments, minimum purchase commitments, and binding annual forecasts.

As of June 30, 2024, there were non-cancellable purchase commitments under the Fresenius Agreement related to the purchase of inventory for $ 4.6 million to be paid in 2024.

The Company recorded accrued expenses of $ 5.7 million for expenditures incurred by clinical and contract manufacturing vendors as of September 30, 2024, and December 31, 2023.

At September 30, 2024, the Company was party to a Negotiated Purchase Order Terms and Conditions for Clinical and Commercial Product, as amended effective as of August 1, 2022, March 31, 2024, and July 31, 2024 (the "Fresenius Agreement"), with Fresenius Kabi that contains specific activities including non-cancellable commitments, minimum purchase commitments, and binding annual forecasts.

As of September 30, 2024, there were non-cancellable purchase commitments under the Fresenius Agreement related to the purchase of inventory for $ 4.4 million to be paid in the remainder of 2024.

The Fresenius Agreement expired pursuant to its terms on September 30, 2024.

Mirati Collaboration

In October 2022, the Company entered into a collaboration and supply agreement with Mirati Therapeutics, Inc.

(“Mirati”) to evaluate the combination of Mirati’s adagrasib, a KRAS G12C selective inhibitor, and FYARRO in KRAS G12C mutant non-

small cell lung cancer (NSCLC) and other solid tumors.

(“Mirati”) to evaluate the combination of Mirati’s adagrasib, a KRAS G12C selective inhibitor, and FYARRO in KRAS G12C mutant non-small cell lung cancer (NSCLC) and other solid tumors.

In May 2024, the Company announced the mutually agreed upon termination of the collaboration and supply agreement with Mirati and the discontinuation of the Phase 1/2 study.

Under the terms of the agreement, Mirati was responsible for sponsoring and operating the Phase 1/2 study and the Company supplied study drug and jointly shared the cost of the study, which will continue during the winding down process.

For the three months ended June 30, 2024 and 2023, the Company incurred $ 0.5 million and $ 0.2 million in expenses related to the Mirati collaboration, respectively.

For the six months ended June 30, 2024 and 2023, the Company incurred $ 0.7 million and $ 0.5 million in expenses related to the Mirati collaboration, respectively

For the three and nine months ended September 30, 2024, the Company incurred $ 0.3 million and $ 1.0 million in expenses related to the Mirati collaboration.

For the three and nine months ended September 30, 2023, the Company incurred $ 0.1 million and $ 0.7 million in expenses related to the Mirati collaboration.

Restructuring

On August 21, 2024, the Company announced a restructuring plan to reduce the Company’s workforce by approximately 32 % in response to the Company's announcement on August 20, 2024 that it will halt the registration-intended PRECISION1 trial of nab-sirolimus in patients with solid tumors harboring TSC1 or TSC2 inactivating alterations.

The Company recorded a total restructuring charge of $ 2.6 million, which consists of one-time termination benefits such as severance costs and related benefits.

For the three and nine months ended September 30, 2024, the Company made cash payments related to the restructuring of $ 0.4 million.

As of September 30, 2024, the $ 2.2 million one-time termination benefits remain payable and are recorded within the accrued expenses and other liabilities line item on the Company's condensed balance sheet.

Restructuring payments commenced in September 2024 and will extend through December 2024.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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Forward-looking statements in this Quarterly Report include, but are not limited to, statements about:

• our assessment of strategic options and our ability to identify and implement any strategic transactions;

• the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements;

• our ability to maintain regulatory approval for FYARRO ® in advanced malignant perivascular epithelioid cell tumor (“PEComa”), or to obtain and maintain regulatory approval for FYARRO in additional indications, or any other product candidates we may develop in the future, and any related restrictions, limitations or warnings in the label of an approved product candidate;

• our belief that we presently have sufficient supply of FYARRO for at least the next two years based on our estimated demand for PEComa sales;

• our plans and potential for success relating to commercializing FYARRO, or any other product candidate that we may develop, if approved;

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• our ability to obtain funding for our operations, including funding necessary to commercialize FYARRO and to complete further development, approval and, if approved, commercialization of FYARRO in additional indications and any other product candidates we may develop in the future;

• the period over which we anticipate our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements;

• the potential for our business development efforts to maximize the potential value of our portfolio;

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• our financial performance;

• statements regarding the legal proceedings related to the termination of the EOC License Agreement (as defined herein), including our expectations regarding the timing of the arbitration decision;

• our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

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

What changed 10-Q

Item 1. Financial Statements