What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-07 · 110 added, 101 removed, 178 unchanged (54% of the section changed)

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Nab -sirolimus is a potent inhibitor of the mTOR biological pathway with demonstrated anti-cancer activity in our lead indication, advanced malignant perivascular epithelioid cell tumor (“PEComa”), a rare cancer.

We believe our approach to utilizing the novel combination of technologies has the potential to produce transformational therapies for patients with cancers beyond PEComa that have known mTOR pathway activation and/or cancers in which other mTOR inhibitors have not been fully exploited due to problems of pharmacology, effective drug delivery, safety, or effective targeting to the disease site.

We exclusively license FYARRO, previously called ABI-009, nab -sirolimus, from Abraxis BioScience, LLC, a wholly owned subsidiary of Celgene Corporation, which is a wholly owned subsidiary of Bristol-Myers Squibb Company (“BMS”).

In November 2021, the U.S.

Food and Drug Administration (the “FDA”) approved FYARRO sirolimus protein-bound particles for injectable suspension (albumin-bound) for the treatment of adult patients with locally advanced unresectable or metastatic malignant PEComa.

On February 22, 2022, we launched FYARRO in the United States for treatment of advanced malignant PEComa and recognized net product sales of $6.2 million and $11.5 million for the three and six months ended June 30, 2024, respectively.

On February 22, 2022, we launched FYARRO in the United States for treatment of advanced malignant PEComa and recognized net product sales of $7.2 million and $18.7 million for the three and nine months ended September 30, 2024, respectively.

See “Results of Consolidated Operations” for further discussion of our results.

In addition to advanced malignant PEComa, based on exploratory data from our completed Phase 2 registrational study, Advanced Malignant PEComa Trial (“AMPECT trial”) and data for FYARRO in other solid tumors with TSC1 and TSC2 inactivating alterations , we initiated a registration-directed tumor-agnostic Phase 2 study (“PRECISION1 trial”) of FYARRO in patients with malignant solid tumors with alterations of the Tuberous Sclerosis Complex 1 (“ TSC1 ”) or Tuberous Sclerosis Complex 2 (“ TSC2 ”) genes.

The PRECISION1 trial was opened for enrollment in the United States during the first quarter of 2022 and, on December 14, 2023, we announced results from an interim analysis on the first third of participants in the PRECISION1 trial.

This interim analysis included data from the first third of trial participants (n=40) with a minimum of 4.5 months of follow-up, including investigator-assessed response and safety analyzed separately in each of the TSC1 and TSC2 arms.

We expect to report the two-thirds interim analysis in the third quarter of 2024, with the overall response rate (ORR) analysis of such two-thirds cohort (n=80) based on independent radiological review with a minimum of six months of follow-up for all patients .

Recent Developments

• PRECISON1 Trial Enrollment and Timing .

In April 2024, we fully enrolled the PRECISION1 trial.

The trial is expected to be completed by the end of 2024, with results anticipated in early 2025.

• Termination of the Mirati Collaboration .

In May 2024, we announced that, at our request, we and Mirati Therapeutics, Inc.

(“Mirati”) mutually agreed to terminate our collaboration and supply agreement .

We entered into the agreement with Mirati in October 2022 to evaluate the combination of Mirati’s adagrasib (KRAZATI ® ), a KRAS G12C selective inhibitor, and FYARRO in KRAS G12C mutant non-small cell lung cancer ("NSCLC") and other solid tumors.

Enrollment in Phase 1/2 trial has been discontinued as we prioritize the evaluation of nab -sirolimus in Phase 2 trials for endometrioid endometrial cancer ("EEC") and in neuroendocrine tumors ("NETs") .

• Clinical Trials Updates.

On August 20, 2024, we halted the PRECISION1 trial, a registration-directed tumor-agnostic Phase 2 study of FYARRO in patients with Tuberous Sclerosis Complex 1 (" TSC1 ") and Tuberous Sclerosis Complex 2 (" TSC2 ") alterations, based on efficacy results from a planned interim analysis of efficacy results from two-thirds of participants in the trial.

An analysis by the Independent Data Monitoring Committee demonstrated that the study was unlikely to exceed an efficacy threshold necessary to support an accelerated approval, the key goal of this Phase 2 study.

We are completing the wind-down of the PRECISION1 trial and all patients who were still receiving benefit at the time the study was halted were transitioned to an expanded access protocol.

We expect to report out the PRECISION1 trial results in 2025.

To further preserve cash runway, we paused new enrollment, but continue dosing previously enrolled patients, in two, ongoing Phase 2 trials of FYARRO for advanced or recurrent endometrioid-type endometrial cancer (EEC) and neuroendocrine tumors (NETs).

Both studies have enrolled sufficient patients (n=24 and n=12 for EEC and NETs, respectively) to assess initial efficacy signals in the fourth quarter of 2024.

• Strategic Review.

On August 20, 2024, we announced our commencement of a comprehensive strategic review to maximize shareholder value.

Such strategic review is ongoing.

• Employee Matters .

On August 16, 2024, our Board of Directors (the “Board”) approved a plan of termination that resulted in a workforce reduction of 22 employees, representing approximately 32% of our workforce.

In addition, as of October 1, 2024, Neil Desai, Ph.D., our former Executive Chairman, and Loretta Itri, our former Chief Medical Officer, ceased their respective employments with the company.

Desai will continue to serve as a member of our Board.

Itri will provide consulting services to the company for up to ten hours per month for an initial three-month term.

• Arbitration Win .

On September 26, 2024, we received the arbitration panel's Final Award in our arbitration against EOC Pharma (Hong Kong) Limited ("EOC").

EOC had claimed that we breached certain provisions of our license agreement with EOC, dated December 8, 2020 (the “EOC License Agreement”), including failing to provide certain manufacturing information to EOC and, as a result, EOC sought monetary damages against us.

In the arbitration panel's Final Award, it found and concluded, among other things, that we did not breach the EOC License Agreement and accordingly we are not liable for any damages to EOC.

See Notes 7 and 12 to the condensed consolidated financial statements and "EOC License Agreement" below for more information about the EOC License Agreement, its termination and the arbitration proceedings.

BMS License Agreement

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Under 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 under the terms of this agreement.

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

No development payments related to milestones under this agreement were paid during the three and six months ended June 30, 2024.

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

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

No development payments related to milestones under this agreement were paid during the three and nine months ended September 30, 2024.

See Note 7 to the condensed consolidated financial statements for more information about the BMS License Agreement.

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

1 (the "BMS Amendment") to the BMS License Agreement.

Under the terms of the BMS Amendment, we paid BMS $5.8 million, representing 50% of the previously outstanding payment obligation under the agreement, following the effective time of our 2021 private investment in public equity (PIPE) financing ("2021 PIPE Financing") that occurred in connection with the closing of the reverse merger of Aerpio Pharmaceuticals, Inc.

1 (the “Amendment”) to the BMS License Agreement.

Under the terms of the Amendment, we paid BMS $5.8 million, representing 50% of the previously outstanding payment obligation under the agreement, following the effective time of our 2021 private investment in public equity (PIPE) financing ("2021 PIPE Financing") that occurred in connection with the closing of the reverse merger of Aerpio Pharmaceuticals, Inc.

whereby Aspen Merger Subsidiary, Inc., our wholly-owned subsidiary (“Merger Sub”), merged with and into Aadi Subsidiary, Inc.

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(“Private Aadi”)), with Private Aadi surviving as our wholly-owned subsidiary (the “Merger”).

Pursuant to the terms of the BMS Amendment, the remaining portion of the previously outstanding payment obligation ($5.8 million), which is recorded on our condensed consolidated balance sheets as due to licensor, is due on the third anniversary of the effective time of the 2021 PIPE Financing (i.e., August 26, 2024), plus any accrued and unpaid interest due thereon.

Pursuant to the terms of the amendment, the remaining portion of the previously outstanding payment obligation ($5.8 million), was paid by the third anniversary of the effective time of the 2021 PIPE Financing (i.e., August 26, 2024).

EOC License Agreement

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In accordance with the BMS License Agreement, we recognized $0.2 million of license expense in the fourth quarter of 2021 and had a corresponding $0.2 million sublicense payable to BMS as of December 31, 2021, which was paid in 2022.

On June 27, 2022, we received written notice from EOC that EOC has elected to terminate the EOC License Agreement, effective immediately.

On June 27, 2022, we received written notice from EOC that EOC elected to terminate the EOC License Agreement, effective immediately.

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

The arbitration process is ongoing and we expect a decision in the second half of 2024.

We are defending ourselves vigorously in this matter and pursuing all relief to which we are entitled .

We are unable to estimate the possible loss or range of loss, and therefore no amounts have been accrued as of June 30, 2024.

S ee Notes 7 and 12 to the condensed consolidated financial statements for more information about the EOC License Agreement, its termination and pending arbitration.

On September 26, 2024, the arbitration panel issued a Final Award which, among other things, found and concluded that we did not breach the EOC License Agreement and

accordingly we are not liable for any damages to EOC .

See Notes 7 and 12 to the condensed consolidated financial statements for more information about the EOC License Agreement, its termination and the arbitration proceedings.

Former Mirati Collaboration

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

Key Trends and Factors Affecting Comparability Between Periods

• Commercial sale of FYARRO was launched on February 22, 2022, for the treatment of patients with advanced malignant PEComa.

We recorded net product sales of $7.2 million and $18.7 million during the three and nine months ended September 30, 2024, respectively.

• We had built a cross-functional commercial team consisting of marketing, market access and commercial operations.

Expenses related to our commercialization of FYARRO, in cluding personnel expenses, sales support, and marketing are included in selling, general and administrative expenses for the three and nine months ended September 30, 2024.

We expect these expenses to decrease, as compared to prior periods, due to our workforce reductions in 2024.

• We expect to decrease our investment in research and development as a result of our halt and subsequent wind-down of the PRECISION1 study following interim data results and the pause of enrollment of our two Phase 2 trials of FYARRO in patients with EEC and NETs, respectively.

• Under the BMS License Agreement, as described above, we made a payment of $5.8 million to BMS on August 26, 2024 .

• Our future expenses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on our strategic review and the ultimate outcome of that process.

Liquidity and Capital Resources

As of September 30, 2024, we had $62.6 million of cash, cash equivalents and short-term investments.

Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into the second half of 2026.

We have incurred net losses in each year since inception and as of September 30, 2024, we had an accumulated deficit of $314.4 million .

These losses have resulted principally from costs incurred in connection with research and development activities, selling, general and administrative costs associated with our operations, and costs associated with the Merger.

We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical and clinical trials and identifying and designing product candidates, the regulatory approval process for FYARRO outside the United States and in additional indications and any other product candidates we may develop in the future and the continued commercialization of FYARRO.

Impact of Negative Global or National Events

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For example, as the COVID-19 pandemic developed, we took numerous steps to help ensure the health and safety of our employees.

While we have resumed normal operations, any resurgence of the COVID-19 pandemic may cause us to reinstitute certain measures to protect employee safety, including staggered work hours or reduced in-person staffing, that could result in additional disruption and/or delays in our ability to conduct development activities.

While we have resumed normal operations, any resurgence of the COVID-19 pandemic may cause us to

reinstitute certain measures to protect employee safety, including staggered work hours or reduced in-person staffing, that could result in additional disruption and/or delays in our ability to conduct development activities.

We have been and continue to actively monitor our supply chain in light of these challenging global and national events and circumstances, including our third-party materials suppliers.

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For example, during the COVID-19 pandemic, our clinical trials were affected by the closure of offices, lack of resources and closure of borders, among other measures being put in place around the world and we made certain modifications to employee travel, with masking and vaccination requirements in our offices, and with our employees working remotely fully or intermittently.

Any inability to travel and conduct face-to-face meetings, as well as constraints surrounding hospital infrastructure and staff, can also make it more difficult to enroll and maintain patients in ongoing or planned clinical trials.

We will continue to actively monitor the rapidly evolving situation related to these global and national events, and may take further actions to mitigate potential negative impacts to our business, and that may alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

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We will continue to evaluate the impact that these events could have on our operations, financial position, results of operations and cash flows in fiscal year 2024.

Key Trends and Factors Affecting Comparability Between Periods

• We have built a cross-functional commercial team consisting of marketing, market access and commercial operations and will continue to strategically build our sales and our commercial infrastructure with capabilities designed to scale when necessary to support future commercial launches.

We expect these expenses to decrease, as compared to prior periods.

• We have built our research and development team and we expect our research and development costs will increase in 2024, relative to prior periods, as a result of significant expenses related to the PRECISION1 trial which was open to enrollment during the year ended December 31, 2023 and continued enrollment through the three and six months ended June 30, 2024, as well as our anticipated expenses related to clinical programs for FYARRO in

EEC and in NETs.

We are currently enrolling patients in (i) a Phase 2 open-label, multi-institutional study to evaluate the efficacy and safety of the combination of FYARRO with letrozole for the treatment of advanced or recurrent EEC and (ii) a Phase 2 multicenter, open-label, single-arm trial to evaluate FYARRO in adult patients with functional or non-functional, well-differentiated, locally advanced unresectable or metastatic NETs of the GI tract, lung, or pancreas who have received ≤2 prior lines of therapy, excluding somatostatin analogs (SSTa).

• Under the BMS License Agreement, as described above, we expect to make a payment of $5.8 million to BMS no later than August 26, 2024.

• We anticipate that we will receive a decision in the EOC arbitration process in the second half of 2024.

If we are required under the decision to pay any amounts to EOC, then such amounts may increase, potentially significantly, our sales, general and administrative expenses in the second half of 2024

Liquidity and Capital Resources

As of June 30, 2024, we had $78.6 million of cash, cash equivalents and short-term investments.

Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into the fourth quarter of 2025.

We have incurred net losses in each year since inception and as of June 30, 2024, we had an accumulated deficit of $301.8 million.

Basis of Presentation

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Chargebacks are discounts and fees that relate to contracts with government and other entities purchasing from the SDs and SP at a discounted price.

The SDs and SP charge back to us the difference between the price initially paid by the SDs and SP and the discounted price paid to the SDs and SP by these entities.

actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment.

The SDs and SP charge back to us the difference between

the price initially paid by the SDs and SP and the discounted price paid to the SDs and SP by these entities.

If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment.

• Co-Payment Assistance:

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Research and development activities are central to our business.

We expect to increase our investment in research and development in order to advance FYARRO in additional indications through clinical trials.

As a result, we expect that our research and development expenses will increase in the foreseeable future as we continue to invest in research and development activities, pursue clinical development of FYARRO in additional indications and any other product candidates we may develop in the future and expand our product candidate pipeline.

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

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

Accordingly, to the extent that our product candidates continue to advance into clinical trials, including larger and later-stage clinical trials, our expenses will increase substantially and may become more variable.

We expect to decrease our investment in research and development as a result of our halt and subsequent wind-down of the PRECISION1 study following interim data results and the pause of our two Phase 2 trials of FYARRO in patients with EEC and NETs, respectively.

As a result, we expect that our research and development expenses will decrease in the foreseeable future.

Cost of Goods Sold

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Income Tax Expense

During the three and six months ended June 30, 2024 and 2023, we recognized no income tax expense on the condensed consolidated statements of operations and comprehensive loss.

During the three and nine months ended September 30, 2024 and 2023, we recognized no income tax expense on the condensed consolidated statements of operations and comprehensive loss.

Since our formation in 2011, we have not recorded any U.S.

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The following table presents the results of operations for the periods indicated (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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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

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Loss before income tax expense (12,546) (16,302) (45,418) (49,496)

Income tax expense — — — —

Net loss $ (12,546) $ (16,302) $ (45,418) $ (49,496)

Comparison of the Six Months Ended June 30, 2024 and 2023

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Product Sales, Net

Our product sales, net consist of sales of FYARRO since its launch in the United States on February 22, 2022.

Product sales, net for the three months ended June 30, 2024 and 2023 were $6.2 million and $6.2 million, respectively.

For the six months ended June 30, 2024 and 2023, product sales, net were $11.5 million and $12.1 million, respectively.

The decrease of sales for the six months ended is a result of distributor ordering patterns and fewer new patient initiations than the historical average.

Product sales, net for the three and nine months ended September 30, 2024 were $7.2 million and $18.7 million, respectively.

For the three and nine months ended September 30, 2023, product sales, net were $6.0 million and $18.0 million, respectively.

The increase in the three and nine months ended September 30, 2024 compared to the same period in the prior year was primarily due to strong demand.

Operating Expenses

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2024 and 2023 were $7.9 million and $11.8 million, respectively.

The $3.9 million decrease was primarily driven by a reduction of $1.3 million in commercial and marketing expense, $1.3 million in legal and other expenses, $1.0 million of personnel expenses, and $0.3 million of consulting and insurance expenses.

Selling, general and administrative expenses for the six months ended June 30, 2024 and 2023 were $18.5 million and $23.0 million, respectively.

The $4.5 million decrease was primarily driven by a reduction of $2.4 million of commercial and marketing expenses, $2.0 million of legal and other expenses, and $0.3 million of consulting and insurance expenses, offset by an increase of $0.2 million of personnel expense primarily related to severance expense.

Selling, general and administrative expenses for the three months ended September 30, 2024 and 2023 were $7.2 million and $11.2 million, respectively.

The $4.0 million decrease was primarily driven by a reduction of $2.3 million in personnel expenses, $1.5 million in commercial and marketing expenses, and $0.3 million of legal and other expenses, offset by an increase of $0.1 million related to consulting expenses.

Selling, general and administrative expenses for the nine months ended September 30, 2024 and 2023 were $25.7 million and $34.2 million, respectively.

The $8.5 million decrease was driven b y a reduction of $4.0 million in commercial and marketing expenses, $2.3 million in legal and other expenses, $2.1 million in personnel expenses, and $0.1 million of consulting and insurance expenses.

Research and Development Expenses

The following table presents our research and development expenses for the periods indicated (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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Total research and development expenses $ 9,997 $ 11,890 $ 36,683 $ 36,161

Research and development expenses for the three months ended June 30, 2024 and 2023 were $13.1 million and $13.3 million, respectively.

The decrease of $0.2 million was primarily driven by a $1.8 million decrease in headcount, consultants, and other expenses, offset by an increase of $1.2 million of clinical development expenses related to clinical programs for FYARRO in EEC and in NETs, and $0.4 million in clinical drug product manufacturing.

Research and development expenses for the six months ended June 30, 2024 and 2023 were $26.7 million and $24.3 million, respectively.

The $2.4 million increase was primarily driven by a $2.8 million increase in clinical development expenses related to the PRECISION1 trial and $1.9 million in clinical drug product manufacturing, offset by a decrease of $2.3 million in headcount, consultants, and other expenses.

Research and development expenses for the three months ended September 30, 2024 and 2023 were $10.0 million a nd $11.9 million, respectively.

The $1.9 million decrease was primarily driven by a $2.8 million decrease in personnel expense, consulting expense, and other expenses, offset by an increase of $0.9 million of clinical drug product manufacturing.

Research and development expenses for the nine months ended September 30, 2024 and 2023 wer e $36.7 million and $36.2 million , respectively.

The $0.5 million increase was primarily driven by a $2.9 million increase in clinical development expenses related to the EEC, NET, and PRECISION1 trials, and $2.7 million in clinical drug product manufacturing, offset by a decrease of $5.1 million in personnel expense, consulting expense, and other expenses.

Restructuring Charges

Restructuring charges for the three and nine months ended September 30, 2024 were $2.6 million.

The increase in restructuring expense was due to a restructuring plan to reduce the Company's workforce by 32% in response to our announcement on August 20, 2024 that we will halt the registration-intended PRECISION1 trial of nab-sirolimus in patients with solid tumors harboring TSC1 or TSC2 inactivating alterations.

Cost of Goods Sold

Cost of goods sold for the three months ended June 30, 2024 and 2023 was $0.8 million and $0.7 million, respectively.

Cost of goods sold for the six months ended June 30, 2024 and 2023 was $1.4 million and $1.2 million , respectively.

The increase of cost of goods sold of $0.1 million and $0.2 million for the three and six months ended June 30, 2024 compared to the same period in 2023 was primarily driven by an increase of costs incurred on sales of FYARRO and costs to manufacture and prepare the product for sale.

Cost of goods sold for the three months ended September 30, 2024 and 2023 was $0.8 million and $0.7 million, respectively.

Cost of goods sold for the nine months ended September 30, 2024 and 2023 was $2.2 million and $1.9 million, respectively.

The increase of cost of goods sold of $0.1 million and $0.3 million for the three and nine months ended September 30, 2024 compared to the same period in 2023 was primarily driven by an increase of costs incurred on sales of FYARRO and costs to manufacture and prepare the product for sale.

Other Income (Expense), Net

Other income, net for the three months ended June 30, 2024 was $1.0 million , compared to other income, net of $1.6 million for the three months ended June 30, 2023 .

The change was primarily driven by a decrease in short-term investments held during the three months ended June 30, 2024, compared to the three months ended June 30, 2023 .

Other income, net for the six months ended June 30, 2024 was $2.2 million , compared to other income, net of $3.2 million for the six months ended June 30, 2023 .

The change was primarily driven by a decrease in short-term investments held during the six months ended June 30, 2024, compared to the six months ended June 30, 2023 .

Other income, net for the three months ended September 30, 2024 was $0.9 million, compared to other income, net of $1.5 million for the three months ended September 30, 2023 .

The change was primarily driven by a decrease in short-term investments held during the three months ended September 30, 2024, compared to the three months ended September 30, 2023 .

Other income, net for the nine months ended September 30, 2024 was $3.1 million, compared to other income, net of $4.7 million for the nine months ended September 30, 2023 .

The change was primarily driven by a decrease in short-term investments held during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 .

Liquidity and Capital Resources

As of June 30, 2024 we had $78.6 million of cash, cash equivalents and short-term investments.

Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into the fourth quarter of 2025.

We have incurred net losses in each year since inception and as of June 30, 2024, we had an accumulated deficit of $301.8 million.

Our net losses were $14.6 million and $18.0 million for the three months ended June 30, 2024 and 2023, respectively, and $32.9 million and $33.2 million for the six months ended June 30, 2024 and 2023, respectively.

As of September 30, 2024 we had $62.6 million of cash, cash equivalents and short-term investments.

Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into the second half of 2026.

We have incurred net losses in each year since inception and as of September 30, 2024, we had an accumulated deficit of $314.4 million.

Our net losses were $12.5 million and $16.3 million for the three months ended September 30, 2024 and 2023, respectively, and $45.4 million and $49.5 million for the nine months ended September 30, 2024 and 2023, respectively.

These losses have resulted principally from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical studies and clinical trials, identifying and designing product candidates, the regulatory approval process for FYARRO outside the United States and in additional indications and any other product candidates we may develop in the future, and the continued commercialization of FYARRO.

We expect our expenses, and the potential for losses, to increase as we conduct clinical trials of FYARRO in additional indications and seek to expand our pipeline.

We expect to continue to incur

significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical studies and clinical trials, identifying and designing product candidates, the regulatory approval process for FYARRO outside the United States and any other product candidates we may develop in the future, and the continued commercialization of FYARRO.

We expect our expenses to decrease given the recent headcount reductions, the halting and wind-down of the PRECISION1 trial and the pausing of the trials in EEC and NETs.

On September 22, 2022, we received funding of $72.2 million, net from a private investment in public equity financing (the “2022 PIPE Financing”) with certain investors (the “2022 PIPE Investors”) .

On March 17, 2022, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), with respect to an “at the market offering” pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having aggregate gross proceeds of up to $75.0 million through Cowen as our sales agent.

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

Under the Sales Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number or dollar value of shares that may be sold in any one trading day and any minimum price below which sales may not be made.

We 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 under the Sales Agreement.

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

The shares of our common stock to be offered and sold under the Sales Agreement will be issued and sold pursuant to our shelf registration statement on the Form S-3 (File No.

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Aggregate net proceeds, after deducting certain expenses incurred of $0.3 million related to the issuance of the shares, were $72.2 million.

The following table summarizes our cash flows for the periods indicated (in thousands):

Six Months Ended June 30,

The following table presents our cash flows for the periods indicated (in thousands):

Nine Months Ended September 30,

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

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Operating Activities

Our cash used in operating activities primarily results from our net loss adjusted for non-cash expenses, changes in working capital components, amounts due to contract research organizations to conduct our clinical programs and employee-related expenditures for research and development and selling, general and administrative activities.

Our cash flows from operating activities will continue to be affected by spending to advance and support FYARRO in additional indications in the clinic and other operating and general administrative activities, including operating as a public company.

For the six months ended June 30, 2024 , cash used in operating activities was $28.8 million and resulted from (i) our net loss of $32.9 million, (ii) a $1.9 million net increase in our operating assets and liabilities, primarily driven by a decrease in accounts payable and accrued liabilities and a decrease in prepaid expenses and other current assets and inventory, and (iii) $6.0 million in non-cash adjustments, which were primarily related to share based compensation, discount amortization on short-term investments, lease expense, depreciation and amortization.

For the six months ended June 30, 2023 , cash used in operating activities was $38.1 million and resulted from (i) our net loss of $33.2 million , (ii) a $9.0 million net increase in our operating assets and liabilities, primarily driven by a decrease in accounts payable and accrued liabilities and a decrease in prepaid expenses and other current assets, offset by an increase in accounts receivable and inventory, and (iii) $4.1 million in non-cash adjustments, which were primarily related to share based compensation, discount amortization on short-term investments, lease expense, depreciation and amortization.

Our cash flows from operating activities will continue to be affected by spending to advance and support FYARRO and other operating and general administrative activities, including operating as a public company, and may fluctuate significantly from quarter-to-quarter and year-to-year, depending on our strategic review and the ultimate outcome of that process.

For the nine months ended September 30, 2024 , cash used in operating activities was $44.5 million and resulted from (i) our net loss of $45.4 million, (ii) $7.5 million net increase in our operating assets and liabilities, primarily driven by a decrease in accounts payable and accrued liabilities and a decrease in prepaid expenses and other current assets and

inventory, and (iii) $8.4 million in non-cash adjustments, which were primarily related to share based compensation, discount amortization on short-term investments, lease expense, and depreciation.

For the nine months ended September 30, 2023 , cash used in operating activities was $50.0 million and resulted from (i) our net loss of $49.5 million, (ii) $7.2 million net increase in our operating assets and liabilities, primarily driven by a decrease in accounts payable and accrued liabilities and a decrease in prepaid expenses and other current asset, and (iii) non-cash adjustments totaling $6.7 million, which was primarily related share based compensation, discount amortization on short-term investments, lease expense, and depreciation.

Investing Activities

Cash provided by investing activities for the six months ended June 30, 2024 was $7.0 million related to maturities of short-term investments of $34.8 million, offset by purchases of short-term investments of $26.6 million and fixed assets of $1.3 million.

Cash provided by investing activities for the six months ended June 30, 2023 was $66.9 million related to maturities of short-term investments of $92.0 million, offset by purchases of short-term investments of $23.1 million and fixed assets of $2.1 million.

Cash provided by investing a ctivities for the nine months ended September 30, 2024 was $12.1 million related to maturities of short-term investments of $50.0 million, offset by purchases of short-term investments of $36.5 million, and fixed assets of $1.5 million.

Cash provided by investing activities for the nine months ended September 30, 2023 was $79.6 million related to maturities of short-term investments of $133.3 million, offset by purchases of short-term investments of $50.5 million, and fixed assets of $3.2 million .

Financing Activities

Cash provided by financing activities for the six months ended June 30, 2024 was $0.1 million and related to the purchase of common stock under the employee stock purchase plan offset by financing costs related to the Sales Agreement.

Cash provided by financing activities for the six months ended June 30, 2023 was $0.3 million and related to the purchase of common stock under the employee stock purchase plan and exercise of stock options offset by financing costs related to the Sales Agreement.

Cash provided by financi ng activities for the nine months ended September 30, 2024 was $0.1 million related to the purchase of common stock under the employee stock purchase plan offset by financing costs related to the Sales Agreement.

Cash provided by financing activities for the nine months ended September 30, 2023 was $0.2 million related to the issuance of common stock under the employee stock purchase plan and exercise of stock options offset by financing costs related to the Sales Agreement .

Contractual Obligations and Commitments

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In August 2021, we entered into an amendment to extend the lease of our 2,760 square feet of office space in Pacific Palisades, California.

We exercised an option, under our prior lease agreement, to extend the term of the lease for an additional three-year period.

We exercised an option, under our prior lease agreement, to extend the term for an additional period of three (3) years and six (6) months, until February 28, 2025, with an option to renew for an additional three (3) years in accordance with the terms of the Pacific Palisades Lease.

Included in the renewal were nine months of rent abatement and a rent escalation clause.

Rent expense is being recorded on a straight-line basis.

Rent expense related to the Pacific Palisades and Morristown leases was $0.1 million for the three months ended June 30, 2024 and 2023, $0.2 million for the six months ended June 30, 2024 and 2023.

Rent expense related to the Pacific Palisades and Morristown leases for the nine months ended September 30, 2024 and 2023 was $0.3 million .

See Note 6 to the condensed consolidated financial statements for details related to future lease payments.

In January 2022, we entered into 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, LLC (“Fresenius Kabi”), pursuant to which Fresenius Kabi manufactures FYARRO for us and we purchase FYARRO as a finished drug product from Fresenius Kabi, on a purchase order basis.

The Fresenius Agreement contains specific activities such as non-cancellable commitments, minimum purchase commitments, or binding annual forecasts.

Under the Fresenius Agreement, which is effective through September 30, 2024, we purchase FYARRO for either clinical or commercial purposes for use in the United States and Canada.

In January 2022, we entered into 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, LLC (“Fresenius Kabi”), pursuant to which Fresenius Kabi manufactured FYARRO for us and we purchased FYARRO as a finished drug product from Fresenius Kabi, on a purchase order basis.

The Fresenius Agreement contained specific activities such as non-cancellable commitments, minimum purchase commitments, or binding annual forecasts.

Under the Fresenius Agreement, which was effective through September 30, 2024, we purchased FYARRO for either clinical or commercial purposes for use in the United States and Canada.

Although we believe we presently have sufficient supply of FYARRO for at least the next two years based on our estimated demand and are seeking to enter into a new agreement with Fresenius Kabi for the manufacture of FYARRO, if we are unable to enter into a new agreement on favorable terms or at all, our business could be materially adversely affected.

We also have contracts with various organizations to conduct research and development activities, including clinical trial organizations to manage clinical trial activities and manufacturing companies to manufacture the drug product used in the clinical trials.

The scope of the services under these research and development contracts can be modified and the contracts cancelled by us upon written notice.

In the event of a cancellation, we would be liable for the cost and expenses incurred to date as well as any close out costs of the service arrangement.

In the event of cancellation, we would be liable for the cost and expenses incurred to date as well as any close out costs of the service arrangement.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented.

Our condensed consolidated financial statements are prepared in accordance with GAAP.

We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.

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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 2. Management’s Discussion and Analysis