View:
10-Q
Q10001829802--12-31falsetrueP1Ytwo yearsthree yearsDecember 30, 20220001829802us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001829802snse:CambrianPurchaseAgreementMembersnse:CambrianBiopharmaIncMember2023-07-3100018298022024-01-012024-03-310001829802us-gaap:LeaseholdImprovementsMember2023-12-310001829802us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMembersnse:ShareBasedCompensationAwardTrancheFourMember2024-01-012024-03-310001829802snse:WarrantsIssuedToEmployeesAndContractorToPurchaseCommonStockMember2023-01-012023-03-310001829802snse:PurchaseAgreementMembersnse:ApeironInvestmentGroupMember2023-06-012023-06-010001829802us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001829802srt:MinimumMember2023-01-012023-03-310001829802snse:CambrianPurchaseAgreementMember2023-08-152023-08-150001829802snse:ResearchEquipmentMember2024-03-310001829802us-gaap:AdditionalPaidInCapitalMember2023-12-3100018298022023-03-310001829802snse:EquityAndDebtFundraisingEventsMemberus-gaap:WarrantMember2024-01-012024-03-310001829802us-gaap:OperatingExpenseMember2023-01-012023-03-310001829802us-gaap:RetainedEarningsMember2023-12-310001829802snse:OfficeEquipmentAndFurnitureMembersrt:MinimumMember2024-03-310001829802us-gaap:CommonStockMember2024-01-012024-03-310001829802us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheOneMemberus-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001829802snse:TwoThousandTwentyOneEmployeeStockPurchasePlanMember2024-03-310001829802us-gaap:AdditionalPaidInCapitalMember2022-12-310001829802us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001829802us-gaap:CommonStockMember2022-12-310001829802snse:EquityAndDebtFundraisingEventsMemberus-gaap:WarrantMember2023-01-012023-12-310001829802us-gaap:RetainedEarningsMember2024-01-012024-03-310001829802us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2024-03-310001829802snse:UnvestedRestrictedStockUnitsMember2024-01-012024-03-310001829802snse:UnvestedRestrictedStockUnitsMember2023-01-012023-03-310001829802us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001829802snse:OfficeSpaceMember2024-01-012024-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMemberus-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001829802snse:OfficeEquipmentAndFurnitureMember2024-03-310001829802us-gaap:FairValueMeasurementsRecurringMember2024-03-310001829802snse:EquityAndDebtFundraisingEventsMemberus-gaap:WarrantMember2024-03-310001829802us-gaap:RetainedEarningsMember2023-03-310001829802us-gaap:ShareBasedCompensationAwardTrancheTwoMembersnse:TwoThousandTwentyOneEquityIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001829802us-gaap:AdditionalPaidInCapitalMember2023-03-310001829802us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2024-03-310001829802us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001829802us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001829802us-gaap:AdditionalPaidInCapitalMember2024-03-310001829802snse:MarketableSecurityMemberus-gaap:CommercialPaperMember2024-03-310001829802snse:PurchaseAgreementMembersnse:ApeironInvestmentGroupMember2023-05-232023-05-230001829802us-gaap:CommonStockMember2023-03-310001829802us-gaap:CommonStockMember2023-12-310001829802snse:ResearchEquipmentMembersrt:MinimumMember2024-03-310001829802us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001829802us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2024-03-310001829802us-gaap:CommonStockMember2023-01-012023-03-310001829802us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2024-03-310001829802snse:ResearchEquipmentMember2023-12-310001829802snse:CambrianPurchaseAgreementMember2023-07-312023-07-310001829802snse:WarrantsIssuedRelatedToConvertibleNotesAndOtherEquityAgreementsMember2024-01-012024-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMembersrt:MaximumMember2023-01-012023-12-310001829802us-gaap:RestrictedStockUnitsRSUMember2023-12-310001829802snse:MarketableSecurityMemberus-gaap:CorporateBondSecuritiesMember2024-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMember2022-01-010001829802srt:MaximumMembersnse:OfficeEquipmentAndFurnitureMember2024-03-3100018298022024-03-310001829802us-gaap:SeriesAPreferredStockMember2024-01-012024-03-310001829802snse:TwoThousandTwentyOneEmployeeStockPurchasePlanMember2021-01-270001829802us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001829802us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001829802snse:WarrantsIssuedToEmployeesAndContractorToPurchaseCommonStockMember2024-01-012024-03-3100018298022023-01-012023-12-310001829802us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001829802us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001829802us-gaap:RetainedEarningsMember2024-03-310001829802us-gaap:EmployeeStockOptionMember2023-01-012023-03-310001829802snse:CommonStockWarrantsMember2024-03-3100018298022023-01-012023-03-310001829802snse:MarketableSecurityMember2024-03-310001829802snse:PurchaseAgreementMembersnse:ApeironInvestmentGroupMember2023-06-0100018298022023-12-310001829802snse:WarrantsIssuedRelatedToConvertibleNotesAndOtherEquityAgreementsMember2023-01-012023-03-3100018298022022-12-310001829802us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001829802snse:MarketableSecurityMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2024-03-310001829802srt:MaximumMember2024-01-012024-03-310001829802us-gaap:RestrictedStockUnitsRSUMember2024-03-310001829802us-gaap:RetainedEarningsMember2023-01-012023-03-3100018298022023-01-010001829802us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2024-03-310001829802us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001829802snse:OfficeEquipmentAndFurnitureMember2023-12-310001829802us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialPaperMember2024-03-310001829802us-gaap:CommonStockMember2024-03-310001829802snse:EquityAndDebtFundraisingEventsMemberus-gaap:WarrantMember2023-12-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMembersrt:MinimumMember2023-01-012023-12-310001829802srt:MinimumMember2024-01-012024-03-310001829802us-gaap:CommonStockMember2024-01-012024-03-310001829802srt:MaximumMember2023-01-012023-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMember2024-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMember2024-01-010001829802snse:TwoThousandTwentyOneEmployeeStockPurchasePlanMember2024-01-012024-03-310001829802us-gaap:LeaseholdImprovementsMember2024-03-310001829802us-gaap:RetainedEarningsMember2022-12-310001829802snse:PurchaseAgreementMembersnse:ApeironInvestmentGroupMember2023-05-230001829802us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001829802us-gaap:GeneralAndAdministrativeExpenseMember2023-01-012023-03-310001829802snse:TwoThousandTwentyOneEquityIncentivePlanMember2024-01-012024-03-310001829802us-gaap:GeneralAndAdministrativeExpenseMember2024-01-012024-03-310001829802srt:MaximumMembersnse:ResearchEquipmentMember2024-03-310001829802us-gaap:AccountingStandardsUpdate201602Member2024-03-3100018298022024-05-01xbrli:purexbrli:sharesiso4217:USDxbrli:sharesiso4217:USD

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-39980

 

Sensei Biotherapeutics, Inc.

(Exact name of Registrant as specified in its Charter)

 

Delaware

83-1863385

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

1405 Research Blvd, Suite 125

Rockville, MD

20850

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (240) 243-8000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

SNSE

 

The Nasdaq Stock Market LLC

Series A Preferred Stock Purchase Rights

 

 

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

The number of shares of Registrant’s Common Stock outstanding as of May 1, 2024 was 25,080,958.

 

 

 


 

Table of Contents

 

Page

PART I

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Common Stock and Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

Item 3.

Defaults Upon Senior Securities

62

Item 4.

Mine Safety Disclosures

62

Item 5.

Other Information

62

Item 6.

Exhibits

63

 

Signatures

65

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,956

 

 

$

13,011

 

Marketable securities

 

 

47,125

 

 

 

52,746

 

Prepaid expenses

 

 

1,884

 

 

 

1,168

 

Other current assets

 

 

269

 

 

 

325

 

Total current assets

 

 

60,234

 

 

 

67,250

 

Right of use assets - operating leases, net

 

 

3,960

 

 

 

4,330

 

Right of use assets - financing leases, net

 

 

1,350

 

 

 

1,543

 

Property and equipment, net

 

 

1,065

 

 

 

1,165

 

Other non-current assets

 

 

86

 

 

 

86

 

Total assets

 

$

66,695

 

 

$

74,374

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

2,000

 

 

$

1,694

 

Compensation and employee benefits liabilities

 

 

514

 

 

 

1,510

 

Operating lease liabilities, current

 

 

1,607

 

 

 

1,567

 

Financing lease liabilities, current

 

 

871

 

 

 

872

 

Total current liabilities

 

 

4,992

 

 

 

5,643

 

Operating lease liabilities, non-current

 

 

2,590

 

 

 

3,001

 

Financing lease liabilities, non-current

 

 

571

 

 

 

768

 

Other non-current liabilities

 

 

68

 

 

 

67

 

Total liabilities

 

 

8,221

 

 

 

9,479

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value and 10,000,000 shares authorized as of March 31, 2024 and December 31, 2023; zero shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value and 250,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 25,073,958 and 25,030,188 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

298,495

 

 

 

296,996

 

Accumulated deficit

 

 

(239,887

)

 

 

(231,895

)

Accumulated other comprehensive loss

 

 

(137

)

 

 

(209

)

Total stockholders’ equity

 

 

58,474

 

 

 

64,895

 

Total liabilities and stockholders’ equity

 

$

66,695

 

 

$

74,374

 

 

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

1


 

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

4,917

 

 

$

5,204

 

General and administrative

 

 

3,813

 

 

 

5,804

 

Total operating expenses

 

 

8,730

 

 

 

11,008

 

Loss from operations

 

 

(8,730

)

 

 

(11,008

)

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

768

 

 

 

969

 

Interest expense

 

 

(28

)

 

 

(42

)

Loss on asset disposal

 

 

 

 

 

(105

)

Other (expense) income, net

 

 

(2

)

 

 

9

 

Net loss

 

 

(7,992

)

 

 

(10,177

)

Net loss per common share, basic and diluted

 

$

(0.32

)

 

$

(0.33

)

Weighted-average number of shares used in computing net loss per common share, basic and diluted

 

 

25,049,111

 

 

 

30,866,087

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(7,992

)

 

$

(10,177

)

Other comprehensive items:

 

 

 

 

 

 

Unrealized gain on marketable securities

 

 

72

 

 

 

181

 

Total other comprehensive income

 

 

72

 

 

 

181

 

Total comprehensive loss

 

$

(7,920

)

 

$

(9,996

)

 

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

2


 

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMMON STOCK AND STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)

 

 

Common Stock

 

 

Additional Paid-In

 

 

Accumulated

 

 

Accumulated Other

 

 

Total Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Comprehensive Loss

 

 

Equity

 

Balance at December 31, 2022

 

 

30,764,160

 

 

$

3

 

 

$

302,202

 

 

$

(197,794

)

 

$

(1,004

)

 

$

103,407

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,213

 

 

 

 

 

 

 

 

 

1,213

 

Issuance of equity in exchange for compensation

 

 

208,510

 

 

 

 

 

 

302

 

 

 

 

 

 

 

 

 

302

 

Surrender of shares for tax withholding

 

 

(50,343

)

 

 

 

 

 

(76

)

 

 

 

 

 

 

 

 

(76

)

Vesting of restricted stock shares

 

 

49,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

181

 

 

 

181

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,177

)

 

 

 

 

 

(10,177

)

Balance at March 31, 2023

 

 

30,971,341

 

 

$

3

 

 

$

303,641

 

 

$

(207,971

)

 

$

(823

)

 

$

94,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

 

25,030,188

 

 

$

3

 

 

$

296,996

 

 

$

(231,895

)

 

$

(209

)

 

$

64,895

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,216

 

 

 

 

 

 

 

 

 

1,216

 

Issuance of equity in exchange for compensation

 

 

 

 

 

 

 

 

293

 

 

 

 

 

 

 

 

 

293

 

Surrender of shares for tax withholding

 

 

(12,361

)

 

 

 

 

 

(10

)

 

 

 

 

 

 

 

 

(10

)

Vesting of restricted stock shares

 

 

56,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

 

 

72

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,992

)

 

 

 

 

 

(7,992

)

Balance at March 31, 2024

 

 

25,073,958

 

 

$

3

 

 

$

298,495

 

 

$

(239,887

)

 

$

(137

)

 

$

58,474

 

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

3


 

SENSEI BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(7,992

)

 

$

(10,177

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,216

 

 

 

1,213

 

Depreciation and amortization

 

 

137

 

 

 

161

 

Accretion on marketable securities

 

 

(114

)

 

 

(348

)

Non-cash lease expense

 

 

370

 

 

 

316

 

Amortization of financing lease right-of-use assets

 

 

194

 

 

 

197

 

Loss on fixed asset disposition, net

 

 

 

 

 

96

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses

 

 

(716

)

 

 

(1,580

)

Other assets

 

 

56

 

 

 

(8

)

Accounts payable and accrued liabilities

 

 

306

 

 

 

242

 

Compensation and employee benefits

 

 

(703

)

 

 

(1,577

)

Operating lease liabilities

 

 

(371

)

 

 

(307

)

Other liabilities

 

 

1

 

 

 

36

 

Net cash used in operating activities

 

 

(7,616

)

 

 

(11,736

)

Investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(37

)

 

 

(151

)

Purchases of short-term investments

 

 

(6,259

)

 

 

(9,846

)

Maturities of short-term investments

 

 

12,066

 

 

 

12,300

 

Proceeds from sale of property and equipment

 

 

 

 

 

9

 

Net cash provided by investing activities

 

 

5,770

 

 

 

2,312

 

Financing activities

 

 

 

 

 

 

Principal payments for financing leases

 

 

(199

)

 

 

(186

)

Payment of employee restricted stock tax withholdings

 

 

(10

)

 

 

(76

)

Net cash used in financing activities

 

 

(209

)

 

 

(262

)

Net decrease in cash and cash equivalents

 

 

(2,055

)

 

 

(9,686

)

Cash and cash equivalents at beginning of period

 

 

13,011

 

 

 

17,795

 

Cash and cash equivalents at end of period

 

$

10,956

 

 

$

8,109

 

Supplemental disclosure of noncash financing information:

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of equity in exchange for compensation included in compensation and employee benefits

 

$

293

 

 

$

302

 

Property and equipment disposals included in other assets

 

$

 

 

$

(120

)

Initial measurement of operating lease right-of-use assets

 

$

 

 

$

258

 

Initial measurement of operating lease liabilities

 

$

 

 

$

258

 

Initial measurement of finance lease right-of-use assets

 

$

1

 

 

$

 

 

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

4


 

SENSEI BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED consolidated FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND OPERATIONS

Business

Sensei Biotherapeutics, Inc. (the “Company” or “Sensei”) is an immuno-oncology company that was incorporated in 1999 as a Maryland corporation until incorporated in Delaware on December 1, 2017. The Company is focused on the discovery and development of next-generation therapeutics for cancer patients.

Liquidity and capital resources

Since its inception, the Company has devoted substantially all of its resources to advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Since its inception, the Company has incurred substantial losses and had a net loss of $8.0 million for the three months ended March 31, 2024. As of March 31, 2024, the Company had an accumulated deficit of $239.9 million. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

The Company expects that its cash, cash equivalents and marketable securities as of March 31, 2024 of $58.1 million will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these financial statements. The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The Company has prepared the accompanying condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States (“US GAAP”). The condensed consolidated financial statements include those accounts of the Company and its subsidiaries after elimination of all intercompany accounts and transactions. Certain reclassifications have been made to amounts presented in our condensed consolidated statement of cash flows for the three months ended March 31, 2023 to conform to the presentation for the three months ended March 31, 2024.

Unaudited interim financial information

The condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from these condensed consolidated financial statements, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results for any interim period are not necessarily indicative of results for any future period.

5


 

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods presented. Estimates are used for, but are not limited to, depreciation of equipment, the Company’s enterprise value, fair value of financial instruments, the Company’s ability to continue as a going concern and contingencies. Actual results may differ from those estimates.

Cash and cash equivalents

Cash equivalents are highly liquid investments with an original maturity of 90 days or less at the date of purchase and consist of time deposits and investments in money market funds with commercial banks and financial institutions. At March 31, 2024, cash and cash equivalents included cash on deposit at commercial banks and a money market fund that invests in U.S. Government securities.

Marketable securities

Investments consist of marketable securities with original maturities greater than 90 days. The Company has classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of marketable securities to be available-for-sale. Accordingly, these investments are recorded at fair value (Level 2). Unrealized gains and losses are reported as the accumulated other comprehensive items in stockholders’ equity. Amortization and accretion of premiums and discounts are recorded in other income (expense). Realized gains or losses on debt securities are included in interest income or interest expense, respectively. If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s statement of operations and comprehensive loss.

Property and Equipment

Property and equipment are recorded at cost and depreciated or amortized over the estimated useful lives of the assets. Repairs or maintenance costs are expensed as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives:

Office equipment and furniture

37 years

Research equipment

17 years

Leases

Effective January 1, 2022, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASC 842”) using the modified retrospective method. At lease inception, the Company determines if an arrangement is or contains a lease, and if so, assesses the lease for classification as either an operating or finance lease. A lease is classified as a finance lease if any one of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or (v) the leased asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease. A lease is classified as an operating lease if it does not meet any of these criteria.

Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable. Leases with a term of one year or less are expensed as rent in the period incurred. The Company elected not to separate lease and non-lease components for all underlying assets. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the options. For leases that existed prior to the adoption of ASC 842, the Company used the remaining lease term to determine the appropriate incremental borrowing rate.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU

6


 

2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on the Company's condensed consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses regularly presented to the Chief Operating Decision Maker ("CODM") and incorporated into each reported segment profit or loss measure. Entities are required to provide both the amount and a detailed description of the composition of other segment items to reconcile them with the segment profit or loss. Furthermore, organizations must disclose the title and position of their CODM. ASU 2023-07 will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. The Company is currently evaluating the impact of incorporating ASU 2023-07 guidance on the Company's condensed unaudited consolidated financial statements and related disclosures.

 

3. MARKETABLE SECURITIES

Marketable securities consist of the following as of March 31, 2024 (in thousands):

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Commercial paper

 

$

12,414

 

 

$

 

 

$

(14

)

 

$

12,400

 

Corporate bonds

 

 

29,848

 

 

 

3

 

 

 

(14

)

 

 

29,837

 

U.S. Government agencies

 

 

5,000

 

 

 

 

 

 

(112

)

 

 

4,888

 

Total

 

$

47,262

 

 

 

3

 

 

$

(140

)

 

$

47,125

 

As of March 31, 2024, all marketable securities held by the Company had remaining contractual maturities of one year or less.

As of March 31, 2024, $0.1 million of unrealized losses were associated with marketable securities with contractual maturities of one year or less.

There were no impairments of the Company’s assets measured and carried at fair value during the three months ended March 31, 2024.

4. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following (in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Research equipment

 

$

2,144

 

 

$

2,107

 

Office equipment and furniture

 

 

532

 

 

 

532

 

Leasehold improvement

 

 

253

 

 

 

253

 

Total property and equipment

 

 

2,929

 

 

 

2,892

 

Less accumulated depreciation and amortization

 

 

(1,864

)

 

 

(1,727

)

Property and equipment, net

 

$

1,065

 

 

$

1,165

 

 

Depreciation and amortization expense for the three months ended March 31, 2024 and 2023 was $137 thousand and $161 thousand, respectively.

7


 

5. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):

 

 

 

Fair value measurements at March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

    Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

      Money market funds

 

$

10,179

 

 

$

 

 

$

 

 

$

10,179

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

   Commercial paper

 

 

 

 

 

12,400

 

 

 

 

 

 

12,400

 

   Corporate bonds

 

 

 

 

 

29,837

 

 

 

 

 

 

29,837

 

   U.S. Government agencies

 

 

 

 

 

4,888

 

 

 

 

 

 

4,888

 

Total

 

$

10,179

 

 

$

47,125

 

 

$

 

 

$

57,304

 

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

There were no transfers among Level 1, Level 2 or Level 3 categories in the three months ended March 31, 2024 and 2023.

6. COMMITMENTS AND CONTINGENCIES

Operating Leases

As of March 31, 2024, the Company leases office and laboratory facilities under operating leases, which expire at various dates through 2027. The Company has $678 thousand in letters of credit outstanding as security on certain of these leases. As part of its adoption of ASC 842, the Company recorded operating right-of-use assets and operating lease liabilities for these leases as of January 1, 2022.

The Company entered into an operating sublease agreement on January 18, 2023 (the "Sublease") with respect to part of its existing Boston office and laboratory facilities (the "Head Lease"). The Company accounted for the Head Lease and the Sublease as separate contracts and there was no effect on the right-of-use asset or lease liability associated with the Head Lease. The Sublease has an effective end date of December 31, 2024. The Head Lease rent expense is presented separately from income related to the Sublease and both are reported as components of operating expenses on the condensed consolidated statements of operations and comprehensive loss. The Company recorded $94 thousand of income related to the Sublease for the three months ended March 31, 2024.

Finance Leases

The Company leases research equipment and furniture under finance leases.

The following table contains a summary of the lease costs recognized under ASC 842 pertaining to the Company’s finance and operating leases for the three months ended March 31, 2024 (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2024

 

Lease Cost:

 

 

 

Amortization of finance right-of-use assets

 

$

194

 

Interest on finance lease liabilities

 

 

28

 

Operating lease cost

 

 

462

 

Variable lease cost

 

 

154

 

Total lease costs

 

 

838

 

Operating Sublease income

 

 

(94

)

Total lease costs, net

 

$

744

 

 

8


 

The following table contains a summary of other information pertaining to the Company’s finance and operating leases for the three months ended March 31, 2024 (in thousands, except lease term and discount rate):

 

 

Three Months Ended March 31,

 

 

 

2024

 

Other Operating Lease Information:

 

 

 

Operating cash flows for operating leases

 

$

462

 

Operating cash flows for operating subleases

 

$

(98

)

Operating cash flows for finance leases

 

$

28

 

Financing cash flows from finance leases

 

$

199

 

 

 

 

 

Weighted average remaining lease term

 

 

 

Operating leases

 

2.5 years

 

Financing leases

 

1.8 years

 

 

 

 

 

Weighted average discount rate

 

 

 

Operating leases

 

7.7%

 

Financing leases

 

8.3%

 


The following table presents the maturity of the Company’s operating and finance lease liabilities as of March 31, 2024 (in thousands):
 

 

 

Operating

 

 

Financing

 

2024

 

$

1,397

 

 

$

675

 

2025

 

 

1,736

 

 

 

757

 

2026

 

 

1,413

 

 

 

107

 

2027

 

 

59

 

 

 

 

Total future minimum lease payments

 

$

4,605

 

 

$

1,539

 

Less amount representing interest

 

 

408

 

 

 

97

 

Total lease liabilities

 

$

4,197

 

 

$

1,442

 

License Agreements

In the normal course of business, the Company enters into licensing agreements with various parties to obtain the right to make, use, and sell licensed products currently in development.

Litigation

The Company records estimated losses from loss contingencies, such as a loss arising from a litigation, when it determines that it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Litigation is subject to many factors that are difficult to predict so that there can be no assurance, in the event of a material unfavorable result in one or more claims, the Company will not incur material costs.

7. Equity

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

9


 

Common Stock Warrants

The following is a summary of the common stock warrant activity for the three months ended March 31, 2024 related to common stock warrants issued in conjunction with equity and debt fundraising events:

 

 

Number
of Common
Stock
Warrants

 

 

Weighted-
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value (in
thousands)

 

Outstanding at December 31, 2023

 

 

412,262

 

 

$

9.81

 

 

 

3.71

 

 

$

 

Outstanding at March 31, 2024

 

 

412,262

 

 

$

9.81

 

 

 

3.46

 

 

$

 

Share Purchase Agreements

On May 23, 2023, the Company entered into a stock purchase agreement with Apeiron Investment Group Ltd., Presight Sensei Co-Invest Fund, L.P., Presight Sensei Co-Invest Management, L.L.C., Christian Angermayer, Apeiron SICAV Ltd. - Presight Capital Fund ONE, and Altarius Asset Management Ltd. (collectively, the “Apeiron Parties”) (the “Apeiron Purchase Agreement”). Pursuant to the Apeiron Purchase Agreement, the Company acquired 4,454,248 shares of its common stock (“Shares”) from the Apeiron Parties at a purchase price of $1.58 per share. The closing of the acquisition (the “Closing”) occurred on June 1, 2023, pursuant to which the Company paid approximately $7.8 million in the aggregate to the Aperion Parties, including $0.75 million for costs related to the negotiation and execution of the Apeiron Purchase Agreement. The acquired Shares were subsequently retired and cancelled.

On July 31, 2023, the Company entered into a stock purchase agreement with Cambrian BioPharma, Inc. and its associates and controlled affiliates (“Cambrian”), pursuant to which the Company agreed to repurchase 1,587,302 shares of its common stock from Cambrian at a price of $1.26 per share and for an aggregate purchase price of approximately $2.0 million. The transaction closed on August 15, 2023 and the 1,587,302 repurchased shares have been retired and cancelled.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law, which contains certain revisions to the Internal Revenue Code, including a 1% excise tax on the value of net corporate stock repurchases that is effective beginning on January 1, 2023. The excise tax is recorded as an incremental cost in equity on the Company's condensed consolidated balance sheets and was not significant as of March 31, 2024.

8. STOCK-BASED COMPENSATION

2018 Equity Incentive Plan

The Company’s 2018 Stock Incentive Plan (the “2018 Plan”) provided for the Company to grant qualified incentive options, nonqualified options, stock grants and other stock-based awards to employees and non-employees to purchase the Company’s common stock. Upon the effectiveness of the 2021 Plan (as defined below), the Company ceased issuing new awards under the 2018 Plan.

2021 Equity Incentive Plan

The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was approved by the board of directors on January 27, 2021 and the Company’s stockholders on January 28, 2021, and became effective on the execution of the underwriting agreement related to the Company's initial public offering. The 2021 Plan provides for the grant of incentive stock options to employees, including employees of any parent or subsidiary corporations, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. The number of shares initially reserved for issuance under the 2021 Plan was 5,000,000, which began automatically increasing on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to 4.0% of the total number of shares of the Company’s capital stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the board of directors. In December 2023, the Company's board of directors determined that the automatic increase of available shares for calendar year 2024 would be reduced from 4.0% to 2.0% of the Company's capital stock. As a result, on January 1, 2024 the number of shares available for issuance pursuant to the 2021 Plan increased to 2,999,187 shares. As of March 31, 2024, 1,610,995 shares remained available for issuance pursuant to the 2021 Plan.

10


 

2021 Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) was approved by the Company’s board of directors on January 27, 2021 and became effective on the execution of the underwriting agreement related to the initial public offering. A total of 333,333 shares of common stock were initially reserved for issuance under the 2021 ESPP, which will automatically increase on January 1 of each calendar year, beginning on January 1, 2022 through January 1, 2031, by an amount equal to 1.0% of the total shares of common stock outstanding on December 31st of the preceding calendar year. The purchase price of the shares under the 2021 ESPP are at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the purchase date. As of March 31, 2024, the Company had issued 152,432 shares under the 2021 ESPP. As of March 31, 2024, 1,044,933 shares were available to be issued under the 2021 ESPP. The Company recognized no share-based compensation expense related to the ESPP for the three months ended March 31, 2024.

Stock Options

During 2023, the Company has granted options to purchase shares of common stock to employees and non-employee directors pursuant to the 2021 Plan at a weighted average fair value of $0.59 per share. The Company uses the Black-Scholes option-pricing model to estimate the fair value of the stock options on the applicable grant dates.

The following is a summary of the stock option award activity during the three months ended March 31, 2024:

 

 

 

Number
of Stock
Options

 

 

Weighted-
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Outstanding at December 31, 2023

 

 

3,419,306

 

 

$

7.12

 

 

 

7.29

 

 

$

 

Granted

 

 

1,421,576

 

 

$

0.78

 

 

 

 

 

 

 

Forfeited

 

 

(25,518

)

 

$

11.84

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

4,815,364

 

 

$

5.22

 

 

 

7.78

 

 

$

423

 

       Options expected to vest as of March 31, 2024

 

 

1,860,763

 

 

$

1.27

 

 

 

9.11

 

 

$

286

 

Exercisable at March 31, 2024

 

 

2,954,601

 

 

$

7.71

 

 

 

6.94

 

 

$

137

 

The aggregate intrinsic value of the outstanding stock option awards is calculated as the difference between the exercise price and the market price of the Company’s common stock at March 31, 2024. There were no stock options exercised in the three months ended March 31, 2024.

The grant date fair value of options vested during the three months ended March 31, 2024 and 2023 was $1.2 million and $1.4 million, respectively.

At March 31, 2024, there was $3.8 million of unrecognized stock-based compensation expense associated with the stock options, which is expected to be recognized over a weighted-average period of 1.71 years.

Restricted Stock Units

The Company has granted restricted stock units with service-based vesting conditions.

The following is a summary of the restricted stock unit activity during the three months ended March 31, 2024:

 

 

Restricted Stock Units

 

 

Weighted-
Average
Grant Date Fair Value

 

Unvested at December 31, 2023

 

 

232,958

 

 

$

2.53

 

   Vested

 

 

(63,131

)

 

$

2.91

 

   Forfeited

 

 

(7,866

)

 

$

2.55

 

Unvested at March 31, 2024

 

 

161,961

 

 

$

2.38

 

 

11


 

Pursuant to the 2021 Plan, the Company has historically granted restricted stock units which vest annually over a period of one, two, three or four years. The Company granted no restricted stock units during the three months ended March 31, 2024.

At March 31, 2024, there was approximately $0.3 million of unrecognized stock-based compensation expense associated with the restricted stock units which is expected to be recognized over a weighted-average period of 2.1 years.

Common Stock Warrants

The following is a summary of the employee-issued common stock warrant activity during the three months ended March 31, 2024:

 

 

Number
of Common
Stock
Warrants

 

 

Weighted-
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value (in
thousands)

 

Outstanding and exercisable at December 31, 2023

 

 

56,692

 

 

$

6.19

 

 

 

1.16

 

 

$

 

Outstanding and exercisable at March 31, 2024

 

 

56,692

 

 

$

6.19

 

 

 

0.91

 

 

$

 

As of March 31, 2024 there was no unrecognized stock-based compensation expense associated with the common stock warrants.

For the three months ended March 31, 2024, the Company utilized the Black-Scholes option-pricing model for estimating the fair value of the stock options granted. The following table presents the assumptions and the Company’s methodology for developing each of the assumptions used:

 

 

Three Months Ended March 31,

 

 

2024

 

2023

Volatility

 

91%-93%

 

93.0%

Expected term (years)

 

5.0-6.0

 

6.0-7.0

Risk-free interest rate

 

3.9%–4.2%

 

3.6%-4.0%

Dividend rate

 

—%

 

—%

 

Volatility—The Company estimates the expected volatility of its common stock at the date of grant based on the historical volatility of comparable public companies over the expected term.
Expected life—The expected life is estimated as the contractual term.
Risk-free interest rate—The risk-free rate for periods within the estimated life of the stock award is based on the U.S. Treasury yield curve in effect at the time of grant.
Dividend rate—The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future.

Stock-based compensation expense was recorded in the following line items in the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

339

 

 

$

292

 

General and administrative

 

 

877

 

 

 

921

 

Total stock-based compensation expense

 

$

1,216

 

 

$

1,213

 

 

9. EMPLOYEE RETIREMENT PLAN

The Company maintains a defined contribution 401(k) profit-sharing plan (the “Plan”) for all employees. Under the Plan, participants may make voluntary contributions up to the maximum amount allowable by law. The Plan is based on employees’ salary deferral, and the Company matches employees’ contributions up to 4% of the employees’ base salary. Employees are 100% vested in the Company’s match contributions. During the three months ended March 31, 2024 and 2023, the Company’s matching contributions were $82 thousand and $89 thousand, respectively.

12


 

10. RELATED-PARTY TRANSACTIONS

Purchase Agreement - Apeiron Investment Group

On May 23, 2023, the Company entered into the Apeiron Purchase Agreement with the Apeiron Parties, pursuant to which the Company agreed to purchase 4,454,248 shares of the Company’s common stock from certain of the Apeiron Parties for a purchase price of $1.58 per share. The closing of the purchase transaction was completed on June 1, 2023, pursuant to which the Company paid approximately $7.8 million in the aggregate to the Aperion Parties, including $0.75 million for costs related to the negotiation and execution of the Purchase Agreement. Prior to the closing, certain of the Apeiron Parties beneficially owned more than 5% of the Company's outstanding shares of common stock. Following the closing, the Apeiron Parties owned no outstanding shares of the Company’s common stock. The price per share and the transaction were unanimously approved by the independent directors of the Company’s board of directors.

Under the terms of the Apeiron Purchase Agreement, the Apeiron Parties agreed to withdraw their notice of intent to nominate director candidates for election to the Company’s board of directors at the 2023 annual meeting of stockholders. The Apeiron Parties additionally agreed to customary standstill restrictions, including an agreement to not acquire any additional shares of the Company’s voting securities or any of the Company’s indebtedness until the date that is the earlier of (i) four years from the date of the Apeiron Purchase Agreement and (ii) 30 days prior to the nomination deadline for the nomination of director candidates for election to the Company’s board of directors at the Company’s 2027 annual meeting of stockholders

Purchase Agreement - Cambrian BioPharma, Inc.

On July 31, 2023, the Company entered into the Cambrian Purchase Agreement, pursuant to which the Company agreed to repurchase 1,587,302 shares of its common stock from Cambrian, a beneficial owner of more than 5% of the Company’s outstanding shares of common stock, at a purchase price of $1.26 per share and for an aggregate purchase price of approximately $2 million. The transaction closed on August 15, 2023 and the 1,587,302 repurchased shares were retired and cancelled on or about the date of the closing. James Peyer, a director of the Company, is the CEO of Cambrian. The price per share and the transaction were unanimously approved by the independent directors of the Company’s board of directors.

Under the terms of the Cambrian Purchase Agreement, Cambrian agreed to vote, until thirty days prior to the deadline for delivery of notice for the nomination of director candidates for election to the Company’s board of directors at the Company’s 2025 annual meeting of stockholders (the “Effective Period”), all of Cambrian’s shares of the Company’s common stock at all meetings of stockholders, as well as in any consent solicitations of the Company’s stockholders, in accordance with the board’s recommendations. In the event that Institutional Shareholder Services, Inc. and Glass Lewis & Co., LLC recommend otherwise with respect to any Company proposals (other than the election or removal of directors), Cambrian will be permitted to vote in accordance with such recommendations. Under the terms of the Cambrian Purchase Agreement, Cambrian has also agreed to certain standstill restrictions during the Effective Period including, among other things, with respect to nominating persons for election to the board of directors, submitting any stockholder proposal for consideration at any stockholder meeting, soliciting any proxies, and conducting any “withhold” or similar campaign.

11. INCOME TAXES

The Company recorded no provision for income taxes for the three months ended March 31, 2024 and 2023.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards, equity-based compensation, research and development tax credit carryforwards, and capitalized research and development expenditures. Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against the Company’s otherwise recognizable net deferred tax assets.

On August 16, 2022, the IRA was signed into law, which contains certain revisions to the Internal Revenue Code, including a 1% excise tax on the value of net corporate stock repurchases that is effective beginning on January 1, 2023. The excise tax is recorded as an incremental cost in equity on the Company's condensed consolidated balance sheets and was not significant as of March 31, 2024.

13


 

12. NET LOSS PER SHARE

Basic and diluted net loss per share attributable to common stockholders is calculated as follows (in thousands, except share and per share amounts):

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(7,992

)

 

$

(10,177

)

Net loss per share—basic and diluted

 

$

(0.32

)

 

$

(0.33

)

Weighted-average number of shares used in computing net loss per share—basic and diluted

 

 

25,049,111

 

 

 

30,866,087

 

The following outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive:

 

For the Three Months Ended March 31,

 

 

2024

 

 

2023

 

Stock options to purchase common stock

 

4,815,364

 

 

 

3,742,702

 

Unvested restricted stock units

 

161,961

 

 

 

270,162

 

Warrants issued to employees and contractor to purchase common stock

 

56,692

 

 

 

56,692

 

Warrants issued related to convertible notes and other equity agreements

 

412,262

 

 

 

412,262

 

 

13. RESTRUCTURING AND RELATED CHARGES

In December 2022, the Company began implementing a restructuring plan to reduce operating costs primarily associated with a reduction in the Company's workforce (the “Restructuring”).

In connection with the Restructuring, the Company incurred no expenses during the three months ended March 31, 2024.

The Company incurred $0.2 million of expenses within research and development and general and administrative expenses during the three months ended March 31, 2023. These costs primarily related to one-time termination benefits and ongoing benefit arrangements, both of which included severance payments and extended benefits coverage support. These costs were accrued as a liability in December 2022 and settled during the three months ended March 31, 2023. Aggregate costs in connection with the Restructuring also included certain contract termination costs.
 

14


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words and phrases “designed to,” “may,” “might,” “can,” “will,” “to be,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “likely,” “continue,” “ongoing” or similar expressions, or the negative of such words, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below in this Quarterly Report under the caption “Risk Factors,” and in our other filings with the Securities and Exchange Commission, or SEC. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the year ended December 31, 2023, which are included in our Annual Report on Form 10-K filed with the SEC on February 29, 2024.

Overview

We are an immuno-oncology company focused on the discovery and development of next-generation therapeutics for cancer patients. Through our TMAb™ (Tumor Microenvironment Activated Biologics) platform, we are developing highly selective therapeutics designed to disable immunosuppressive signals or activate immunostimulatory signals selectively in the tumor microenvironment. Our strategy is to generate novel product candidates that incorporate next-generation technologies or approaches using our robust set of R&D capabilities. We plan to efficiently develop these product candidates by incorporating state-of-the-art biomarker approaches and mechanistic understanding into clinical trial designs targeted to well-defined patient populations.

We currently have four investigational product candidates in various stages of early development:

SNS-101 is our conditionally active monoclonal antibody targeting the immune checkpoint VISTA (V-domain Ig suppressor of T-cell activation). In May 2023, we initiated a first-in-human Phase 1/2 open-label, multi-center, dose escalation and expansion trial to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and efficacy of SNS-101 as monotherapy and/or in combination with cemiplimab in patients with advanced solid tumors.
o
We have completed enrollment in the dose escalation portion of the Phase 1/2 clinical trial, enrolling 16 patients in the monotherapy arm and 18 patients in the combination arm.
o
In the monotherapy dose escalation arm, patients have cleared all planned dosing cohorts of 0.3, 1, 3, 10, and 15 mg/kg. In the combination dose escalation arm, patients have cleared all planned dosing cohorts of 3, 10, and 15 mg/kg of SNS-101 plus Libtayo.
o
No dose limiting toxicities were observed in either the monotherapy or combination dose escalation arms.
o
We plan to present topline clinical data from the monotherapy and combination dose escalation portion of the Phase 1/2 trial in a poster presentation at the upcoming 2024 American Society of Clinical Oncology (ASCO) Annual Meeting taking place in Chicago, Illinois, from May 31, 2024 to June 4, 2024.
SNS-102 is our conditionally active monoclonal antibody targeting VSIG4 (V-Set and Immunoglobulin Domain Containing 4), an immune checkpoint often expressed on macrophages. We have selected a product candidate that is 585-fold more selective for VSIG4 at low pH conditions. Various potential counter-receptors have been provisionally identified and are currently in the process of being refined and confirmed.
SNS-103 is our conditionally active monoclonal antibody targeting ENTPDase1 (ecto-nucleoside triphosphate diphosphohydrolase-1), also known as CD39. In 2023, we selected a product candidate from a set of lead-optimized antibodies.
SNS-201 is a bispecific antibody that is being designed to conditionally activate Cluster of Differentiation 28 (CD28). It is a bispecific format with monovalent CD28 engagement and bivalent pH-selective VISTA binding for efficient engagement at low pH. In 2023, we selected a product candidate from a set of lead-optimized bispecific antibodies.

 

15


 

In January 2024, we announced the expansion of the Phase 1/2 clinical trial of SNS-101 to include additional patients in a more focused set of indications. Prior to initiating the Phase 2 portion, we plan to enroll up to an aggregate of 40 additional patients across both the monotherapy and combination arms to further optimize the Phase 2 trial design. In the monotherapy expansion arm, we are enrolling up to 10 patients with microsatellite stable (MSS) colorectal cancer (CRC) at a dose level of 15 mg/kg. In the combination expansion arm, we are enrolling up to 30 patients with MSS CRC, Head and Neck cancer, non-small cell lung cancer, and melanoma at a dose level of 15 mg/kg plus Libtayo. Enrollment in the expansion cohorts has commenced, and we are considering enrolling additional patients with other tumor types and/or at other dose levels for both the monotherapy and combination expansion arms. We expect to report initial data from the expansion cohorts and hold an end-of-Phase 1 meeting with the FDA by the end of 2024.

 

In connection with the expansion of the Phase 1/2 trial of SNS-101, we paused the IND-enabling studies originally planned for our next TMAb product candidate. With this realignment of resources, we expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025. Preclinical work on our TMAb product candidates to characterize selected lead antibodies, including their mechanisms of action, and target biology is expected to continue throughout 2024. We plan to continue reviewing our financial resources with the expectation that IND-enabling studies for additional TMAb product candidates will resume if we raise sufficient additional capital.

We do not have any product candidates approved for sale, have not generated any revenue from product sales, and do not expect to generate any revenue from product sales for at least the next several years. We have largely funded our operations with proceeds from the sale of convertible preferred stock, common stock and convertible debt. Through the date of this Report, we have raised an aggregate of $123.4 million of gross proceeds from private placements of our equity and convertible debt securities and net proceeds of $138.5 million from our initial public offering, or IPO, in February 2021.

We have incurred significant operating losses over the last several years. Our net loss was $8.0 million and $10.2 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $239.9 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

conduct clinical trials of product candidates, including SNS-101;
continue the research and development of our other product candidates and prepare to submit INDs for such candidates;
invest in our TMAb platform;
seek to discover and develop additional product candidates or acquire or in-license drugs, product candidates or technologies;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
ultimately establish a sales, marketing and distribution infrastructure and scale up manufacturing capabilities to commercialize any product candidates for which we may obtain regulatory approval;
manufacture our product candidates or otherwise secure the clinical and commercial supply of our product candidates;
hire additional research and development and selling, general and administrative personnel;
maintain, expand and protect our intellectual property portfolio; and
incur costs associated with operating as a public company.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses. We expect to continue to incur net losses and negative cash flows for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, lawyers and accountants, and incur other increased costs associated with being a public company. In addition, if we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product.

16


 

Components of Our Results of Operations

Operating Expenses

Research and Development Expense

Our research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. These expenses include:

expenses incurred under agreements with contract research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;
the cost of manufacturing our product candidates including the cost of contract manufacturing organizations, or CMOs, that manufacture product for use in our preclinical studies and clinical trials and perform analytical testing, scale-up and other services in connection with our development activities;
the cost of outsourced professional scientific development services;
employee-related expenses, including salaries, benefits and stock-based compensation for employees engaged in the research and development function;
expenses relating to regulatory activities, including filing fees paid to regulatory agencies;
fees for maintaining licenses and other amounts due under our third party licensing agreements;
laboratory materials and supplies used to support our research activities; and
allocated expenses for utilities and other facility-related costs.

We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.

Our direct external research and development expenses consist primarily of external costs, such as fees paid to CROs, CMOs, research/testing laboratories and outside consultants in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate these costs to specific product candidates because many of them are deployed across several of our development programs and, as such, are not separately classified. We use internal resources primarily to conduct research and manage our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple development programs and, therefore, we do not track their costs by program and, as such, are not separately classified. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our preclinical studies and clinical trials, and prepare regulatory filings for our product candidates.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:

the scope, progress, outcome and costs of our preclinical studies, our current product candidates and any other product candidates we may acquire or develop;
manufacturing of our product candidates or making arrangements with third-party manufacturers for both clinical and commercial supplies of these product candidates;
successful patient enrollment in, and the initiation, duration and completion of clinical trials;
the cost of gaining regulatory approvals for our product candidates, subject to the successful outcome of ongoing and future clinical trials; and
the extent of any required post-marketing approval commitments to applicable regulatory authorities.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in

17


 

achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years and significant additional development costs.

General and Administrative Expense

General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include facility related costs, patent filing and prosecution costs and professional fees for legal, auditing and tax services, and insurance costs.

We anticipate that our general and administrative expenses will increase as a result of increased payroll, expanded infrastructure and higher consulting, legal and tax-related services associated with maintaining compliance with Nasdaq listing and SEC requirements, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company.

Other Income (Expense)

Our other income (expense) consists of realized gain or loss on short-term investments, gain on debt extinguishments, accretion expense on short-term investments and interest expense.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred or for the research and development tax credits earned in each year, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following sets forth our results of operations for the three months ended March 31, 2024 and 2023:

 

 

Three Months Ended March 31,

 

 

 

 

(in thousands)

 

2024

 

 

2023

 

 

Change

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Research and development

 

$

4,917

 

 

$

5,204

 

 

$

(287

)

General and administrative

 

 

3,813

 

 

 

5,804

 

 

 

(1,991

)

Total operating expenses

 

 

8,730

 

 

 

11,008

 

 

 

(2,278

)

Loss from operations

 

 

(8,730

)

 

 

(11,008

)

 

 

2,278

 

Total other income

 

 

738

 

 

 

831

 

 

 

(93

)

Net loss

 

$

(7,992

)

 

$

(10,177

)

 

$

2,185

 

Research and Development Expenses

Research and development expenses were $4.9 million for the three months ended March 31, 2024, compared to $5.2 million for the three months ended March 31, 2023. The decrease of $0.3 million was primarily attributable to $0.6 million lower manufacturing related expense, $0.5 million of lower costs for preclinical research, $0.3 million of lower facilities expense and $0.3 million of less consulting fees, primarily offset by $0.7 million of higher expense associated with clinical trials, $0.6 million of increased outside research fees and $0.1 million higher expense relating to relating to lab supply purchases.

General and Administrative Expenses

General and administrative expenses were $3.8 million for the three months ended March 31, 2024, compared to $5.8 million for the three months ended March 31, 2023. The decrease of $2.0 million was primarily attributable to $1.5 million of lower external professional services associated with stockholder activism related to our 2023 annual meeting of stockholders, $0.2 million less

18


 

expense for directors and officers insurance, $0.2 million of lower expense for outside services, $0.1 million of lower personnel costs, including stock-based compensation and incentives, $0.1 million of less consulting fees and $0.1 million related to lower restructuring costs, partially offset by $0.2 million of higher facilities expense.

Other Income

Other income was $0.7 million for the three months ended March 31, 2024, compared to other income of $0.8 million for the three months ended March 31, 2023. The other income decrease of $0.1 million was primarily related to a $0.2 million decrease in interest income offset by a $0.1 million increase related to disposals of equipment.

Liquidity and Capital Resources

Sources of Liquidity

We have not generated any product revenue and have incurred net losses and negative cash flows from our operations. As of March 31, 2024, we had cash, cash equivalents and marketable securities of $58.1 million. We have financed our operations through sales of our common stock, convertible preferred stock and convertible debt. Through the date of this Report, we have raised an aggregate of $123.4 million of gross proceeds from private placements of our equity and convertible debt securities and net proceeds of $138.5 million from our IPO in February 2021. Our net loss was $8.0 million and $10.2 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $239.9 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods below: