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 September 30, 2023
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: 001-40675
_________________________________________________
(Exact name of registrant as specified in its charter)
_________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | ||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||
(617 ) 500-8080
(Registrant’s telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading symbol | Name of Exchange on which registered | ||||||||||||
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. Yes x No o
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). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | o | Accelerated filer | o | ||||||||||||||
| x | 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 31, 2023 the registrant had 29,269,121 shares of Class A common stock, $0.001 par value per share, issued and outstanding and 0 shares of Class B common stock, $0.001 par value per share, issued and outstanding.
TABLE OF CONTENTS
| Page | ||||||||
2
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements including within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding our plans to develop, manufacture and commercialize our product candidates (including whether as potential monotherapies or in combination with other therapeutic agents), the design, timing or outcome of our ongoing or planned preclinical studies or clinical trials involving IMM-1-104, IMM-6-415, any of our other pipeline product candidates and any future product candidates, the clinical utility of our product candidates when administered alone or in combination with other therapeutic agents, the filing with, and approval by, regulatory authorities of our product candidates, the sufficiency of funds to operate the business of the Company, and the potential impact of the pandemic related to COVID-19 and its variants on our business and operations, are forward-looking statements.
The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those projected in the forward-looking statements, including, but not limited to, those described in the sections of this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties include, but are not limited to:
•our limited operating history;
•our history of operating losses;
•our ability to raise the substantial additional capital that will be required to finance our operations;
•the difficulty of obtaining regulatory approval for any of our current or future product candidates;
•our ability to submit an Investigational New Drug application, or IND, or IND amendments or comparable documents in foreign jurisdictions in order to commence clinical trials on the timelines we expect;
•our limited experience in designing and conducting clinical trials;
•the timing of the initiation, progress and potential results of our ongoing and planned preclinical studies and clinical trials and our research programs, including our Phase 1/2a clinical trial of IMM-1-104;
•our ability to successfully complete our Phase 1/2a clinical trial of IMM-1-104;
•the risk of substantial delays in completing, if at all, the development and commercialization of our current or future product candidates;
•risks related to adverse events, toxicities or other undesirable side effects caused by our current or future product candidates;
•the risk of delays or difficulties in the enrollment and/or maintenance of patients in clinical trials;
•our substantial reliance on the successful development of our current and future product candidates, as well as our platform, including our proprietary product candidate identification and screening technologies such as Disease Cancelling Technology ("DCT") and Fluency;
•risks related to competition in our industry;
•the market opportunity for our product candidates, if approved;
3
•risks related to manufacturing;
•risks related to our reliance on third parties;
•risks related to our intellectual property; and
•other important risk factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition are described in Part II, Item 1A. “Risk Factors” section of this Quarterly Report on Form 10-Q.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Unless otherwise stated or the context requires otherwise, references to “Immuneering,” the “Company,” “we,” “us,” and “our,” refer to Immuneering Corporation and its subsidiaries.
4
Risk Factors Summary
We are subject to numerous risks and uncertainties, including those further described below in Part II, Item IA. “Risk Factors” in this Quarterly Report on Form 10-Q, that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business. In particular, the following are principal factors that may offset our competitive strengths or have a negative effect on our business strategy, which could materially adversely affect our business, financial conditions, results of operations, future growth prospects, or cause a decline in the price of our common stock:
•We are a clinical-stage oncology company with a limited operating history in developing pharmaceutical products, have not completed any clinical trials and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.
•We have incurred significant net losses for the past several years and we expect to continue to incur significant net losses for the foreseeable future and may never obtain profitability.
•We will require substantial additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or future commercialization efforts.
•The regulatory approval processes of the U.S. Food and Drug Administration, or FDA, and other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable with respect to outcomes. If we are ultimately unable to obtain regulatory approval for our product candidates, or to obtain regulatory approval to treat the indications we seek to treat with our product candidates, we will be unable to generate product revenue or the level of planned product revenue and our business will be substantially harmed.
•We may encounter substantial delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
•The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA or other comparable foreign regulatory authorities.
•Our current or future product candidates may cause adverse events, toxicities or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential or result in significant negative consequences.
•We are early in our development efforts. Our business is substantially dependent on the successful development of our current and future product candidates. If we are unable to advance our current or future product candidates through clinical trials, obtain marketing approval to treat the indications we seek to treat with our product candidates, and ultimately commercialize any product candidates we develop, or experience significant delays in doing so, our business will be materially harmed.
•We are substantially dependent on our platform, including our proprietary technologies such as DCT and Fluency, which are supported by our information technology systems. Any failure of these or other elements of our platform will materially harm our business.
•Our long-term prospects depend in part upon discovering, developing and commercializing product candidates, which may fail in development or suffer delays that adversely affect their commercial viability.
•Our approach to the discovery and development of product candidates is unproven, and we may not be successful in our efforts to use and expand our DCT platform to build a pipeline of product candidates with commercial value.
•We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.
•We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.
5
•We substantially rely, and expect to continue to rely, on third parties, including independent clinical investigators and contract research organizations ("CROs"), to conduct certain aspects of our preclinical studies and our clinical trials. If these third parties do not successfully carry out their contractual duties, comply with applicable regulatory requirements or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
•We contract with third parties for the manufacture of our product candidates for preclinical studies and clinical trials, and expect to continue to do so for commercialization of any approved product candidate. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
•The manufacture of drugs is complex and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide adequate supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented.
•If we are unable to obtain and maintain patent and other intellectual property protection for our product candidates and technologies or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be impaired, and we may not be able to compete effectively in our market.
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities, current | |||||||||||
| Accounts receivable | |||||||||||
| Prepaids and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangible asset, net | |||||||||||
| Right-of-use assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Other liabilities, current | |||||||||||
| Lease liabilities, current | |||||||||||
| Total current liabilities | |||||||||||
| Long-term liabilities: | |||||||||||
| Lease liabilities, non-current | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 10) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Class A common stock, $ | |||||||||||
Class B common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Amortization of intangible asset | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Other income (expense) | ( | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share attributable to common stockholders, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | |||||||||||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Unrealized gains (losses) from marketable securities | ( | ||||||||||||||||||||||
| Comprehensive Loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
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| Class A Common Stock | Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Shares | Par Value | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon public offering, net of commissions, underwriting discounts and $ | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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IMMUNEERING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 and 2022
(Unaudited)
Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustment to reconcile to net loss to net cash used in operating activities: | |||||||||||
| Depreciation/amortization expense | |||||||||||
| Reduction in carrying amount of right-of-use assets | |||||||||||
| Intangible asset amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Net amortization of premium (accretion of discount) on marketable securities | ( | ||||||||||
| Loss on disposal of fixed assets | |||||||||||
| Change in assets and liabilities: | |||||||||||
| (Increase) decrease in: | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Other assets | ( | ||||||||||
| Increase (decrease) in: | |||||||||||
| Accounts payable | ( | ||||||||||
| Accrued expenses | ( | ||||||||||
| Lease liabilities | ( | ( | |||||||||
| Other liabilities | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Purchases of marketable securities | ( | ( | |||||||||
| Maturities of marketable securities | |||||||||||
| Net cash provided by investing activities | |||||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Proceeds from public offering of common stock, net of commissions and underwriting | |||||||||||
| Payment of offering costs | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental disclosures of noncash information: | |||||||||||
| Property and equipment in accounts payable/accrued expenses | $ | $ | |||||||||
| Reduction of right-of-use asset and lease liability in connection with lease modification | |||||||||||
| Deferred offering costs included in accounts payable/accrued expenses | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
11
IMMUNEERING CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
tNote 1 – Organization and Nature of Business
Immuneering Corporation, a Delaware corporation, (“Immuneering” or the “Company”) was incorporated in 2008. Immuneering is a clinical-stage oncology company seeking to develop medicines for broad populations of cancer patients with an initial aim to therapeutically address universal-RAS. The Company aims to achieve universal activity through deep cyclic inhibition of the MAPK pathway, impacting cancer cells while sparing healthy cells. Immuneering’s lead product candidate, IMM-1-104, is in a Phase 1/2a study in patients with advanced solid tumors harboring RAS mutations.
On October 30, 2019, Immuneering formed a wholly owned subsidiary, Immuneering Securities Corporation (“ISC”), a Massachusetts securities corporation, for the sole purpose of buying, selling and holding securities on the Company’s behalf.
On December 22, 2021, the Company acquired all outstanding shares of capital stock of BioArkive, Inc. (“BioArkive”), a California corporation, which as a result became a wholly owned subsidiary.
Immuneering, ISC and BioArkive are collectively referred to as the “Company” throughout these condensed consolidated financial statements.
The Company is subject to a number of inherent risks associated with any biotechnology company that has substantial expenditures for research and development. These risks include, but are not limited to, the need to obtain adequate additional funding, possible failure of clinical trials or other events demonstrating lack of clinical safety or efficacy of its product candidates, dependence on key personnel, reliance on third-party service providers for manufacturing drug product and conducting clinical trials, the ability to successfully secure its proprietary technology, and risks related to the regulatory approval and commercialization of a product candidate. There can be no assurance that the Company’s research and development programs will be successful. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees, advisors, and consultants.
On August 3, 2021, the Company completed its initial public offering (“IPO”) pursuant to which it issued and sold 8,625,000 shares of its Class A common stock, inclusive of 1,125,000 shares of its Class A common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $120,318,750 , after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company, which were $2,124,317 . Upon the closing of the IPO, all 8,528,078 shares of the Company’s convertible preferred stock then outstanding automatically converted into 11,939,281 shares of Class A common stock. Upon the conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock (at par value) and additional paid-in capital.
On April 20, 2023, the Company completed an underwritten follow-on equity offering, pursuant to which it issued and sold 2,727,273 shares of its Class A common stock $0.001 par value per share at an offering price of $11.00 per share. The aggregate net proceeds received by the Company from the offering were $28,200,003 , after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company of $203,768 .
To date, the Company has funded its operations through service revenues (which have since ceased), and with proceeds from the sale of its capital stock and convertible notes. The Company has incurred recurring losses over the past several years and as of September 30, 2023, the Company had an accumulated deficit of $148,175,086 . The Company expects to continue to generate operating losses for the foreseeable future. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurances that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations. Management considered whether or not there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern, and concluded that there are none as it estimates that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance date of the unaudited condensed consolidated financial statements.
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Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (“FASB”). The FASB sets generally accepted accounting principles (“GAAP”) to ensure the condensed consolidated financial statements are consistently reported. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codifications (“ASC”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Financial Information
The unaudited interim condensed consolidated financial statements of the Company have been prepared, without audit, in accordance with GAAP and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been omitted from the unaudited interim condensed consolidated financial statements, as is permitted by such rules and regulations. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes for the year ended December 31, 2022.
It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, operating results and cash flows. Revenues and net loss for any interim period are not necessarily indicative of future or annual results.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting periods. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets, liabilities and the recording of expenses that are not readily apparent from other sources. Significant estimates reflected in these condensed consolidated financial statements included, but are not limited to, the research and development expenses, determination of fair value of stock-based awards, the valuation of common stock prior to the IPO, and the right-to-use assets and operating lease liabilities. Actual results may differ materially and adversely from these estimates.
Goodwill
Goodwill represents the excess of the fair value of the acquiree over the recognized basis of the net identifiable assets acquired and includes the future economic benefits from other assets that could not be individually identified and separately recognized. Goodwill is not amortized, but instead is periodically reviewed for impairment and an impairment charge is recorded in the periods in which the recorded carrying value of goodwill exceeds its fair value.
On a quarterly basis, the Company performs a review of its business to determine if events or changes in circumstances have occurred which could have a material adverse effect on the fair value of the Company and its goodwill. If such events
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or changes in circumstances were deemed to have occurred, the Company would perform an impairment test of goodwill as of the end of the quarter and record any noted impairment loss.
The goodwill test is performed at least annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
The Company performs its annual impairment test during the fourth quarter of each fiscal year. There were no
Deferred Offering Costs
The Company capitalizes certain legal, professional, and other third-party charges related to ongoing equity financings as deferred offering costs until fully consummated. These costs are to be recorded as a reduction of the offering’s proceeds which are recorded to additional paid-in capital within stockholders’ equity. Should the Company choose not to initiate such financing, the deferred offering costs would be immediately expensed as operating expenses.
On August 10, 2022, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with Piper Sandler & Co, (the “Sales Agent”) to sell shares of the Company’s common stock, par value $0.001 per share, with aggregate gross sales proceeds of up to $50 million, from time to time, through an “at the market” equity offering program. Deferred offering costs associated with the Sales Agreement are reclassified to additional paid-in capital on a pro-rata basis when the Company completes offerings under the Sales Agreement. Any remaining deferred costs will be expensed to the statement of operations should the planned offering be abandoned. The Company had approximately $0.3
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (“JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company elected to avail itself of this extended transition period and, as a result, the Company will not be required to adopt certain new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
In 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements. The new standard, as amended, requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments - Overall, applied on an instrument-by-instrument basis for eligible instruments. ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) became effective for the Company on January 1, 2023. The Company adopted this effective January 1, 2023 and there was no impact to the condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), which eliminates Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on today’s Step 1). This update is effective for annual and interim impairment tests performed in periods beginning after December 15, 2022. Early adoption of the standard is permitted. The Company adopted this effective January 1, 2023 and there was no impact to the condensed consolidated financial statements.
Note 3 – Marketable Securities
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comprehensive income (loss) in the condensed consolidated balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the condensed consolidated statements of comprehensive loss, until realized. The Company assesses its available-for-sale marketable securities for impairment on a quarterly basis. There were no impairments of the Company’s available-for-sale marketable securities measured and carried at fair value during the three and nine months ended September 30, 2023 or 2022. Realized gains and losses are included in other income (expense).
Our marketable securities portfolio contains investments in U.S. Treasury, other U.S. government-backed securities, and commercial paper. We review our portfolio based on the underlying risk profile of the securities and we don't expect there to be a loss on these investments. We also regularly review the securities in an unrealized loss position and evaluate the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions.
During the three and nine months ended September 30, 2023 and 2022, we recognized no no
Marketable securities as of September 30, 2023 consisted of the following:
| September 30, 2023 | ||||||||||||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Current: | ||||||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Government securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Commercial paper | ( | |||||||||||||||||||||||||
| Total marketable securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
Marketable securities as of December 31, 2022 consisted of the following:
| December 31, 2022 | ||||||||||||||||||||||||||
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Current: | ||||||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Government securities | ( | |||||||||||||||||||||||||
| Commercial paper | ( | |||||||||||||||||||||||||
| Total marketable securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
Note 4 – Fair Value Measurements
We record cash equivalents and marketable securities at fair value. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability.
Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.
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The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of September 30, 2023:
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market | $ | $ | $ | $ | |||||||||||||||||||
| U.S. Treasuries | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Total cash equivalents | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | |||||||||||||||||||
| Government securities | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Total marketable securities | |||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | $ | |||||||||||||||||||
There have been no changes to the valuation methods during the nine months ended September 30, 2023. There were no transfers between Level 1 and Level 2 and we had no
Cash equivalents and marketable securities have been initially valued at the transaction price and subsequently, at the end of each reporting period, valued utilizing third-party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market-based approaches, and observable market inputs to determine value. After completing our valuation procedures, we did not adjust or override any fair value measurements provided by the pricing services as of September 30, 2023 and December 31, 2022.
The following table summarizes our cash equivalents and marketable securities measured at fair value on a recurring basis as of December 31, 2022:
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Money market | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Government securities | |||||||||||||||||||||||
| Total cash equivalents | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | |||||||||||||||||||
| Government securities | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Total marketable securities | |||||||||||||||||||||||
| Total cash equivalents and marketable securities | $ | $ | $ | $ | |||||||||||||||||||
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Note 5 – Property and Equipment, net
Property and equipment, net consisted of the following:
| September 30, 2023 | December 31, 2022 | ||||||||||
| Computer equipment | $ | $ | |||||||||
| Furniture and fixtures | |||||||||||
| Lab equipment | |||||||||||
| Leasehold improvements | |||||||||||
| Construction in progress | |||||||||||
| Total | |||||||||||
| Accumulated depreciation/amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation/amortization expense totaled $78,294 and $68,075 for the three months ended September 30, 2023 and 2022, respectively. Depreciation/amortization expense totaled $233,062 and $170,337 for the nine months ended September 30, 2023 and 2022, respectively.
Note 6 – Accrued Expenses
Accrued expenses consisted of the following:
| September 30, 2023 | December 31, 2022 | ||||||||||
| Accrued professional services | $ | $ | |||||||||
| Accrued employee expenses | |||||||||||
| Accrued research and development expenses | |||||||||||
| Accrued other | |||||||||||
| Total | $ | $ | |||||||||
Note 7 - Common Stock
The Company had 200,000,000 0.001 29,269,121 26,418,732 one
As of September 30, 2023 and December 31, 2022, the following number of shares of Class A common stock have been reserved:
| September 30, 2023 | December 31, 2022 | ||||||||||
| Exercise of common stock options | |||||||||||
The Company had 20,000,000 0.001 no
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stock have no
IPO
On August 3, 2021, the Company completed its initial public offering pursuant to which it issued and sold 8,625,000 shares of its Class A common stock, inclusive of 1,125,000 shares of its Class A common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO were $120,318,750 , after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company, which were $2,124,317 . Upon the closing of the IPO, all 8,528,078 shares of the Company’s convertible preferred stock then outstanding automatically converted into 11,939,281 shares of Class A common stock. Upon the conversion of the convertible preferred stock, the Company reclassified the carrying value of the convertible preferred stock to common stock (at par value) and additional paid-in capital.
On August 3, 2021 in connection with the closing of the IPO, the Company filed a restated certificate of incorporation, which amended and restated the Company’s certificate of incorporation to, among other things: (i) increase the number of authorized shares of common stock to 200,000,000 shares of Class A common stock and 20,000,000 shares of Class B common stock, par value $0.001 per share; (ii) authorize 10,000,000 shares of Preferred Stock; and (iii) authorize the Board of Directors to establish the rights, preferences and restrictions on any unissued series of Preferred Stock.
Equity Offerings
On August 10, 2022, the Company filed a Registration Statement on Form S-3 (File No. 333-266738) (the “2022 Shelf Registration Statement”) with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants and/or units or any combination thereof in the aggregate amount of up to $200 million for a period of up to three years from the date of its effectiveness on August 19, 2022.
On August 10, 2022, the Company also entered into the Sales Agreement with the Sales Agent to sell shares of the Company’s Class A common stock, par value $0.001 per share, with aggregate gross sales proceeds of up to $50 million, from time to time, through an “at the market” equity offering program (the “ATM Program”) under the 2022 Shelf Registration Statement. Subject to the terms and conditions of the Sales Agreement, the Sales Agent may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act, including sales made through the Nasdaq Global Market, on any other existing trading market for the common stock, to or through a market maker, or, if expressly authorized by the Company, in privately negotiated transactions. The Company or Sales Agent may terminate the Sales Agreement upon notice to the other party and subject to other conditions. The Company will pay the Sales Agent a commission equal to 3.0 % of the gross proceeds of any Common Stock sold through the Sales Agent under the Sales Agreement and has provided the Sales Agent with customary indemnification rights.
Issuance costs incurred related to the Sales Agreement are classified as long-term assets on the balance sheet at September 30, 2023. The Company had approximately $0.3 No
On April 20, 2023, the Company completed an underwritten follow-on equity offering, pursuant to which it issued and sold 2,727,273 shares of its Class A common stock, $0.001 par value per share, at an offering price of $11.00 per share under the 2022 Shelf Registration Statement. The aggregate net proceeds received by the Company from the offering were $28,200,003 , after deducting underwriting discounts and commissions, but before deducting offering costs payable by the Company of $203,768 .
Note 8 - Net Loss Per Share Attributable to Common Stockholders
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Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase.
Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. The Company has reported net losses for all periods presented, therefore diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Basic and diluted net loss per share attributable to common stockholders was calculated at September 30, 2023 and September 30, 2022 as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Denominator - basic and diluted: | |||||||||||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | |||||||||||||||||||||||
| Net loss per share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares) at September 30, 2023 and September 30, 2022:
| 2023 | 2022 | ||||||||||
| Options to purchase common stock | |||||||||||
| Total shares of common stock equivalents | |||||||||||
Note 9 – Stock-Based Compensation
During 2015, the Company established the Long Term Incentive Plan (“Incentive Plan”), under which incentive stock options, nonqualified stock options, restricted stock or other awards may be awarded to employees, directors or consultants of the Company. The options typically vest over a four-year period. Upon the effectiveness of the Company’s 2021 Incentive Award Plan (the "2021 Plan"), the Company ceased granting awards under the Incentive Plan. However, the Incentive Plan continues to govern awards outstanding thereunder.
On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Plan, which became effective on July 29, 2021. The 2021 Plan provides for the grant of incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares reserved for issuance under the 2021 Plan was initially equal to 2,590,000 plus an annual increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 4 % of the aggregate number of shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors. No more than 15,350,000 shares of Class A common stock may be issued under the 2021 Plan upon the exercise of incentive stock options. Shares issued under the 2021 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares. If an award under the 2021 Plan expires, lapses or is terminated, exchanged for or settled in cash, surrendered, repurchased, cancelled without having been fully exercised/settled or forfeited, any unused shares subject to the award will, as applicable, become or again be available for new grants under the 2021 Plan. In addition, shares subject to stock options issued under the Incentive Plan may become available for issuance under the 2021 Plan to the extent such stock options are canceled, forfeited, exchanged, settled in cash or otherwise terminated. As of September 30, 2023, there were 1,555,719 shares available for future issuance under the 2021 Plan.
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On July 23, 2021, the Company’s Board of Directors adopted, and on July 23, 2021 its stockholders approved, the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on July 29, 2021. A total of 250,000 shares of Class A common stock were initially reserved for issuance under this plan. The number of shares of Class A common stock that may be issued under the 2021 ESPP will automatically increase on the first day of each calendar year, beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (i) 1 % of the shares of Class A common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as determined by the Board of Directors, provided that not more than 3,340,000 shares of Class A common stock may be issued under the 2021 ESPP. As of September 30, 2023, there were 777,389 shares of common stock reserved for future issuance under the 2021 ESPP and no shares had been granted or purchased under the 2021 ESPP.
The Company recognized stock-based compensation expense of $1,479,160 and $4,086,547 during the three and nine months ended September 30, 2023, respectively. During the three and nine months ended September 30, 2022, the Company recognized stock-based compensation expense of $1,066,212 and $3,016,283 , respectively. As of September 30, 2023, compensation expense remaining to be recognized for outstanding stock options was $12,450,569 and to be recognized over a weighted-average period of 2.65 years.
The fair value of options granted is calculated on the grant date using the Black-Scholes option valuation model. Prior to the Company's IPO on August 3, 2021, the Company was a private company and thus lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own publicly traded stock price. For the nine months ended September 30, 2023, the Company granted 2,269,610 shares of stock options at a weighted-average grant date fair value of $5.31 .
The Company used the following assumptions in its application of the Black-Scholes option pricing model for grants during the nine months ended September 30, 2023 and 2022:
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Weighted-average risk-free interest rate | |||||||||||
| Expected term (in years) | |||||||||||
| Expected dividend yield | |||||||||||
| Expected volatility | |||||||||||
The following table summarizes the stock option activity during the nine months ended September 30, 2023:
| Number of Options | Weighted- Average Exercise Price per Share | Weighted Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding at December 31, 2022 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Cancelled | ( | ||||||||||||||||||||||
| Outstanding at September 30, 2023 | $ | $ | |||||||||||||||||||||
| Vested and exercisable at September 30, 2023 | $ | $ | |||||||||||||||||||||
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For the three and nine months ended September 30, 2023 and 2022, the Company recognized share-based compensation expense on the accompanying condensed consolidated statements of operations as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Cost of revenue | $ | $ | $ | $ | |||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Note 10 – Commitments and Contingencies
Operating Leases
In October 2020, the Company entered into an office lease (“Via Frontera Lease”) in San Diego, California with a lease term of 67 months. At the lease commencement date, a right-to-use asset and lease liability was recognized by the Company for $637,863 . In January 2022, the Company exercised its option to terminate the Via Frontera Lease 20 months early. The Company subsequently entered into a sublease of the Via Frontera Lease, the term of which commenced in March 2022. The lease and sublease terminated on October 1, 2023. The lease termination was accounted for as a lease modification which reduces the term of the existing lease and the Company adjusted the value of its right-of-use asset and operating lease liability by $347,739 using an incremental borrowing rate of approximately 6 %. The sublease income was accounted for as a reduction of rent expense in the statement of operations.
The modification is reflected as a non-cash operating activity in the statement of cash flows for the nine months ended September 30, 2022.
As part of the BioArkive acquisition, the Company assumed the obligations of three leases in San Diego, California. One is for 38,613 square feet of office and laboratory space, under a lease that terminates on April 30, 2032, the second was for a 6,100 square feet of office and laboratory space under a lease that terminated on December 31, 2022 (and that was not renewed), and the third is for a lease for 4,760 square feet of office and laboratory space under a lease that terminates on March 31, 2024. As a result, the Company recorded right-to-use assets and lease liabilities of $4,824,700
The Company currently also leases office space in Cambridge, Massachusetts and New York, New York pursuant to short-term arrangements. The Cambridge lease is on a month-to-month basis, requiring one month’s notice before termination. The New York lease is renewable on a yearly basis and the most recent renewal extended the lease term until February 28, 2024. The Company also previously leased office space in San Francisco, California, pursuant to a short-term rental arrangement with a lease term that ended on July 31, 2023 and the Company chose not to renew. These lease agreements include or included payments for lease and non-lease components. The Company has elected to not separate such components and these payments were recognized as rent expense.
As of September 30, 2023, total future minimum lease payments for its short-term leases in Cambridge, Massachusetts, and New York, New York were $20,760 due in 2023 and $13,840 due in 2024.
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| Amount | |||||
| Remainder of 2023 | $ | ||||
| 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| Thereafter | |||||
| Total future lease payments | |||||
| Less: Imputed interest | ( | ||||
| Total lease liabilities | $ | ||||
| Current portion lease liabilities | $ | ||||
| Lease liabilities, noncurrent | |||||
| Total lease liabilities | $ | ||||
Quantitative information regarding the Company’s leases for the nine months ended September 30, 2023 and 2022 is as follows:
| September 30, 2023 | September 30, 2022 | ||||||||||
| Lease costs: | |||||||||||
| Operating lease cost | $ | $ | |||||||||
| Short-term lease cost | |||||||||||
| Sublease income | ( | ( | |||||||||
| Total lease costs | $ | $ | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Operating cash flows from short-term leases | |||||||||||
| $ | $ | ||||||||||
| Weighted-average remaining lease term - operating leases | |||||||||||
| Weighted-average discount rate - operating leases | % | % | |||||||||
As the Company’s leases typically do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.
Litigation
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities and may be exposed to litigation in connection with its product candidates and operations. The Company’s policy is to assess the likelihood of any adverse judgments or outcomes related to legal matters, as well as ranges of probable losses. When it is probable that future expenditures will be made and can be reasonably estimated the Company will accrue a liability for such matters. Significant judgement is required to determine both probability and estimated amount. The Company is not aware of any material legal matters.
Clinical Research Contracts
The Company may enter into contracts in the normal course of business with contract research organizations for clinical trials, with contract manufacturing organizations for clinical supplies, and with other vendors for preclinical studies, supplies and other services for our operating purposes. These contracts generally provide for termination with a 30 -day notice.
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, including the audited consolidated financial statements and notes thereto. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage oncology company seeking to develop medicines for broad populations of cancer patients. Our initial aim is to develop a universal-RAS therapy, an approach designed to include patients with solid tumors driven by any mutation in KRAS, NRAS or HRAS. Our inclusive approach differentiates us from narrowly targeted precision therapies, which are limited to patients with tumors harboring select mutations.
We are currently evaluating our lead product candidate, IMM-1-104, in a Phase 1/2a clinical trial in patients with advanced solid tumors harboring RAS mutations. IMM-1-104 is being developed as a once-daily oral monotherapy that aims to achieve universal-RAS activity through deep cyclic inhibition of the MAPK pathway. Deep cyclic inhibition is a novel mechanism that aims to deprive tumor cells of the sustained proliferative signaling required for rapid growth, while sparing healthy cells through a cadenced, normalized level of signaling. This mechanism was engineered using our proprietary informatics-based discovery platform. The development of our pipeline is translationally guided by our proprietary, human-aligned 3D tumor modeling platform that we combine with bioinformatics-driven patient profiling, which we believe has the potential to increase the probability of success in clinical development versus traditional drug development approaches. Our second product candidate, IMM-6-415, aims to achieve universal-MAPK activity with an accelerated twice-daily oral dosing cadence, also through deep cyclic inhibition of the MAPK pathway. IMM-6-415 is currently in IND-enabling studies. Our pipeline also includes Trifecta MEK, RAS modulators and other small molecule drug discovery programs.
In April 2023, we announced initial pharmacokinetic, or PK, pharmacodynamic, or PD, and safety data from the ongoing Phase 1 portion of our Phase 1/2a clinical trial of IMM-1-104 in patients with advanced solid tumors harboring RAS mutations.
In June 2023, we announced the completion of the dose-escalation portion of the Phase 1/2a clinical trial of IMM-1-104. The trial’s Safety Review Committee ("SRC") completed its evaluation and observed that doses up to and including 320 mg once daily were tolerable with no dose limiting toxicities observed. We subsequently commenced enrollment in the Phase 1b dose evaluation portion of the trial, which is designed in part to evaluate two dosing cohorts at an oral dose of 240mg or 320 mg once daily.
In October 2023, we announced additional preclinical data that further support the potential of IMM-1-104 and IMM-6-415 both as single agents and in combination regimens with other therapeutic agents across multiple MAPK-driven tumor types, including those with RAS or RAF mutations. We believe these findings support the potential therapeutic use of cytotoxic agents and RAF inhibitors in combination with our product candidates, and build on our previously disclosed data supporting combinations with KRAS-G12C inhibitors and immuno-oncology agents. Additionally, IMM-1-104 and IMM6-415 are designed with a unique deep cyclic inhibition mechanism that aims to provide improved tolerability, which is important for successful combination therapies.
In November 2023, we announced an expanded clinical development plan for the Phase 1/2a clinical trial of IMM-1-104, including with respect to an additional: two Phase 1b/2a combination therapy arms (intended to enroll approximately 60 total patients with pancreatic ductal adenocarcinoma ("PDAC") in a first-line setting), and three Phase 2a monotherapy expansion arms (intended to enroll approximately 90 total patients with PDAC, RAS-mutant melanoma, or RAS-mutant non-small cell lung cancer).
Subject to the results of the ongoing Phase 1b portion of the IMM-1-104 trial, in early 2024 we expect to: announce our projected recommendation for a Phase 2 dose, provide additional safety data, and begin dosing in the Phase 2a portion of the IMM-1-104 trial. We also expect to announce initial data from multiple arms of the Phase 2a portion of the IMM-1-104 trial in 2024. In addition, we plan to submit an IND for IMM-6-415 to the U.S. Food and Drug Administration, or FDA, in the fourth quarter of 2023.
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For the period from inception through 2017, we devoted substantially all of our efforts to business planning, service revenue generation, developing tools to aid in drug discovery, and recruiting management and technical staff. Since 2018, we have focused significant effort on our own internal research and development programs, and since December 2022 have exclusively focused our efforts on such programs. We have financed our operations through service revenues (which have since ceased), the issuance of convertible debt and the sale of convertible preferred stock and common stock.
On December 22, 2021, we completed the acquisition of all outstanding shares of capital stock of BioArkive, Inc., a California corporation (“BioArkive”) for a market value of $8.75 million.
BioArkive is a San Diego based contract research organization that previously provided preclinical research services and biosample storage to us and other biotechnology companies. BioArkive was fully integrated into our operations following the acquisition and exclusively supports our internal preclinical research activities for our oncology pipeline. In connection with the acquisition, we assumed the obligations under BioArkive’s three lease agreements.
On April 20, 2023, we completed an underwritten offering, pursuant to which we issued and sold 2,727,273 shares of our Class A common stock at an offering price of $11.00 per share. The aggregate net proceeds received from the offering was $28.2 million, after deducting underwriting discounts and commissions, but before deducting offering costs payable by us, which were $0.2 million.
Since inception, we have had significant annual operating losses. Our net loss was approximately $38.4 million, for the nine months ended September 30, 2023 and $50.5 million for the year ended December 31, 2022. As of September 30, 2023, we had an accumulated deficit of approximately $148.2 million and approximately $97.2 million in cash, cash equivalents and marketable securities.
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 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 internally developed product candidates as well as add operational, financial and management informational systems and personnel to support our product development. In addition, if and when 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. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
Based on our current business plans, we believe that our existing cash, cash equivalents and marketable securities will enable us to fund our development activities and other operations into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which cannot be assured.
We have not had any internally developed products approved for sale. We do not expect to generate any product sales unless and until we successfully complete development of, obtain regulatory approval for, and successfully bring to market one or more of our internally developed product candidates. If we obtain regulatory approval for any of our internally developed product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including without limitation potential collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.
Components of Our Results of Operations
Revenue
Our revenue was historically generated by providing computational biology professional services to pharmaceutical and biotechnology companies. We charged an agreed upon rate per hour based on the aggregate level of personnel assigned to
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work on the project or a fixed fee for a defined scope of work. Our contracts specified the period of time over which these professional services would be provided. We recognized revenue over time by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress, which depicts the performance in transferring control of the associated services to the customer. We used input methods to measure the progress toward the complete satisfaction of performance obligations and evaluate the measure of progress each reporting period and, if necessary, adjusted the measure of performance and related revenue recognition. Any such adjustments were recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment.
We ceased accepting new services contracts in order to focus on developing our wholly-owned internal pipeline. In September 2022, we completed our last remaining services contract associated with the computational biology professional services business.
We also discontinued our biosample storage business, which was acquired through the BioArkive transaction, to external parties. In December 2022, we completed our last remaining storage contract. The revenue earned associated with the biosample storage business for the year ended December 31, 2022 is immaterial to the financial statements.
At this time, we do not anticipate entering into any new service or storage contracts or agreements.
Cost of Revenue
Historically, our cost of revenue has primarily consisted of expenses related to providing professional services to our customers. These costs include salaries, bonuses, benefits, stock-based compensation expense, depreciation, facilities, and other outside services. As a result of the discontinued service contracts and bio-sample storage business, the cost of revenue incurred for the year ended December 31, 2022 is immaterial to the financial statements.
Operating Expenses
Our operating expenses consist of: (i) research and development expenses, and (ii) general and administrative expenses.
Research and Development
Research and development expenses account for a significant portion of our operating expenses. Our research and development expenses consist primarily of direct and unallocated costs incurred in connection with the development of our research platform, product candidates, discovery efforts and preclinical and clinical activities related to our program pipeline.
Our direct costs include:
•expenses incurred under agreements with third-party contract research organizations, or CROs, and other vendors that conduct our preclinical and clinical activities on our behalf, including clinical trial sites that conduct research and development activities on our behalf;
•laboratory expenses related to the execution of discovery programs, preclinical studies and clinical trials; and
•costs related to production of clinical and preclinical materials, including fees paid to contract manufacturers.
Our unallocated costs include:
•personnel-related expenses, consisting of employee salaries, bonuses, benefits and stock-based compensation expense, and recruiting costs for personnel engaged in research and development activities;
•contractor and consulting fees related to the preparation and ongoing support of clinical trials; and
•facility and equipment related expenses, consisting of indirect and allocated expenses for rent, depreciation, maintenance of facilities, insurance, and other supplies.
We expense research and development costs in the periods in which they are incurred.
Our direct research and development expenses are tracked on a program-by-program basis once they are in Phase 1 clinical trials and consist of external costs and fees paid to contract manufacturing organizations, or CMOs, and CROs in connection with our preclinical and clinical development and manufacturing activities. Such program costs also include the external costs of laboratory and consumable materials and costs of raw materials that are directly attributable to and
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incurred for any single program. We do not allocate employee costs, contractor/consultant fees, costs associated with our platform development and discovery efforts, payments made under third-party licensing agreements, costs of laboratory supplies and consumable materials that are not directly attributable to any single program, and facilities expenses, including rent, depreciation and other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform technology and, as such, are not separately classified.
Due to the inherently unpredictable nature and numerous risks and uncertainties associated with product development and the current stage of development of our product candidates and programs, we cannot reasonably estimate or know the nature, timing and estimated costs necessary to complete the remainder of the development of our product candidates or programs. We are also unable to predict if, when, or to what extent we will obtain approval and generate revenues from the commercialization and sale of any of our product candidates.
The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, such as:
•successful completion of preclinical studies and initiation of clinical trials for future product candidates;
•successful enrollment and completion of clinical trials for our current product candidates;
•data from our clinical programs that support an acceptable risk-benefit profile of our product candidates in the intended patient populations;
•acceptance by the FDA or other applicable regulatory agencies of IND applications, clinical trial applications and/or other regulatory filings for our product candidates;
•expansion and maintenance of a workforce of experienced scientists and others to continue to develop our product candidates;
•successful application for and receipt of marketing approvals from applicable regulatory authorities;
•obtainment and maintenance of intellectual property protection and regulatory exclusivity for our product candidates;
•making of arrangements with contract manufacturing organizations for, or establishment of, commercial manufacturing capabilities;
•establishment of sales, marketing and distribution capabilities and successful launch of commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;
•acceptance of our product candidates, if and when approved, by patients, the medical community and third-party payors;
•effective competition with other therapies;
•obtainment and maintenance of coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;
•maintenance, enforcement, defense and protection of our rights in our intellectual property portfolio;
•avoidance of infringement, misappropriation or other violations with respect to others’ intellectual property or proprietary rights; and
•maintenance of a continued acceptable safety profile of our product candidates following receipt of marketing approvals, if any.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.
The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors.
We may never succeed in achieving regulatory approval for any of our product candidates. Further, a number of factors, including those outside of our control, could adversely impact the timing and duration of our product candidates’ development, which could increase our research and development expense. We may obtain unexpected results from our preclinical studies and 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 factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For
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example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.
We expect that our research and development expenses will substantially increase for the foreseeable future as we continue to implement our business strategy, which includes advancing our product candidates through clinical development, expanding our research and development efforts, including hiring additional personnel to support our research and development efforts, and seeking regulatory approvals for our product candidates that successfully complete clinical trials. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect our research and development expenses to increase as our product candidates advance into later stages of clinical development. As of the date of this Quarterly Report on Form 10-Q, we cannot reasonably determine or accurately project total program-specific expenses through commercialization, if such was to occur. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.
General and Administrative
Our general and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, stock-based compensation, and recruiting costs for personnel in executive, finance, and other administrative functions. Other significant general and administrative expenses include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services, insurance costs, travel expenses and facility related expenses not otherwise included in research and development expenses.
We expect our general and administrative expenses will increase for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities, as well as to support our operations generally. As we expand our operations, we also expect to incur increased expenses associated with operating as a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and rules and regulations of the Securities and Exchange Commission (“SEC”), Sarbanes-Oxley Act, director and officer insurance costs, and investor and public relations costs.
Amortization of intangible asset
Amortization of intangible asset relates to the technology acquired in the BioArkive acquisition.
Other Income (Expense)
Interest income
Interest income consists of interest earned on our cash and cash equivalents balances and our marketable securities. The primary objective of our investment policy is capital preservation.
Other income (expense)
Other income (expense) consists of the amortization of premiums or accretion of discounts related to our marketable securities.
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Results of Operations
Comparison of the Three Months Ended September 30, 2023 and 2022
The following table summarizes our results of operations for the periods indicated:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue | $ | — | $ | 38 | $ | (38) | (100.0) | % | |||||||||||||||
| Cost of revenue | — | 19 | (19) | (100.0) | % | ||||||||||||||||||
| Gross profit | — | 19 | (19) | (100.0) | % | ||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | 10,050 | 9,364 | 686 | 7.3 | % | ||||||||||||||||||
| General and administrative | 3,869 | 3,836 | 33 | 0.9 | % | ||||||||||||||||||
| Amortization of intangible asset | 7 | 7 | — | — | % | ||||||||||||||||||
| Total operating expenses | 13,926 | 13,207 | 719 | 5.4 | % | ||||||||||||||||||
| Loss from operations | (13,926) | (13,188) | (738) | 5.6 | % | ||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest income | 856 | 223 | 633 | 283.9 | % | ||||||||||||||||||
| Other income (expense) | 476 | 121 | 355 | 293.4 | % | ||||||||||||||||||
| Net loss | $ | (12,594) | $ | (12,844) | $ | 250 | (1.9) | % | |||||||||||||||
Revenue
The following table summarizes the revenue recognized for the periods indicated:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue | $ | — | $ | 38 | $ | (38) | (100.0) | % | |||||||||||||||
Revenue decreased by approximately $38 thousand, or 100.0%, to $0 for the three months ended September 30, 2023 compared to approximately $38 thousand for the three months ended September 30, 2022. The decrease in revenue was due to the completion of the remaining services contracts associated with the computational biology professional services business in September 2022, in addition to fulfilling the final bio-sample storage contract in December 2022.
Cost of Revenue
Cost of revenue decreased by approximately $19 thousand, or 100.0%, to $0 for the three months ended September 30, 2023 compared to approximately $19 thousand for the three months ended September 30, 2022. The decrease was primarily due to decreased employee-related costs related to services contracts that were discontinued as of September 2022.
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Research and Development
The following table summarizes the components of our research and development expenses for the periods indicated:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Direct research and development expenses by program: | |||||||||||||||||||||||
| IMM-1-104 | $ | 2,199 | $ | 1,330 | $ | 869 | 65.3 | % | |||||||||||||||
| Other programs | 3,781 | 3,951 | (170) | (4.3) | % | ||||||||||||||||||
| Unallocated research and development expenses: | |||||||||||||||||||||||
| Employee-related costs | 3,048 | 3,401 | (353) | (10.4) | % | ||||||||||||||||||
| Stock-based compensation expense | 658 | 507 | 151 | 29.8 | % | ||||||||||||||||||
| Facilities and other expenses | 308 | 129 | 179 | 138.8 | % | ||||||||||||||||||
| Depreciation/amortization | 56 | 46 | 10 | 21.7 | % | ||||||||||||||||||
| Total research and development | $ | 10,050 | $ | 9,364 | $ | 686 | 7.3 | % | |||||||||||||||
Research and development expenses increased by approximately $0.7 million, or 7.3%, to approximately $10.1 million for the three months ended September 30, 2023 as compared to approximately $9.4 million for the three months ended September 30, 2022. The increase of approximately $0.7 million was primarily due to an increase of approximately $0.7 million related to direct research and development expenses, including a $0.9 million increase in expenses related to IMM-1-104, offset by a decrease of $0.2 million in expenses for earlier stage programs. The remaining variance was driven by unallocated research and development expenses of approximately $13 thousand, which were primarily driven by the decrease of $0.4 million in employee-related costs, offset by an increase of $0.2 million related to stock-based compensation expense, as well as an increase of $0.2 million in depreciation/amortization, and facilities and other expenses, in the aggregate.
General and Administrative
The following table summarizes the components of our general and administrative expenses for the periods indicated:
| Three Months Ended September 30, | Change | ||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Employee-related costs | $ | 1,951 | $ | 1,799 | $ | 152 | 8.4 | % | |||||||||||||||
| Stock-based compensation expense | 822 | 558 | 264 | 47.3 | % | ||||||||||||||||||
| Professional fees | 734 | 896 | (162) | (18.1) | % | ||||||||||||||||||
| Facilities and other allocated expenses | 88 | 442 | (354) | (80.1) | % | ||||||||||||||||||
| Other | 274 | 141 | 133 | 94.3 | % | ||||||||||||||||||
| Total general and administrative | $ | 3,869 | $ | 3,836 | $ | 33 | 0.9 | % | |||||||||||||||
General and administrative expenses increased by approximately $33 thousand, or 0.9%, to approximately $3.9 million for the three months ended September 30, 2023 compared to approximately $3.8 million for the three months ended September 30, 2022. The increase of approximately $33 thousand was primarily due to decreased facilities and other allocated expenses of approximately $0.4 million, and decreased professional fees for accounting, auditing and legal services of $0.2 million, partially offset by increased stock-based compensation expense of $0.3 million, an increase in employee-related costs of approximately $0.2 million, and an increase of $0.1 million in other expenses.
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Amortization of Intangible Asset
Amortization of intangible asset was $7,317 in the three months ended September 30, 2023, compared to $7,317 in the three months ended September 30, 2022. This amortization is related to the technology acquired for the BioArkive acquisition completed in December 2021.
Other Income (Expense)
Interest income increased by approximately $0.6 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, due to the interest earned on our cash, cash equivalents and marketable securities balances as a result of an increase in interest rates.
Other income was approximately $0.5 million for the three months ended September 30, 2023, primarily as a result of the increase in the accretion of premiums related to our marketable securities.
Comparison of the Nine Months Ended September 30, 2023 and 2022
The following table summarizes our results of operations for the periods indicated:
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue | $ | — | $ | 316 | $ | (316) | (100.0) | % | |||||||||||||||
| Cost of revenue | — | 158 | (158) | (100.0) | % | ||||||||||||||||||
| Gross profit | — | 158 | (158) | (100.0) | % | ||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Research and development | 29,714 | 26,395 | 3,319 | 12.6% | |||||||||||||||||||
| General and administrative | 12,375 | 11,500 | 875 | 7.6% | |||||||||||||||||||
| Amortization of intangible asset | 22 | 23 | (1) | (4.3)% | |||||||||||||||||||
| Total operating expenses | 42,111 | 37,918 | 4,193 | 11.1% | |||||||||||||||||||
| Loss from operations | (42,111) | (37,760) | (4,351) | 11.5% | |||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest income | 2,853 | 498 | 2,355 | 472.9% | |||||||||||||||||||
| Other income (expense) | 870 | (6) | 876 | (14600.0)% | |||||||||||||||||||
| Net loss | $ | (38,388) | $ | (37,268) | $ | (1,120) | 3.0 | % | |||||||||||||||
Revenue
The following table summarizes the revenue recognized for the periods indicated:
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Revenue | $ | — | $ | 316 | $ | (316) | (100.0) | % | |||||||||||||||
Revenue decreased by approximately $0.3 million, or 100.0%, to $0 for the nine months ended September 30, 2023 compared to approximately $0.3 million for the nine months ended September 30, 2022. The decrease in revenue was due to the completion of the remaining services contracts associated with the computational biology professional services business in September 2022, in addition to fulfilling the final bio-sample storage contract in December 2022.
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Cost of Revenue
Cost of revenue decreased by approximately $0.2 million, or 100.0%, to $0 for the nine months ended September 30, 2023 compared to approximately $0.2 million for the nine months ended September 30, 2022. The decrease was primarily due to decreased employee-related costs related to services contracts that were discontinued as of September 2022.
Research and Development
The following table summarizes the components of research and development expenses for the periods indicated:
| Nine Months Ended September 30, | Change | ||||||||||||||||||||||
| 2023 | 2022 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Direct research and development expenses by program: | |||||||||||||||||||||||
| IMM-1-104 | $ | 5,265 | $ | 2,656 | $ | 2,609 | 98.2 | % | |||||||||||||||
| Other programs | 11,425 | 11,716 | (291) | (2.5) | % | ||||||||||||||||||
| Unallocated research and development expenses: | |||||||||||||||||||||||
| Employee-related costs | 10,019 | 10,125 | (106) | (1.0) | % | ||||||||||||||||||
| Stock-based compensation expense | 1,864 | 1,445 | 419 | 29.0 | % | ||||||||||||||||||
| Facilities and other allocated expenses | 977 | 347 | 630 | 181.6 | % | ||||||||||||||||||
| Depreciation/amortization | 164 | 106 | 58 | 54.7 | % | ||||||||||||||||||
| Total research and development | $ | 29,714 | |||||||||||||||||||||