# Corvus Pharmaceuticals, Inc. (CRVS) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Corvus Pharmaceuticals, Inc.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1626971/000155837024003567/crvs-20231231x10k.htm
Accession: 0001558370-24-003567
Filing date: 2024-03-19
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CRVS/
All MD&A years: /company/CRVS/mda/
Previous year: /company/CRVS/mda/fy2022/ (FY 2022)
Next year: /company/CRVS/mda/fy2024/ (FY 2024)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual report on Form 10-K. This Annual Report on Form 10-K, including the following sections, contains forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. For a detailed discussion of these risks and uncertainties, see the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K. We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Form 10-K. We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Form 10-K.

Overview

We are a clinical stage biopharmaceutical company. Our strategy is to focus our efforts on the development of immune modulator product candidates with the potential to treat solid cancers, T cell lymphomas, autoimmune, allergic and infectious diseases. We have three product candidates that are in clinical development for treatment of various solid tumors, lymphomas and autoimmune diseases.

Our lead product candidate is soquelitinib (formerly CPI-818), a selective, covalent inhibitor of ITK (interleukin 2 inducible T cell kinase) and is in a multi-center Phase 1/1b clinical trial in patients with various recurrent, malignant T cell lymphomas. Soquelitinib is designed to inhibit the proliferation of certain malignant T cells and also to affect the differentiation of normal T cells, which could enhance immunity to tumor cells. We believe these properties have the potential to regulate the growth and activity of both abnormal malignant T cells and abnormal T cells involved in autoimmunity and allergy.

Our second product candidate, ciforadenant, is an oral, small molecule antagonist of the A2A receptor for adenosine designed to disable a tumor’s ability to subvert attack by the immune system by blocking the binding of immunosuppressive adenosine in the tumor microenvironment to the A2A receptor. We are collaborating with the Kidney Cancer Research Consortium to evaluate ciforadenant in an open label Phase 1b/2 clinical trial as a first line therapy for metastatic RCC in combination with ipilimumab (anti-CTLA-4) and nivolumab (anti-PD-1).

Our third product candidate is mupadolimab, a humanized monoclonal antibody that is designed to react with a specific site on CD73. In both preclinical and in vivo studies, mupadolimab has demonstrated binding to various immune cells and the enhancement of immune responses by activating B cells. While we believe mupadolimab has the potential to be an important new therapeutic agent with a novel mechanism of action for the treatment of a broad range of cancers and infectious diseases, we are waiting to initiate a potential Phase 2 randomized clinical trial in order to prioritize the development of our other two lead product candidates. Angel Pharmaceuticals Co. Ltd. (“Angel Pharmaceuticals”) is continuing the development of mupadolimab in China and is enrolling patients in a Phase 1 trial with mupadolimab alone and together with pembrolizumab in patients with advanced NSCLC and head and neck cancer.

Our molecularly targeted product candidates are designed to exhibit a high degree of specificity, which we believe have the potential to provide greater safety compared to other cancer therapies and may facilitate their development either as monotherapies or in combination with other cancer therapies such as immune checkpoint inhibitors or chemotherapy.

We believe the breadth and status of our pipeline demonstrates our management team’s expertise in understanding and developing immunology focused assets as well as in identifying product candidates that can be in-licensed and further developed internally to treat many types of cancer. We hold worldwide rights to all of our product candidates (other than in greater China).

Our diverse and versatile product candidates also have enabled us to take steps to address markets in foreign countries. In October 2020, we announced the formation and launch of Angel Pharmaceuticals, a China-based biopharmaceutical company with a mission to bring innovative quality medicines to Chinese patients for treatment of

75

Table of Contents

serious diseases including cancer, autoimmune diseases and infectious diseases. We formed Angel Pharmaceuticals as a wholly owned subsidiary and it launched with a post-money valuation of approximately $106.0 million, based on an approximate $41.0 million cash investment from a Chinese investor group that includes funds associated with Tigermed and Betta Pharmaceuticals, Hisun Pharmaceuticals and Zhejiang Puissance Capital. Such cash is not available for our use. Contemporaneously with the financing, Angel Pharmaceuticals licensed the rights to develop and commercialize our three clinical- stage candidates — soquelitinib, ciforadenant and mupadolimab — in greater China and obtained global rights to our BTK inhibitor preclinical programs. Under the collaboration, we currently have a 49.7% equity interest in Angel Pharmaceuticals, excluding 7% of Angel’s equity reserved for issuance under the Employee Stock Ownership Plan, and are entitled to designate three individuals on Angel’s five-person board of directors.

To date, the majority of our efforts have been focused on the research, development and advancement of soquelitinib, ciforadenant, and mupadolimab, and we have not generated any revenue from product sales and, as a result, we have incurred significant losses. We expect to continue to incur significant research and development and general and administrative expenses related to our operations. Our net loss for the years ended December 31, 2023 and 2022 was $27.0 million and $41.3 million, respectively. As of December 31, 2023, we had an accumulated deficit of $334.7 million. We expect our losses will increase as we continue our development of, seek regulatory approval for and begin to commercialize soquelitinib, ciforadenant and mupadolimab, and as we develop other product candidates. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

Since our inception and through December 31, 2023, we have funded our operations primarily through the sale and issuance of stock, including through our initial public offering (“IPO”) in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million and a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million, in each case net of underwriting discounts and commissions and offering expenses. Immediately prior to the consummation of the IPO, all of our outstanding shares of convertible preferred stock were converted into 14.3 million shares of our common stock.

In March 2020, we entered into an open market sale agreement (the “2020 Sales Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of our common stock, from time-to-time, with aggregate gross sales proceeds of up to $50,000,000, through an at-the-market equity offering program under which Jefferies will act as our sales agent. In November 2021, we entered into another Sale Agreement (“2021 Sales Agreement”) with Jefferies to sell shares of our common stock from time-to-time, with aggregate gross sales proceeds of up to $40,000,000.

On March 28, 2023, we terminated both the 2020 Sales Agreement and the 2021 Sales Agreement and concurrently entered into a new open market sale agreement (the “2023 Sales Agreement”) with Jefferies to sell shares of our common stock, from time-to-time, with aggregate gross sales proceeds of up to $90,000,000, through an at-the-market equity offering program under which Jefferies will act as our sales agent. The issuance and sale of shares of common stock pursuant to the 2023 Sales Agreement are deemed an “at-the-market” offering under the Securities Act of 1933, as amended. Jefferies is entitled to compensation for its services equal to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the 2023 Sales Agreement.

During the year ended December 31, 2023, we sold 2,461,903 shares of common stock under our at-the-market offering program resulting in net proceeds of $7.8 million. As of December 31, 2023, $81.9 million remained available for sale under the 2023 Sales Agreement.

Our three product candidates, soquelitinib, ciforadenant and mupadolimab, are in clinical development by us and / or our partner, Angel Pharmaceuticals. Except for Greater China, we own the world-wide rights to these product candidates.

We plan to focus our development efforts in 2024 on soquelitinib with the start of a potentially registrational Phase 3 clinical trial of soquelitinib in relapsed PTCL and a randomized, placebo-controlled Phase 1 trial of soquelitinib in patients with moderate to severe atopic dermatitis. As a result of our ongoing development efforts, we anticipate needing to spend substantial resources for the foreseeable future. Consequently, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we

76

Table of Contents

expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. Such financing could result in dilution to stockholders and may include the imposition of debt covenants and repayment obligations or other restrictions that may affect our business. If we raise additional capital through strategic collaboration agreements, we may have to relinquish valuable rights to our product candidates, including potential future revenue streams. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies’ stock have been highly volatile as a result of factors such as the impacts of pandemics, such as COVID-19, and increases in inflation rates or interest rates. As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

As of December 31, 2023, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $27.1 million. Based on our currently available cash resources and our currently planned level of operations and cash flows for the twelve-month period subsequent to the date of issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we will require additional funding prior to the end of 2024. In accordance with applicable accounting standards, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within 12 months after the date of the issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Under the applicable accounting standards, the receipt of potential funding from future equity issuances cannot be considered probable, as these events are outside our control. Accordingly, management has concluded that substantial doubt exists about our ability to continue as a going concern for 12 months from the date the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are issued. See “Risk Factors—Risks Related to Our Limited Operating History, Financial Condition and Need for Additional Capital.”

We currently have no manufacturing capabilities and do not intend to establish any such capabilities. We have no commercial manufacturing facilities for our product candidates. As such, we are dependent on third parties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices.

Components of Results of Operations

Revenue

To date, we have not generated any revenues. We do not expect to receive any revenues from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into revenue-generating collaboration agreements with third parties.

Research and Development Expenses

Our research and development expenses consist primarily of costs incurred to conduct research and development of our product candidates. We record research and development expenses as incurred. Research and development expenses include:

[[GREPCENT_TABLE]]
[["","\u25cf","employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","external research and development expenses incurred under arrangements with third parties, such as contract research organizations, preclinical testing organizations, contract manufacturing organizations, academic and non-profit institutions and consultants;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;"]]
[[/GREPCENT_TABLE]]

77

Table of Contents

[[GREPCENT_TABLE]]
[["","\u25cf","license fees; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","other expenses, which include direct and allocated expenses for laboratory, facilities and other costs."]]
[[/GREPCENT_TABLE]]

We plan to increase our research and development expenses substantially as we continue the development and potential commercialization of our product candidates. Our current planned research and development activities include the following:

[[GREPCENT_TABLE]]
[["","\u25cf","completion of our ongoing Phase 1/1b clinical trial of soquelitinib;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","a potential Phase 3 registrational clinical trial for soquelitinib in PTCL;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","enrollment and completion of our Phase 1b/2 clinical trial with ciforadenant in collaboration with the Kidney Cancer Research Consortium;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","a potential clinical trial of soquelitinib in solid tumors;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","a potential clinical trial of soquelitinib in atopic dermatitis;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","process development and manufacturing of drug supply of soquelitinib and ciforadenant; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","preclinical studies under our other programs in order to select development product candidates."]]
[[/GREPCENT_TABLE]]

In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates to build the value of our product candidate pipeline and our business.

Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties related to timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including many of which are beyond our control. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and the successful development of our product candidates is uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in “Part II, Item 1A—Risk Factors.” As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses include personnel costs, expenses for outside professional services and allocated expenses. Personnel costs consist of salaries, benefits and stock-based compensation. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expense related to our office and research and development facility.

We expect that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of one or more of our product candidates.

78

Table of Contents

Results of Operations

Comparison of the periods below as indicated (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Year ended December 31,","","Change","","Change"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021","\u200b","2022 to 2023","\u200b","2021 to 2022"],["Operating expenses:","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["Research and development","\u200b","$","16,526","\u200b","$","24,468","\u200b","$","29,115","\u200b","$","(7,942)","\u200b","$","(4,647)"],["General and administrative","\u200b","","6,881","\u200b","","8,097","\u200b","","9,515","\u200b","","(1,216)","\u200b","","(1,418)"],["Total operating expenses","\u200b","","23,407","\u200b","","32,565","\u200b","","38,630","\u200b","","(9,158)","\u200b","","(6,065)"],["Loss from operations","\u200b","","(23,407)","\u200b","","(32,565)","\u200b","","(38,630)","\u200b","","9,158","\u200b","","6,065"],["Interest income and other expense, net","\u200b","","1,584","\u200b","","654","\u200b","","(15)","\u200b","","930","\u200b","","669"],["Gain from sale of property and equipment","\u200b","","\u2014","\u200b","","22","\u200b","","\u2014","\u200b","","(22)","\u200b","","22"],["Sublease income - related party","\u200b","\u200b","78","\u200b","\u200b","587","\u200b","\u200b","235","\u200b","\u200b","(509)","\u200b","","352"],["Loss from equity method investment","\u200b","\u200b","(5,284)","\u200b","\u200b","(10,005)","\u200b","\u200b","(4,831)","\u200b","\u200b","4,721","\u200b","","(5,174)"],["Net loss","\u200b","$","(27,029)","\u200b","$","(41,307)","\u200b","$","(43,241)","\u200b","$","14,278","\u200b","$","1,934"]]
[[/GREPCENT_TABLE]]

​

Research and Development Expenses

Research and development expenses for the years ended December 31, 2023 and 2022, consisted of the following costs by program (specific program costs consist solely of external costs):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Year ended December 31,","","Change","","Change"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021","\u200b","2022 to 2023","\u200b","2021 to 2022"],["Soquelitinib","\u200b","$","5,335","\u200b","$","3,861","\u200b","$","934","\u200b","$","1,474","\u200b","$","2,927","\u200b"],["Ciforadenant","\u200b","\u200b","963","","\u200b","1,327","","\u200b","1,532","","\u200b","(364)","","\u200b","(205)","\u200b"],["Mupadolimab","\u200b","","772","\u200b","","9,789","\u200b","","14,145","\u200b","","(9,017)","\u200b","","(4,356)","\u200b"],["Unallocated employee and overhead costs","\u200b","","9,456","\u200b","","9,491","\u200b","","12,504","\u200b","","(35)","\u200b","","(3,013)","\u200b"],["\u200b","\u200b","$","16,526","\u200b","$","24,468","\u200b","$","29,115","\u200b","$","(7,942)","\u200b","$","(4,647)","\u200b"]]
[[/GREPCENT_TABLE]]

​

For the year ended December 31, 2023, the increase in soquelitinib costs of $1.5 million as compared to the year ended December 31, 2022, primarily consisted of an increase of $1.3 million in outside services and an increase of $0.6 million in clinical trial expenses, which was partially offset by a decrease of $0.4 million in drug manufacturing costs.

For the year ended December 31, 2023, the decrease in ciforadenant costs of $0.4 million as compared to the year ended December 31, 2022, primarily consisted of a decrease of $0.3 million in drug manufacturing costs and a decrease of $0.4 million in other outside services, which was partially offset by an increase of $0.3 million in clinical trial expenses.

For the year ended December 31, 2023, the decrease in mupadolimab costs of $9.0 million as compared to the year ended December 31, 2022, primarily consisted of a decrease of $7.3 million in drug manufacturing costs, a decrease of $1.4 million in clinical trial expenses and a decrease of $0.3 million in other outside services.

For the year ended December 31, 2023, the decrease in unallocated costs compared to the year ended December 31, 2022, was negligible.

For the year ended December 31, 2022, the increase in soquelitinib costs of $2.9 million as compared to the year ended December 31, 2021, primarily consisted of an increase of $1.1 million in manufacturing costs, an increase of $0.3 million in clinical trial expenses and an increase of $0.9 million in other outside services. Additionally, $0.6 million

79

Table of Contents

in drug manufacturing costs, which were expensed in prior years, were billed to Angel Pharmaceuticals during the year ended December 31, 2021.

For the year ended December 31, 2022, the decrease in ciforadenant costs of $0.2 million as compared to the year ended December 31, 2021, primarily consisted of a decrease of $0.5 million in clinical trial expenses, which was partially offset by an increase of $0.1 million in drug manufacturing costs and an increase of $0.2 million in other outside services.

For the year ended December 31, 2022, the decrease in mupadolimab costs of $4.4 million as compared to the year ended December 31, 2021, primarily consisted of a decrease of $8.6 million in clinical trial expenses and a decrease of $1.0 million in other outside services, which was partially offset by an increase of $5.7 million in drug manufacturing costs as a result of the purchase of antibody for our clinical trial for mupadolimab, which was subsequently paused, under a non-cancelable purchase commitment. Additionally, $0.5 million in drug manufacturing costs, which were expensed in prior years, were billed to Angel Pharmaceuticals during the year ended December 31, 2022.

For the year ended December 31, 2022, the decrease in unallocated costs of $3.0 million as compared to the year ended December 31, 2021, primarily consisted of a decrease of $3.1 million in personnel and related costs and a decrease of $0.3 million in facility related costs, partially offset by an increase of $0.4 million in outside services.

General and Administrative Expenses

For the year ended December 31, 2023, the decrease in general and administrative expenses of $1.2 million as compared to the year ended December 31, 2022, primarily consisted of a decrease of $0.6 million in personnel and related costs and a decrease of $0.6 million in other outside costs.

For the year ended December 31, 2022, the decrease in general and administrative expenses of $1.4 million as compared to the year ended December 31, 2021, primarily consisted of a decrease in personnel and related costs.

Interest Income and Other Expense, net

For the year ended December 31, 2023, the increase in interest income and other expense, net of $0.9 million as compared to the year ended December 31, 2022, primarily consisted of an increase in interest income earned due to an increase in interest rates.

For the year ended December 31, 2022, the increase in interest income and other expense, net of $0.7 million as compared to the year ended December 31, 2021, primarily consisted of an increase in interest income earned due to an increase in interest rates.

Gain from sale of property and equipment

For the year ended December 31, 2022, the gain from sale of property and equipment consisted of proceeds from the sale of laboratory equipment.

Sublease income – related party

For the year ended December 31, 2023, the decrease in sublease income – related party of $0.5 million as compared to the year ended December 31, 2022, was due to the expiration of the building sublease agreement with Angel Pharmaceuticals in January 2023.

For the year ended December 31, 2022, the increase in sublease income – related party of $0.6 million as compared to the year ended December 31, 2021, consisted of a full year of rent payments made by Angel Pharmaceuticals pursuant to the facility sublease entered into in August 2021.

Loss from equity method investment

80

Table of Contents

For the year ended December 31, 2023, the decrease in loss from equity method investment of $4.7 million as compared to the year ended December 31, 2022, primarily consisted of a decrease in our share of Angel Pharmaceutical’s loss for the year ended December 31, 2022.

For the year ended December 31, 2022, the increase in loss from equity method investment of $5.2 million as compared to the year ended December 31, 2021, primarily consisted of an increase in our share of Angel Pharmaceutical’s loss for the year ended December 31, 2022.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2023, we had cash, cash equivalents and marketable securities of $27.1 million and an accumulated deficit of $334.7 million, compared to cash, cash equivalents and marketable securities of $42.3 million and an accumulated deficit of $307.7 million as of December 31, 2022.

Since our inception and through December 31, 2023, we have funded our operations primarily through the sale and issuance of stock, including through our IPO in March 2016, in which we raised net proceeds of approximately $70.6 million, a follow-on offering of our common stock in March 2018, in which we raised net proceeds of approximately $64.9 million and a follow on offering in February 2021, in which we raised net proceeds of approximately $32.0 million, in each case net of underwriting discounts and commissions and offering expenses.

On March 28, 2023, we entered into the 2023 Sales Agreement with Jefferies to sell shares of our common stock, from time-to-time, with aggregate gross sales proceeds of up to $90,000,000, through an at-the-market equity offering program under which Jefferies will act as our sales agent. The issuance and sale of shares of common stock pursuant to the 2023 Sales Agreement are deemed an “at-the-market” offering under the Securities Act of 1933, as amended. Jefferies is entitled to compensation for its services equal to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the 2023 Sales Agreement.

During the year ended December 31, 2023, we sold 2,461,903 shares of common stock under our at-the-market offering program resulting in net proceeds of $7.8 million. As of December 31, 2023, $81.9 million remained available for sale under the 2023 Sales Agreement.

Funding Requirements

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $334.7 million through December 31, 2023. We do not expect positive cash flows from operations in the foreseeable future, if ever. Historically, we have incurred operating losses as a result of ongoing efforts to develop our product candidates, including conducting ongoing research and development, clinical and preclinical studies and providing general and administrative support for these operations. We do not have any products approved for sale, and we do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current and future product candidates and/or enter into additional significant collaboration agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur net operating losses for at least the next several years and we expect the losses to increase as we advance our soquelitinib, ciforadenant and mupdolimab product candidates, as well as any future product candidates, through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization and continue our research and development efforts. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We do not yet have a sales organization or commercial infrastructure and, accordingly, we will need to incur significant expenses to develop a sales organization and commercial infrastructure in advance of generating any commercial product sales. Moreover, we incur substantial costs associated with operating as a

81

Table of Contents

public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

Until we can generate a sufficient amount of revenue from the commercialization of our product candidates or from additional significant collaboration or license agreements with third parties, if ever, we expect to finance our future cash needs through private and public equity offerings, including our “at-the-market” offering program, debt financings, and potential future collaboration, license and development agreements. Adequate funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be required to significantly reduce our operating expenses and may have to significantly delay, scale back or discontinue the development of one or more of our current or future product candidates. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term, but we may have to relinquish valuable rights to our product candidates or grant licenses on terms that are not favorable to us. Any of the foregoing could significantly harm our business, financial condition and prospects.

We expect to incur substantial additional losses in the future as we conduct our planned research and development activities. We believe that our existing cash, cash equivalents and marketable securities will only be sufficient to fund our planned operating and capital needs through the fourth quarter of 2024 and will not be sufficient to enable us to fund our projected operations through at least the next twelve months from the date of this Annual Report on Form 10-K. These conditions raise substantial doubt about our ability to continue as a going concern for a period of 12 months from the date of the issuance of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially based on a number of factors.

The accompanying consolidated financial statements and related notes have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The consolidated financial statements and related notes do not reflect any adjustments relating to the recoverability and classification of assets or amounts and classification of liabilities that might be necessary if we are unable to continue as a going concern.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements depend on many factors, including:

[[GREPCENT_TABLE]]
[["","\u25cf","the progress, timing, costs and results of clinical trials for soquelitinib, including the potential registrational clinical trial for soquelitinib, and to a lesser extent, the timing, costs and results of the clinical trials for ciforadenant and mupadolimab;"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","the timing, progress, costs and results of preclinical and clinical development activities for our other product candidates;"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","the number and scope of preclinical and clinical programs we decide to pursue;"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","the costs involved in prosecuting, maintaining and enforcing patent and other intellectual property rights;"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","the cost and timing of regulatory approvals;"]]
[[/GREPCENT_TABLE]]

82

Table of Contents

​

[[GREPCENT_TABLE]]
[["","\u25cf","our efforts to enhance operational systems and hire additional personnel, including personnel to support development of our product candidates and satisfy our obligations as a public company; and"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","other factors described in the section of this report entitled \u201cRisk Factors.\u201d"]]
[[/GREPCENT_TABLE]]

​

Summary of Statement of Cash Flows

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

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Year ended December 31,","","Change","","Change"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021","\u200b","2022 to 2023","\u200b","2021 to 2022"],["Net cash provided by (used in):","","\u200b","","","\u200b","","","\u200b","","","\u200b","","","\u200b","","\u200b"],["Operating activities","\u200b","$","(23,935)","\u200b","$","(27,023)","\u200b","$","(36,715)","\u200b","$","3,088","\u200b","$","9,692","\u200b"],["Investing activities","\u200b","","15,541","\u200b","","(23,276)","\u200b","","21,560","\u200b","","38,817","\u200b","","(44,836)","\u200b"],["Financing activities","\u200b","","7,855","\u200b","","\u2014","\u200b","","62,158","\u200b","","7,855","\u200b","","(62,158)","\u200b"],["Net increase in cash and cash equivalents","\u200b","$","(539)","\u200b","$","(50,299)","\u200b","$","47,003","\u200b","$","49,760","\u200b","$","(97,302)","\u200b"]]
[[/GREPCENT_TABLE]]

​

Cash Flows from Operating Activities

Cash used in operating activities during the year ended December 31, 2023 was $23.9 million, which primarily consisted of a net loss of $27.0 million, adjusted by non-cash charges of $6.7 million, primarily consisting of $2.1 million of stock compensation expense and $5.3 million in loss from equity method investment, a decrease of $0.5 million in accounts payable, a decrease of $3.6 million in accrued and other liabilities and a decrease of $0.6 million in accounts receivable – related party.

Cash used in operating activities during the year ended December 31, 2022 was $27.0 million, which primarily consisted of a net loss of $41.3 million, adjusted by non cash charges of $12.9 million, primarily consisting of $2.7 million of stock compensation expense and $10.0 million in loss from equity method investment, a decrease of $0.6 million in prepaid and other current assets, an increase of $0.4 million in accounts payable, an increase of $0.5 million in accrued and other liabilities and an increase of $0.1 million in accounts receivable – related party.

Cash used in operating activities during the year ended December 31, 2021 was $36.7 million, which primarily consisted of a net loss of $43.2 million, adjusted by non cash charges of $9.8 million, primarily consisting of $4.2 million of stock compensation expense and $4.8 million in loss from equity method investment, and an increase of $0.2 million in other assets, partially offset by a decrease of $2.4 million in accounts payable and accrued and other liabilities, an increase of $0.5 million in accounts receivable – related party, an increase of $0.3 million in prepaid and other current assets and an increase of $0.2 million in operating lease right-of-use asset, net of operating lease liability.

Cash Flows from Investing Activities

Cash provided by investing activities during the year ended December 31, 2023 was $15.5 million, which consisted of proceeds from maturities of marketable securities of $62.6 million, which were partially offset by purchases of marketable securities of $47.0 million.

Cash used in investing activities during the year ended December 31, 2022 was $23.3 million, which consisted of purchases of marketable securities of $66.2 million and purchases of property and equipment of $0.3 million, which were partially offset by proceeds from maturities of marketable securities of $43.2 million.

Cash provided by investing activities during the year ended December 31, 2021 was $21.6 million, which consisted of proceeds from maturities of marketable securities of $30.9 million, which were partially offset by purchases of marketable securities of $9.4 million.

83

Table of Contents

Cash Flows from Financing Activities

Cash provided by financing activities during the year ended December 31, 2023 was $7.9 million, which primarily consisted of $7.8 million in net proceeds from the issuance of common stock through our at-the-market offering program.

During the year ended December 31, 2022, there was no cash provided by or used in financing activities.

Cash provided by financing activities during the year ended December 31, 2021 was $62.2 million, which consisted of $32.0 million in net proceeds from our February 2021 follow-on public offering, $29.0 million in net proceeds from the issuance of common stock through our at-the-market offering program, and $1.2 million in proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

Contractual Obligations

Our principal commitment consists of obligations under our non-cancelable operating lease for our facilities that expires in 2025.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of these consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. On an ongoing basis, our management evaluates its estimates including, but not limited to: those related to the accrual for certain liabilities, including accrued clinical trial liabilities; valuations of equity awards used to determine stock-based compensation; valuation of intangible assets and long-lived assets; going concern assessment; and the amounts of deferred tax assets and liabilities, including the related allowance. We base our estimates on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. We believe our critical accounting policies relating to clinical trial accruals and stock-based compensation reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements. Our significant accounting policies are more fully described in Note 2 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10 K.

Cash, Cash Equivalents and Marketable Securities

We consider all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents.

Investments with remaining maturities, at the date of purchase, greater than three months, but less than one year are considered short-term. We determined the appropriate classification of marketable securities at the time of purchase and evaluates such designation as of each balance sheet date. To date, all marketable securities have been classified as available-for-sale and are carried at fair value with unrealized gains and losses, if any, included as a component of accumulated other comprehensive income (loss) in stockholders’ equity (deficit). Interest and realized gains and losses are included in interest income. Realized gains and losses are recognized based on the specific identification method.

84

Table of Contents

Research and Development Expenses

We record research and development expenses as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the goods have been received or when the service has been performed rather than when the payment is made. Research and development expenses consist of costs incurred by us for the discovery and development of our product candidates and include:

[[GREPCENT_TABLE]]
[["","\u25cf","employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, academic and non-profit institutions and consultants;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","license fees; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","other expenses, which include direct and allocated expenses for laboratory, facilities and other costs."]]
[[/GREPCENT_TABLE]]

Clinical Trial Accruals

Costs for preclinical studies and clinical trial activities are recognized based on an evaluation of the vendors’ progress towards completion of specific tasks. We apply significant judgment in developing estimates for clinical trial accruals based on assumptions related to vendors’ progress towards completion. In developing these estimates, we estimate vendors’ progress towards completion using data such as clinical site activations, patient enrollment or information provided to us by our vendors regarding their actual costs incurred. Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services are performed. We determine accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion, or the services completed. Our estimates of accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time.

Recent Accounting Pronouncements

See Note 2 in Item 8 “Financial Statements and Supplementary Data.”

Segment Information

We have one primary business activity and operate as one reportable segment.

​