# Replimune Group, Inc. (REPL) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Replimune Group, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1737953/000173795324000008/repl-20240331.htm
Accession: 0001737953-24-000008
Filing date: 2024-05-16
Report date: 2024-03-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/REPL/
All MD&A years: /company/REPL/mda/
Previous year: /company/REPL/mda/fy2023/ (FY 2023)
Next year: /company/REPL/mda/fy2025/ (FY 2025)

Item 7.    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 in conjunction with our consolidated financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K. In addition to historical information, some of the statements contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Annual Report on Form 10-K, particularly including those risks identified in Part I, Item 1A “Risk factors” and our other filings with the SEC.

We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Annual Report on Form 10-K. Statements made herein are as of the date of the filing of this Annual Report on Form 10-K with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report on Form 10-K, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a clinical-stage biotechnology company committed to applying our leading expertise in the field of oncolytic immunotherapy to transform the lives of cancer patients through our novel oncolytic immunotherapies. Our proprietary

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oncolytic immunotherapy product candidates are designed and intended to maximally activate the immune system against cancer.

Oncolytic immunotherapy is an emerging drug class, which we intend to establish as the second cornerstone of immune-based cancer treatments, alongside checkpoint blockade. Oncolytic immunotherapy exploits the ability of certain viruses to selectively replicate in and directly kill tumors, as well as induce a potent, patient-specific, anti-tumor immune response. Our product candidates incorporate multiple mechanisms into a practical “off-the-shelf” approach that is intended to maximize the immune response against a patient’s cancer and to offer significant advantages over other approaches of inducing anti-tumor immunity, including personalized vaccine approaches. We believe that the bundling of multiple approaches for the treatment of cancer into single therapies may improve patient outcomes and simplify the development path of our product candidates.

Financial

Since our inception, we have devoted substantially all of our resources to developing our proprietary RPx platform, building our intellectual property portfolio, conducting research and development of our product candidates, business planning, raising capital and providing selling, general and administrative support for our operations. To date, we have incurred significant operating losses and we have financed our operations primarily with proceeds from the sale of equity securities and to a lesser extent the proceeds from the issuance of debt securities. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization, if approved, of one or more of our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales.

Since our initial public offering, or IPO, on July 20, 2018, we have raised an aggregate of approximately $849.1 million in net proceeds to fund our operations, of which $101.2 million was from our IPO, $706.0 million was from four separate follow-on offerings, or the Public Offerings, that we closed in November 2019, June 2020, October 2020 and December 2022, respectively, and $41.9 million was from at-the-market offerings.

Our net losses were $215.8 million and $174.3 million for the years ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $701.3 million. These losses have resulted primarily from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We anticipate that our expenses and capital requirements will fluctuate from period to period depending upon the Company's development programs and priorities. We expect to continue to incur costs in connection with our ongoing development activities, including further advancement of any preclinical activities and clinical trials of our product candidates across our platform, and if and as we:

•conduct our current and future clinical trials;

•further preclinical development of our platform;

•operate our in-house manufacturing facility;

•seek to identify and develop additional product candidates;

•seek marketing approvals for any of our product candidates that successfully complete clinical trials, if any;

•establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

•until our manufacturing facility is fully validated, continued limited manufacturing by third parties for clinical development;

•maintain, expand and protect our intellectual property portfolio;

•hire and retain additional clinical, quality control, scientific and selling, general and administration personnel;

•acquire or in-license other drugs, technologies or intellectual property rights; and

•add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and operations as a public company.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are

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unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of March 31, 2024, we had cash and cash equivalents and short-term investments of $420.7 million. Based on our current operating plan, we believe that our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements through at least 12 months from the issuance of the consolidated financial statements included in this Annual Report on Form 10-K.

See “Results of Operations — Liquidity and capital resources” and “Risk factors — Risks related to our financial position and need for additional capital.”

Components of our results of operations

Revenue

To date, we have not generated any revenue from product sales as we do not have any approved products and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for RP1 or any other product candidates that we may develop in the future are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from those collaborations or license agreements.

Operating expenses

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:

•expenses incurred under agreements with third parties, including CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as CMOs that manufacture our raw materials and/or product candidates for use in our preclinical and clinical trials;

•salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

•costs of outside consultants engaged in research and development functions, including their fees, stock-based compensation and related travel expenses;

•the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

•costs related to compliance with regulatory requirements in connection with the development of our product candidates; and

•facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

Our direct external research and development expenses are tracked on a program-by-program basis and consist of costs, such as fees paid to consultants, contractors, CMOs, and CROs in connection with our preclinical and clinical development activities. We do not allocate personnel costs, costs associated with our discovery efforts, laboratory supplies or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. Non-employee costs associated with our manufacturing facility including depreciation, amortization and facility costs are appropriately allocated to development programs based on the percentage of time spent per program.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue enrollment and initiate additional clinical trials and continue to discover and

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develop additional product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

•the scope, rate of progress, expense and results of our ongoing clinical trials, as well as future clinical trials or other product candidates and other research and development activities that we may conduct;

•the number and scope of preclinical and clinical programs we decide to pursue;

•our ability to maintain our current research and development programs and to establish new ones;

•uncertainties in clinical trial design;

•the rate of enrollment in clinical trials;

•the successful completion of clinical trials with safety, tolerability, and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

•the receipt of regulatory approvals from applicable regulatory authorities;

•our success in operating our manufacturing facility, or securing manufacturing supply through relationships with third parties;

•our ability to obtain and maintain patents, trade secret protection, and regulatory exclusivity, both in the United States and internationally;

•our ability to maintain, expand and protect our rights in our intellectual property portfolio;

•the commercialization of our product candidates, if and when approved;

•the acceptance of our product candidates, if approved, by patients, the medical community, and third-party payors;

•our ability to successfully develop our product candidates for use in combination with third-party products or product candidates;

•negative developments in the field of immuno-oncology;

•competition with other products; and

•significant and changing government regulation and regulatory guidance.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development. We may never succeed in obtaining regulatory approval for any of our product candidates.

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate, commercial, and business development and administrative functions. Selling, general and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, pre-commercial planning, marketing and strategic planning, business development, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our selling, general and administrative expenses will continue to increase in the future as we increase our selling, general and administrative headcount to support our continued research and development and pre-launch activities to prepare for potential commercialization of our product candidates. We also expect to continue to incur increased expenses, including accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements; director and officer insurance costs; and investor and public relations costs.

Other income (expense), net

Research and development incentives

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Research and development incentives consists of reimbursements of research and development expenditures. We participate, through our subsidiary in the United Kingdom, in the research and development program provided by the United Kingdom tax relief program, such that a percentage of up to 14.5% of our qualifying research and development expenditures are reimbursed by the United Kingdom government, and such incentives are reflected as other income.

Investment income

Investment income consists of income earned on our cash and cash equivalents and short-term investments.

Interest expense on finance lease liability

Interest expense on finance lease liability consists of amortization of finance charges under our financing lease.

Interest expense on debt obligations

Interest expense on debt obligations consists of the amortization of debt discount and cash paid for interest under the Hercules Loan Agreement.

Other income (expense), net

Other income (expense), net consists primarily of realized and unrealized foreign currency transaction gains and losses.

Income taxes

During the year ended March 31, 2024 and 2023, the Company recorded an income tax provision of $0.4 million and $0.3 million, respectively, related to U.S. current taxes primarily due to the transfer pricing arrangement between the U.S. and the U.K., as well as unfavorable adjustments related to stock compensation, resulting in U.S. taxable income reduced by certain prior year available net operating losses.

Results of operations

Comparison of the years ended March 31, 2024 and 2023

The following table summarizes our results of operations for the years ended March 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","Year Ended March 31,","","Change"],["","2024","","2023","","$","","%"],["","(Amounts in thousands)"],["Operating expenses:"],["Research and development","$","174,963","","","$","126,527","","","$","48,436","","","38","%"],["Selling, general and administrative","59,810","","","50,553","","","9,257","","","18","%"],["Total operating expenses","234,773","","","177,080","","","57,693","","","33","%"],["Loss from operations","(234,773)","","","(177,080)","","","(57,693)","","","33","%"],["Other income (expense):"],["Research and development incentives","1,920","","","2,914","","","(994)","","","(34)","%"],["Investment income","23,356","","","10,006","","","13,350","","","133","%"],["Interest expense on finance lease liability","(2,163)","","","(2,197)","","","34","","","(2)","%"],["Interest expense on debt obligations","(4,497)","","","(1,963)","","","(2,534)","","","129","%"],["Other income (expense)","771","","","(5,676)","","","6,447","","","(114)","%"],["Total other income (expense), net","19,387","","","3,084","","","16,303","","","529","%"],["Loss before income taxes","$","(215,386)","","","$","(173,996)","","","$","(41,390)","","","24","%"],["Income tax provision","408","","","288","","","120","","","42","%"],["Net loss","$","(215,794)","","","$","(174,284)","","","$","(41,510)","","","24","%"]]
[[/GREPCENT_TABLE]]

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Research and development expenses

Research and development expenses for the year ended March 31, 2024 were $175.0 million, compared to $126.5 million for the year ended March 31, 2023. The following table summarizes our research and development expenses for the years ended March 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","Year Ended March 31,","","Change"],["","2024","","2023","","$","","%"],["Direct research and development expenses by program:"],["RP1","51,492","","","39,641","","","11,851","","","30","%"],["RP2","10,701","","","3,632","","","7,069","","","195","%"],["RP3","13,162","","","13,349","","","(187)","","","(1)","%"],["Unallocated research and development expenses:"],["Personnel related (including stock-based compensation)","80,395","","","53,634","","","26,761","","","50","%"],["Other","19,213","","","16,271","","","2,942","","","18","%"],["Total research and development expenses","$","174,963","","","$","126,527","","","$","48,436","","","38","%"]]
[[/GREPCENT_TABLE]]

The total increase of $48.4 million was due to an increase of approximately $18.7 million in direct research costs related to our ongoing clinical trials and increased patient enrollment for RP1, RP2 and RP3, including an increase of approximately $13.3 million in the areas of CRO costs, investigator costs, and imaging costs. The costs for RP1 also increased compared to the prior year as we prepared the primary analysis and preparations for a potential BLA filing for CERPASS as well as the initial full data presentation for IGNYTE and preparations for a potential BLA submission for IGNYTE. In addition, we focused on an updated data presentation on the ARTACUS trial. Furthermore, we continued to ramp up activities to develop RP2 throughout the year ended March 31, 2024 as compared to the prior year, whereas activities for RP3 remained consistent year over year as a result of the deprioritization of development efforts on this product candidate during the later part of fiscal 2024.

The increase of $29.7 million in our unallocated expenses was due primarily to a $26.8 million increase in personnel-related costs, including a $22.1 million increase in payroll and fringe benefits and a stock-based compensation increase of $4.7 million. The increase in personnel-related costs largely reflected the hiring of additional personnel in our research and development functions as we expand the development plan in multiple indications. Personnel related costs for the years ended March 31, 2024 and 2023 included stock-based compensation expense of $14.7 million and $10.1 million, respectively.

Selling, general and administrative expenses

Selling, general and administrative expenses were $59.8 million for the year ended March 31, 2024, compared to $50.6 million for the year ended March 31, 2023. The increase of $9.3 million is primarily the result of an increase of $6.3 million in personnel related costs, including an increase of $5.0 million in payroll and fringe benefits and a stock-based compensation increase of $1.3 million. The increase in personnel related costs was driven by the continued hiring of additional personnel within our selling, general and administrative functions, specifically focusing on commercial planning and building of our initial commercial infrastructure. Personnel related costs for the year ended March 31, 2024 and 2023 included stock-based compensation expense of $19.4 million and $18.1 million, respectively.

Total other income (expense), net

Other income for the year ended March 31, 2024 was $19.4 million compared to $3.1 million for the year ended March 31, 2023. The net change of $16.3 million is primarily attributable to an increase of $13.4 million in investment income in the current year as compared to the prior year as a result of increases in interest rates throughout the year, as well as a $6.4 million decrease in expense due to the changes in foreign exchange rates of the Great British Pound to United States Dollar. These increases were partially offset by an increase in expense of $2.5 million of interest expense on debt obligations, as the Company drew down an additional term loan advance of $15.0 million in December 2023 from the debt agreement with Hercules.

Income tax provision

Income tax provision for the year ended March 31, 2024 was $0.4 million compared to $0.3 million for the year ended March 31, 2023. The income tax provision for the current year is attributable to U.S. current taxes primarily due to the transfer pricing arrangement between the U.S. and the U.K., as well as unfavorable adjustments related to stock compensation, resulting in U.S. taxable income reduced by certain prior year available net operating losses.

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Liquidity and capital resources

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for the foreseeable future, if at all.

Sources of liquidity

To date, we have financed our operations primarily with proceeds from the sale of equity securities and, to a lesser extent, proceeds from borrowing under a secured loan facility. Through March 31, 2024, we had received net proceeds of $935.9 million through the sale of equity securities, as well as net $42.8 million from our incurrence of debt under the Hercules Loan Agreement. As of March 31, 2024, we had cash and cash equivalents and short-term investments of $420.7 million.

Cash flows

The following table summarizes our cash flows for each of the periods presented:

[[GREPCENT_TABLE]]
[["","Year Ended March 31,"],["","2024","","2023"],["","(Amounts in thousands)"],["Net cash used in operating activities","$","(185,467)","","","$","(128,050)"],["Net cash provided by (used in) investing activities","97,201","","","(142,502)"],["Net cash provided by financing activities","16,283","","","311,303"],["Effect of exchange rate changes on cash and cash equivalents","(86)","","","(109)"],["Net increase (decrease) in cash and cash equivalents","$","(72,069)","","","$","40,642"]]
[[/GREPCENT_TABLE]]

Operating activities

During the year ended March 31, 2024, net cash used in operating activities was $185.5 million, primarily resulting from our net loss of $215.8 million, which was partially offset by non-cash charges of $24.8 million, consisting primarily of stock-based compensation expense of $34.1 million offset by $12.3 million related to the net amortization of premiums and discounts on short-term investments. Additionally, there was an increase in cash of $5.5 million related to changes in our operating assets and liabilities. Changes in our operating assets and liabilities for the year ended March 31, 2024 consisted primarily of a $9.2 million increase in accrued expenses and other current liabilities, a $2.8 million decrease in accounts payable, and a net $2.4 million change in operating and financing right-of-use assets and lease liabilities.

During the year ended March 31, 2023, net cash used in operating activities was $128.1 million, primarily resulting from our net loss of $174.3 million, partially offset by non-cash charges of $31.1 million, consisting primarily of stock-based compensation expense of $28.1 million, and an increase in cash of $15.1 million related to changes in our operating assets and liabilities. Changes in our operating assets and liabilities for the year ended March 31, 2023 consisted primarily of a $11.4 million increase in accrued expenses and other current liabilities, a net $2.4 million change in operating and financing right-of-use assets and lease liabilities, and a $2.0 million increase in accounts payable.

Investing activities

During the year ended March 31, 2024, net cash provided by investing activities was $97.2 million, consisting of $592.4 million in proceeds from sales and maturities of short-term investments, partially offset by $489.5 million in purchases of available for sale securities and $5.7 million in purchases of property, plant and equipment.

During the year ended March 31, 2023, net cash used in investing activities was $142.5 million, consisting of $583.4 million in purchases of available for sale securities and $2.3 million in purchases of property, plant and equipment, offset by $443.2 million in proceeds from sales and maturities of short-term investments.

Financing Activities

During the year ended March 31, 2024, net cash provided by financing activities was $16.3 million, consisting primarily of $15.0 million in proceeds from the incurrence of debt under the Hercules Loan Agreement, as well as approximately $1.8 million in proceeds from the exercise of stock options.

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During the year ended March 31, 2023, net cash provided by financing activities was $311.3 million, consisting primarily of $149.9 million in proceeds from the issuance of common stock, $92.8 million from the issuance of pre-funded warrants to purchase common stock, $37.4 million from the issuance of common stock through sales under our at-the-market facilities, $28.2 million in proceeds from the incurrence of debt under the Hercules Loan Agreement, as well as approximately $3.4 million in proceeds from the exercise of stock options.

Funding requirements

Our plan of operation is to continue implementing our business strategy, continue research and development of RP1 and our other product candidates and continue to expand our research pipeline and our internal research and development capabilities. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates and if and as we:

•conduct our current and future clinical trials with RP1, RP2 and RP3;

•further preclinical development of our RPx platform;

•operate, qualify and maintain our in-house manufacturing facility and qualify and maintain our product candidates made therein for use in our clinical trials;

•seek to identify and develop additional product candidates;

•seek marketing approvals for any of our product candidates that successfully complete clinical trials, if any;

•establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

•until our planned manufacturing facility is fully validated, continued limited manufacturing by third parties for clinical development;

•maintain, expand and protect our intellectual property portfolio;

•acquire or in-license other drugs, technologies or third-party intellectual property; and

•add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and operations as a public company.

As of March 31, 2024, we had cash and cash equivalents and short-term investments of $420.7 million. Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments as of March 31, 2024, will enable us to fund operations into the second half of 2026. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with the development of RP1 and other product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including those described in this section and above under “— Operating expenses — Research and development expenses.”

Developing novel biopharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of therapies that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of our equity or convertible debt securities, our shareholders’ interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholder. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute your ownership interest.

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If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual obligations and commitments

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Our contractual obligations include those related to our operating and financing leases, long-term debt, as well as costs associated with contracts entered into in the normal course of business with CROs, CMOs and other third parties for clinical trials and preclinical research studies and testing.

Lease Commitments

As of March 31, 2024, the aggregate amount of future lease payments is approximately $52.9 million, with $3.9 million due within one year. For additional information on our leases and timing of future payments, see Note 13 Commitments and contingencies, of the "notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on Form 10-K.

Loan Agreement

Our commitments due for our term loan under our arrangement with Hercules include principal payments of $45.0 million as of March 31, 2024. Borrowings under the term loan agreement are repayable in monthly interest-only payments through September 2026, and the agreement has a maturity date of October 2027. Our remaining commitments, based on our current draws, are due through October 2027, and include principal and interest payments of $62.2 million, and an additional fee upon maturity of the loan of $2.2 million. See Note 7, Long term debt, of the "notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on Form 10-K for further discussion of the Hercules term loan.

Other Obligations

Manufacturing and research commitments include agreements that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. As of March 31, 2024, the aggregate amount of non-cancelable purchase obligations related to such manufacturing commitments are approximately $0.9 million and all of this balance is due within one year.

Collaborations

BMS

In February 2018, we entered into a Clinical Trial Collaboration and Supply Agreement with Bristol-Myers Squibb Company, or BMS. Pursuant to the agreement, BMS is providing to us, at no cost, nivolumab, its anti-PD-1 therapy, for use in combination with RP1 in our ongoing Phase 1/2 clinical trial. Under the agreement, we will sponsor, fund and conduct the clinical trial in accordance with an agreed-upon protocol. BMS granted us a non-exclusive, non-transferrable, royalty-free license (with a right to sublicense) under its intellectual property to use nivolumab in the clinical trial and has agreed to supply nivolumab, at no cost to us, for use in the clinical trial. Both parties will own the study data produced in the clinical trial, other than study data related solely to nivolumab, which will belong solely to BMS, or study data related solely to RP1, which will belong solely to us. In January 2020, this agreement was expanded to cover an additional cohort of 125 patients with anti-PD-1 failed melanoma.

Unless earlier terminated, the agreement will remain in effect until (i) the completion of the clinical trial, (ii) all related clinical trial data have been delivered to both parties and (iii) the completion of any statistical analyses and bioanalyses contemplated by the clinical trial protocol or any analysis otherwise agreed upon by the parties. The agreement may be terminated by either party (x) in the event of an uncured material breach by the other party, (y) in the event the other party is insolvent or in bankruptcy proceedings or (z) for safety reasons. Upon termination, the licenses granted to us to use nivolumab in the clinical trial will terminate. The agreement contains representations, warranties, undertakings and indemnities customary for a transaction of this nature.

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In April 2019, we entered into a separate agreement with BMS on terms similar to the terms set forth in the agreement described above, pursuant to which BMS will provide, at no cost to us, nivolumab for use in our Phase 1 clinical trial of RP2 in combination with nivolumab.

Regeneron

In May 2018, we entered into a Master Clinical Trial Collaboration and Supply Agreement with Regeneron. Pursuant to the agreement we agreed to undertake one or more clinical trials with Regeneron for the administration of our product candidates in combination with cemiplimab, an anti-PD-1 therapy developed by Regeneron, across multiple solid tumor types, the first of which is our ongoing Phase 2 clinical trial testing RP1 in combination with cemiplimab versus cemiplimab alone in patients with CSCC. Each clinical trial will be conducted pursuant to an agreed study plan which, among other things, will identify the name of the sponsor and which party will manage the particular study, and include the protocol, the budget and a schedule of clinical obligations.

Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license of their respective intellectual property and agreed to contribute the necessary resources needed to fulfill their respective obligations, in each case, under the terms of agreed study plans. The Company does not expect any further reimbursements from Regeneron related to the initial study plan of June 2018 and the CERPASS trial. The agreement contains representations, warranties, undertakings and indemnities customary for a transaction of this nature. The agreement also contains certain time-based covenants that restrict us from entering into a third-party arrangement with respect to the use of our product candidates in combination with an anti-PD-1 therapy and that restrict Regeneron from entering into a third-party arrangement with respect to the use of cemiplimab in combination with an HSV-1 virus, in each case, for the treatment of a tumor type that is the subject of a clinical trial to which the covenants apply. Unless otherwise mutually agreed in a future study plan, these covenants are only applicable to our ongoing Phase 2 clinical trial in CSCC.

The agreement may be terminated by either party if (i) there is no active study plan for which a final study report has not been completed and the parties have not entered into a study plan for an additional clinical trial within a period of time after the delivery of the most recent final study report or (ii) in the event of a material breach.

Roche

In December 2022, we entered into a Master Clinical Trial Collaboration and Supply Agreement with Roche in relation to our RP2 and RP3 programs in colorectal cancer, or CRC, and hepatocellular carcinoma, or HCC. Under the agreement, the companies intended to collaborate in 30 patient cohort signal finding studies in third-line, or 3L, CRC and in first- and second-line, or 1L and 2L, respectively, HCC. Following our re-prioritization of our product development portfolio in December 2023, we have agreed with Roche to terminate the CRC collaboration and pursue the 2L cohort in HCC with RP2 only. Roche has expressed its intent to continue to supply its currently approved drugs, atezolizumab and bevacizumab for the 2L cohort in HCC but is unlikely to share costs following our re-prioritization. We are in discussions with Roche about revising these agreements following our changes to our RP2 and RP3 development plans. Under the terms of the initial agreement we retained the responsibility of operating the clinical trials as well as retaining all the rights to the development and commercialization of our product candidates. The agreement may be terminated by either party upon sixty days prior written notice to the other party.

Incyte

In July 2023, we entered into a Clinical Trial Collaboration and Supply Agreement with Incyte Corporation, or Incyte. Under the agreement, the companies will collaborate in a signal finding study in which Incyte will initiate and sponsor a clinical trial of INCB99280 (oral PD-L1 inhibitor) and RP1 in approximately 40 patients with unresectable, high risk CSCC in the neoadjuvant setting. Under the terms of the agreement, we will supply Incyte with RP1 for the study and share costs of the study equally with Incyte. The agreement may be terminated by either party upon (i) a material breach not reasonably cured within thirty days; (ii) the discontinuation of development of its clinical drug candidate; (iii) the unethical or illegal business practices of the other party; or (iv) if the parties have not agreed on the protocol or budget within ninety days of the effective date of the agreement. In addition, the Company may terminate the agreement upon the inappropriate or unsafe use of the RP1 product candidate. As of March 31, 2024, we and Incyte had not yet agreed on the protocol or budget. However, we and Incyte continue to discuss a potential protocol and neither party has triggered termination of the agreement in accordance with the termination right described in clause (iv) above. The parties are evaluating potential collaboration efforts pending further CERPASS data readout of RP1 in combination with cemiplimab and additional data for Incyte's product candidate INCB99280.

Critical accounting policies and estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United

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States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in greater detail in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Accrued research and development expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

•CROs in connection with performing research activities and conducting preclinical studies and clinical trials on our behalf;

•CMOs in connection with the production of preclinical and clinical trial materials;

•investigative sites or other service providers in connection with clinical trials;

•vendors in connection with preclinical and clinical development activities; and

•vendors related to product manufacturing and development and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CMOs and CROs that supply, conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed and/or timing of receiving invoices for actual services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-based compensation

We issue stock-based awards to employees, directors, consultants and non-employees in the form of stock options, restricted stock units, and performance-based restricted stock units, or PSUs. We measure such stock-based awards in accordance with ASC 718, Compensation — Stock Compensation, which requires all stock-based awards to be recognized in the consolidated statements of operations and comprehensive loss based on their fair value on the date of the grant and the related compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. We have, to date, issued stock-based awards with service-based and performance-based vesting conditions. Expense for stock-based awards with service-based vesting conditions is recorded using the straight-line method and for PSUs with performance-based vesting conditions, the expense is recorded using the graded vesting method. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield. See Note 10 of the "Notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on Form 10-K

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for more information. Forfeitures are accounted for as they occur. The fair value of each RSU and PSU is estimated on the date of grant based on the fair value of our common stock on that same date.

We classify stock-based compensation expense in our consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Recently issued accounting pronouncements

Refer to Note 2, summary of significant accounting policies of the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements that are applicable to our business and may potentially have an impact on our financial position and results of operations.