Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

FOR THE QUARTERLY PERIOD ENDED June 30, 2024


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

FOR THE TRANSITION PERIOD FROM _ TO _

COMMISSION FILE NUMBER 001-38501

______________________________________________

SCHOLAR ROCK HOLDING CORPORATION

(Exact name of registrant as specified in its charter)


Delaware	82-3750435
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

301 Binney Street, 3rd Floor Cambridge, Massachusetts	02142
(Address of principal executive offices)	(Zip Code)

(857) 259 3860

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SRRK	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the Registrant’s Common Stock as of August 2, 2024 was 80,032,623.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”), including the documents incorporated by reference, contains forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

●

the success, cost and timing of clinical trials for apitegromab (such as our Phase 3 SAPPHIRE clinical trial and our Phase 2 EMBRAZE clinical trial) and SRK-181, including the progress, completion, timing of results, and actual results of our clinical trials;

●

the timing, scope, or likelihood of our ability to obtain and maintain regulatory approval from the U.S. Food and Drug Administration (“FDA”), the European Commission (“EC”) and other regulatory authorities for apitegromab following completion of our Phase 3 SAPPHIRE clinical trial, and any related restrictions, limitations or warnings in the label of any approval for apitegromab;

●

our success in identifying and executing a development program for our preclinical product candidates, including SRK-439 and identifying additional product candidates from our preclinical programs and research pipeline;

●

our success in identifying and executing development programs for additional indications for apitegromab and SRK-181;

●

the clinical utility of our product candidates and their potential advantages over other therapeutic options;

●

our ability to obtain, generally or on terms acceptable to us, funding for our operations, including funding necessary to complete further development and, upon successful development, if approved, commercialization of apitegromab, SRK-181, SRK-439 or any of our future product candidates;

●

our ability to retain our executives and highly skilled technical and managerial personnel, which could be affected due to any transition in management, or if we fail to recruit additional highly skilled personnel;

●

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates and the duration of such protection and our ability to operate our business without infringing on the intellectual property rights of others;

●

our ability, through third party manufacturers, to successfully manufacture our product candidates for clinical trials and for commercial use, if approved;

●

our ability to successfully build a commercial infrastructure to launch and market apitegromab, or otherwise provide access to apitegromab, if and when it is approved or receives pricing or reimbursement approval;

●

our ability to establish or maintain collaborations or strategic relationships;

●

our expectations relating to the potential of our proprietary platform technology;

●

the size and growth potential of the markets for our product candidates, and our ability to serve those markets, either alone or in combination with others;

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●

the impact of new laws and regulations or amendments to existing laws and regulations in the United States and foreign countries;

●

risks associated with the impact of global economic and political developments on our business, including rising inflation and capital market disruptions, economic sanctions and economic slowdowns or recessions or public health pandemics;

●

developments and projections relating to our competitors and our industry;

●

our estimates and expectations regarding cash, cash reserves, and expense levels, future revenues, capital requirements and needs for additional financing, including our expected use of proceeds from our public offerings, and liquidity sources;

●

our expectations regarding the period during which we qualify as a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act;

●

our expectations regarding our ability to continue as a going concern; and

●

other risks and uncertainties, including those listed under the caption Part II, Item 1A “Risk Factors”.

The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our most recent Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for future periods and Current Reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Current Reports on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of this report.

We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry data, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

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SCHOLAR ROCK HOLDING CORPORATION

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	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	5
Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	5
Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023	6
Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2024 and 2023	7
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	8
Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	31

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3. Defaults Upon Senior Securities	80
Item 4. Mine Safety Disclosures	80
Item 5. Other Information	80
Item 6. Exhibits	81
SIGNATURES	82

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)


	June 30,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	93,372	$	101,855
Marketable securities		97,122		178,083
Prepaid expenses and other current assets		8,643		8,256
Total current assets		199,137		288,194
Property and equipment, net		3,549		4,600
Operating lease right-of-use asset		17,975		11,417
Restricted cash		2,407		2,407
Other long-term assets		3,797		4,417
Total assets	$	226,865	$	311,035
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,315	$	3,465
Accrued expenses		21,886		20,449
Operating lease liability		6,198		7,408
Short-term debt		1,588		1,334
Other current liabilities		—		85
Total current liabilities		32,987		32,741
Long-term portion of operating lease liability		11,773		4,392
Long-term debt		48,485		48,684
Total liabilities		93,245		85,817
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2024 and December 31, 2023		—		—
Common stock, $0.001 par value; 300,000,000 shares authorized; 79,992,068 and 75,979,495 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		80		76
Additional paid-in capital		925,376		901,471
Accumulated other comprehensive income (loss)		(54)		92
Accumulated deficit		(791,782)		(676,421)
Total stockholders’ equity		133,620		225,218
Total liabilities and stockholders’ equity	$	226,865	$	311,035

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

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SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating expenses:
Research and development	$	42,373	$	26,867	$	85,466	$	56,602
General and administrative		17,125		12,215		32,451		22,989
Total operating expenses		59,498		39,082		117,917		79,591
Loss from operations		(59,498)		(39,082)		(117,917)		(79,591)
Other income (expense), net		990		1,157		2,556		2,287
Net loss	$	(58,508)	$	(37,925)	$	(115,361)	$	(77,304)
Net loss per share, basic and diluted	$	(0.60)	$	(0.47)	$	(1.20)	$	(0.97)
Weighted average common shares outstanding, basic and diluted		96,813,116		80,117,983		96,352,858		79,865,424

Comprehensive loss:
Net loss	$	(58,508)	$	(37,925)	$	(115,361)	$	(77,304)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities		(4)		266		(146)		821
Total other comprehensive income (loss)		(4)		266		(146)		821
Comprehensive loss	$	(58,512)	$	(37,659)	$	(115,507)	$	(76,483)

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

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SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid‑in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity
Balance at December 31, 2023	75,979,495	$	76	$	901,471	$	92	$	(676,421)	$	225,218
Unrealized loss on marketable securities	—		—		—		(142)		—		(142)
Exercise of stock options	47,293		—		280		—		—		280
Issuance of common shares upon RSU vesting	360,373		—		—		—		—		—
Exercise of pre-funded and common warrants	3,357,493		4		6,102		—		—		6,106
Equity-based compensation expense	—		—		8,164		—		—		8,164
Net loss	—		—		—		—		(56,853)		(56,853)
Balance at March 31, 2024	79,744,654	$	80	$	916,017	$	(50)	$	(733,274)	$	182,773
Unrealized loss on marketable securities	—		—		—		(4)		—		(4)
Exercise of stock options	6,617		—		47		—		—		47
Issuance of common shares upon RSU vesting	240,797		—		—		—		—		—
Equity-based compensation expense	—		—		9,312		—		—		9,312
Net loss	—		—		—		—		(58,508)		(58,508)
Balance at June 30, 2024	79,992,068	$	80	$	925,376	$	(54)	$	(791,782)	$	133,620

						Accumulated
				Additional		Other				Total
	Common Stock			Paid‑in		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Loss		Deficit		Equity
Balance at December 31, 2022	51,672,579	$	52	$	771,699	$	(884)	$	(510,632)	$	260,235
Unrealized gain on marketable securities	—		—		—		555		—		555
Sale of common shares, net of issuance costs	68,696		—		827		—		—		827
Exercise of stock options	28,706		—		243		—		—		243
Issuance of common shares upon RSU vesting	219,378		—		—		—		—		—
Equity-based compensation expense	—		—		6,170		—		—		6,170
Other	—		—		2		—		—		2
Net loss	—		—		—		—		(39,379)		(39,379)
Balance at March 31, 2023	51,989,359	$	52	$	778,941	$	(329)	$	(550,011)	$	228,653
Unrealized gain on marketable securities	—		—		—		266		—		266
Sale of common shares, net of issuance costs	550,594		1		4,395		—		—		4,396
Exercise of stock options	53,333		—		292		—		—		292
Issuance of common shares upon RSU vesting	273,035		—		—		—		—		—
Exercise of pre-funded warrants	2,293,466		2		(2)		—		—		—
Equity-based compensation expense	—		—		6,818		—		—		6,818
Other	—		—		1		—		—		1
Net loss	—		—		—		—		(37,925)		(37,925)
Balance at June 30, 2023	55,159,787	$	55	$	790,445	$	(63)	$	(587,936)	$	202,501

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

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SCHOLAR ROCK HOLDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended
	June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(115,361)	$	(77,304)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,096		1,464
Amortization of debt discount and debt issuance costs		135		157
Equity-based compensation		17,476		12,988
Amortization/accretion of investment securities		(3,236)		(2,563)
Non-cash operating lease expense		2,893		3,658
Change in operating assets and liabilities:
Prepaid expenses and other current assets		(526)		1,571
Other assets		620		117
Accounts payable		(150)		(950)
Accrued expenses		1,456		(10,516)
Operating lease liabilities		(3,280)		(4,144)
Other liabilities		(104)		(82)
Net cash used in operating activities		(98,981)		(75,604)
Cash flows from investing activities:
Purchases of property and equipment		(45)		(71)
Proceeds from sale of property and equipment		—		13
Purchases of marketable securities		(68,449)		(105,200)
Maturities of marketable securities		152,500		180,000
Net cash provided by investing activities		84,006		74,742
Cash flows from financing activities:
Proceeds from sale of common shares, net of issuance costs		—		5,223
Proceeds from pre-funded and common warrant exercises		6,106		—
Debt modification payment		(80)		—
Proceeds from stock option exercises		466		539
Other		—		3
Net cash provided by financing activities		6,492		5,765
Net (decrease)/increase in cash, cash equivalents and restricted cash		(8,483)		4,903
Cash, cash equivalents and restricted cash, beginning of period		104,262		105,773
Cash, cash equivalents and restricted cash, end of period	$	95,779	$	110,676
Supplemental disclosure for non-cash items:
Operating lease liability adjustment from rent modification	$	9,451	$	—
Supplemental cash flow information:
Cash paid for interest	$	3,330	$	3,090

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

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SCHOLAR ROCK HOLDING CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

1. Nature of the Business

Scholar Rock Holding Corporation (the “Company”) is a late-stage biopharmaceutical company focused on the discovery, development, and delivery of innovative medicines for the treatment of serious diseases in which signaling by protein growth factors plays a fundamental role. As a global leader in transforming growth factor beta (“TGFβ”) superfamily biology, the Company’s novel understanding of the molecular mechanisms of growth factor activation enabled the development of a proprietary platform for the discovery and development of monoclonal antibodies that locally and selectively target the precursor, or latent, forms of growth factors. By targeting the signaling proteins at the cellular level and acting in the disease microenvironment, the Company believes that it may avoid the historical dose-limiting safety challenges associated with inhibiting growth factors for therapeutic effect.

The Company’s first product candidate, apitegromab, is a highly selective, fully human, monoclonal antibody, with a unique mechanism of action that results in inhibition of the activation of the growth factor, myostatin, in skeletal muscle. Apitegromab is being developed as a potential first muscle-targeted therapy for the treatment of spinal muscular atrophy (“SMA”). The Company is conducting SAPPHIRE, a pivotal Phase 3 clinical trial to evaluate the efficacy and safety of apitegromab in patients with nonambulatory Type 2 and Type 3 SMA. In 2023, the Company completed enrollment for the Phase 3 SAPPHIRE trial. In 2024, the Company announced data from the Phase 2 TOPAZ trial extension period which showed patient outcomes at 48 months of treatment with apitegromab. The FDA granted Fast Track designation, Rare Pediatric Disease designation and Orphan Drug designation to apitegromab for the treatment of SMA in May 2021, August 2020 and March 2018, respectively. The European Medicines Agency (“EMA”) granted Priority Medicine (“PRIME”) designation in March 2021 and the EC granted Orphan Medicinal Product designation in December 2018 to apitegromab for the treatment of SMA.

In October 2023, the Company announced plans to expand into cardiometabolic disorders and advance its anti-myostatin program with SRK-439, a novel, fully human anti-myostatin monoclonal antibody, for evaluation in cardiometabolic disorders, including obesity, towards a potential investigational new drug (“IND”) submission in 2025. To inform the development of SRK-439, in May 2024 the Company initiated the Phase 2 EMBRAZE proof-of-concept trial, designed to assess the safety and efficacy of apitegromab to preserve muscle mass in individuals living with obesity and on background therapy of a GLP-1 receptor agonist (“GLP-1 RA”), with data expected in the second quarter of 2025.

The Company’s second product candidate, SRK-181, a highly selective inhibitor of the activation of latent TGFβ is being developed for the treatment of cancers that are resistant to checkpoint inhibitor therapies, such as anti-PD-1 or anti-PD-L1 antibody therapies (referred to together as anti-PD-(L)1 antibody therapies). SRK-181 is being evaluated in the Company’s Phase 1 DRAGON proof-of-concept clinical trial in patients with locally advanced or metastatic solid tumors that exhibit resistance to anti-PD-(L)1 antibody therapies. The Phase 1 DRAGON trial completed enrollment in December 2023 and continues to treat patients who remain on study. This two-part clinical trial consists of a dose escalation portion (Part A) and a dose expansion evaluating SRK-181 in combination with an approved anti-PD- (L)1 antibody therapy (Part B). Part B includes the following active cohorts: urothelial carcinoma, cutaneous melanoma, non-small cell lung cancer, clear cell renal cell carcinoma, and head and neck squamous cell carcinoma. Safety, efficacy and biomarker data were presented in November 2023 at the Society for Immunotherapy of Cancer 38th Annual Meeting and in June 2024 at the American Society of Clinical Oncology (“ASCO”) annual meeting.

Additionally, the Company continues to create a pipeline of product candidates to deliver novel therapies to underserved patients suffering from a wide range of serious diseases, including neuromuscular disorders, cardiometabolic disorders, cancer, fibrosis, and iron-restricted anemia. The Company was originally formed in May 2012. Its principal offices are in Cambridge, Massachusetts.

Since its inception, the Company’s operations have focused on research and development of monoclonal antibodies that selectively inhibit activation of growth factors for therapeutic effect, as well as establishing the Company’s intellectual property portfolio and performing research and development activities. The Company has primarily financed its

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operations through various equity financings, as well as research and development collaboration agreements and the Company’s debt facility (Note 10).

Revenue generation activities have been limited to two collaborations, both containing research services and the issuance of a license. The first agreement, executed in 2013, was with Janssen Biotech, Inc., a subsidiary of Johnson & Johnson and was terminated in July 2022. The second agreement (the “Gilead Collaboration Agreement”), with Gilead Sciences, Inc. (“Gilead”), was in effect between December 2018 and January 2022. No revenues have been recorded from the sale of any commercial product.

The Company is subject to a number of risks similar to other life science companies, including, but not limited to, successful discovery and development of its drug candidates, raising additional capital, development by its competitors of new technological innovations, protection of proprietary technology and regulatory approval and market acceptance of the Company’s product candidates. The Company has incurred recurring losses since its inception, including net losses of $115.4 million and $77.3 million for the six months ended June 30, 2024 and 2023, respectively. In addition, the Company had an accumulated deficit of $791.8 million as of June 30, 2024. The Company anticipates that it will continue to incur significant operating losses for the next several years as it continues to develop its product candidates.

The Company has evaluated whether there are certain events, considered in the aggregate, which raise substantial doubt about the Company’s ability to continue as a going concern beyond one year after the date that the consolidated financial statements are issued.

Based on current operating plans, the Company does not expect to have sufficient cash, cash equivalents and marketable securities to fund its operating expenses and capital requirements beyond one year from the issuance of these consolidated financial statements without receiving additional external financing, and therefore, the Company has concluded that there is substantial doubt about its ability to continue as a going concern.

The Company will require additional funding through a combination of contribution from revenues, equity offerings, debt financings or other capital sources, such as collaborations with other companies, strategic alliances or licensing arrangements to finance its future operations. The Company may not be able to obtain such funding on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements. The terms of any such funding may adversely affect the holdings or rights of the Company’s stockholders. If the Company is unable to obtain sufficient capital, the Company may be forced to delay or reduce the scale of some of its operations.

2. Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

The significant accounting policies used in preparation of the unaudited consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K. There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Cash, Cash Equivalents and Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash per the balance sheet to the statement of cash flows (in thousands):


	As of June 30,
	2024		2023
Cash and cash equivalents	$	93,372	$	108,064
Restricted cash		2,407		2,612
	$	95,779	$	110,676

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Unaudited Interim Financial Information

The consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited consolidated financial statements include the accounts of Scholar Rock Holding Corporation and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the related reporting of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard requires that a financial asset or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. Under previous GAAP, a company only considered past events and current conditions in measuring an incurred loss. Under ASU 2016-13, the information that a company must consider is broadened in developing an expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. The guidance is applied using a modified retrospective, or prospective approach, depending on a specific amendment. In November 2019, the FASB deferred the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. Therefore, the new standard was effective for the Company on January 1, 2023. The Company established processes and internal controls to comply with the new credit loss standard and related disclosure requirements. The Company’s investment policy has primary objectives of preservation of capital and maintenance of liquidity. As a result, the Company typically invests in money market funds, U.S. treasury obligations and government agency securities. The Company believes that such funds are subject to minimal credit risk. The Company has not experienced any credit losses and does not believe it is exposed to any significant credit risk on these investments. The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2017-07”). The standard requires disclosure of incremental segment information on an annual and interim basis and allows for multiple measures of a segment’s profit or loss provided that one of those measures is consistent with GAAP. The amendments in this update do not change how a public company identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments, but rather requires public entities to provide in interim periods all disclosures about a reporting segment’s profit or loss and assets that are currently required annually. ASU 2023-07 becomes effective for the annual period starting on January 1, 2024, and for interim periods starting on January 1, 2025. The option for early adoption is permitted, however, the Company has decided not to early adopt, does not anticipate a material impact to its net financial position, and is still evaluating the impact on its disclosures in future years as a result of the adoption of ASU 2023-07.

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In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances the transparency of income tax disclosures to provide information to investors to better assess how a company’s operations and related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flows. This requires public entities to disclose additional categories in the rate reconciliation regarding federal and state income taxes, and provide more details surrounding reconciling items if a quantitative threshold is met. The effective date for public companies is for annual periods starting on January 1, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance, however, the Company has decided not to early adopt, does not anticipate a material impact to its net financial position, and is still evaluating the impact on its disclosures will be in future years as a result of the adoption of ASU 2023-09.

3. Fair Value of Financial Assets and Liabilities

The following tables summarize the assets and liabilities measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023 (in thousands):


	Fair Value Measurements at June 30, 2024
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds, included in cash and cash equivalents	$	79,688	$	79,688	$	—	$	—
U.S. treasury obligations, included in cash and cash equivalents		9,331		9,331		—		—
Marketable securities:
U.S. treasury obligations and government agency securities		97,122		97,122		—		—
Total assets	$	186,141	$	186,141	$	—	$	—


	Fair Value Measurements at December 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds, included in cash and cash equivalents	$	61,764	$	61,764	$	—	$	—
U.S. treasury obligations, included in cash and cash equivalents		30,765		30,765		—		—
Marketable securities:
U.S. treasury obligations and government agency securities		178,083		178,083		—		—
Total assets	$	270,612	$	270,612	$	—	$	—

Cash, cash equivalents and marketable securities are Level 1 assets and include investments in money market funds and U.S. treasury obligations and government agency securities that are valued using quoted market prices. Accordingly, money market funds and government funds are categorized as Level 1 as of June 30, 2024 and December 31, 2023. There were no transfers of assets between fair value measurement levels during the six months ended June 30, 2024 or 2023.

The carrying amounts reflected in the balance sheets for prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values at June 30, 2024 and December 31, 2023, due to their short-term nature.

The Company believes the terms of its debt reflect current market conditions for an instrument with similar terms and maturity, therefore the carrying value of the Company's debt approximates its fair value based on Level 3 of the fair value hierarchy.

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4. Marketable Securities

The following table summarizes the Company’s investments as of June 30, 2024 (in thousands):


			Gross
	Amortized		Unrealized				Estimated
	Cost		Gains		Losses		Fair Value
Marketable securities available-for-sale:
U.S. treasury obligations and government agency securities	$	97,176	$	1	$	(55)	$	97,122
Total available-for-sale securities	$	97,176	$	1	$	(55)	$	97,122

The following table summarizes the Company’s investments as of December 31, 2023 (in thousands):


			Gross
	Amortized		Unrealized				Estimated
	Cost		Gains		Losses		Fair Value
Marketable securities available-for-sale:
U.S. treasury obligations and government agency securities	$	177,991	$	93	$	(1)	$	178,083
Total available-for-sale securities	$	177,991	$	93	$	(1)	$	178,083

The aggregate fair value of marketable securities with unrealized losses was $81.3 million and $11.9 million at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024 and December 31, 2023, 47 investments and three investments, respectively, were in an unrealized loss position. All such investments have been in an unrealized loss position for less than a year and these losses are considered temporary. The Company has the ability and intent to hold these investments until a recovery of their amortized cost, which may not occur until maturity.

The Company believes that U.S. treasury obligations and government agency securities are subject to minimal credit risk. As a result, the Company did not record any charges for credit-related impairments for its available-for-sale securities for the six months ended June 30, 2024.

5. Prepaid Expenses and other Assets

As of June 30, 2024 and December 31, 2023, prepaid expenses and other assets consist of the following (in thousands):


	As of
	June 30,		December 31,
	2024		2023
Prepaid external research and development expenses	$	3,392	$	4,059
Prepaid other		2,906		2,486
Receivables		1,288		1,076
Prepaid insurance		1,057		635
	$	8,643	$	8,256

As of June 30, 2024 and December 31, 2023, other long-term assets consist of the following (in thousands):


	As of
	June 30,		December 31,
	2024		2023
Prepaid external research and development expenses	$	3,399	$	4,074
Prepaid other		375		312
Prepaid insurance		23		31
	$	3,797	$	4,417

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6. Accrued Expenses

As of June 30, 2024 and December 31, 2023, accrued expenses consist of the following (in thousands):


	As of
	June 30,		December 31,
	2024		2023
Accrued external research and development expense	$	9,339	$	6,825
Accrued payroll and related expenses		7,352		10,591
Accrued professional and consulting expense		4,254		2,267
Accrued other		941		766
	$	21,886	$	20,449

7. Common Stock

In June 2024, the stockholders approved an amendment to our amended and restated certificate of incorporation to increase the number of authorized shares of common stock from 150,000,000 to 300,000,000.

The Company has had a sales agreement in place during various time periods with Jefferies LLC with respect to an at-the-market (“ATM”) offering program. Under this program, the Company is able to offer and sell, from time to time at its sole discretion, shares of its common stock through Jefferies as its sales agent. In an ATM offering, exchange-listed companies incrementally sell newly issued shares into the secondary trading market through a designated broker-dealer at prevailing market prices. The current ATM agreement, established in November 2022, allows for the sale of shares of common stock having an aggregate offering price of up to $100 million. As of June 30, 2024, the Company has sold 619,290 shares, generating net proceeds of $5.2 million, under the ATM program. No sales were made under the ATM program during the six months ended June 30, 2024.

The Company has issued pre-funded warrants, as well as warrants as part of its financing activities. Both the pre-funded warrants and warrants meet the conditions for equity classification and are recorded as a component of stockholders’ equity within additional paid-in capital. In June 2022 and November 2020, the Company issued 25,510,205 and 2,179,487 pre-funded warrants, respectively. During the six months ended June 30, 2024, 2,526,833 of the Company’s pre-funded warrants were exercised. As of June 30, 2024, the Company has 17,008,164 pre-funded warrants outstanding. In June 2022, the Company also issued 10,459,181 warrants with an exercise price of $7.35. During the six months ended June 30, 2024, 830,660 of the Company’s warrants were exercised. As of June 30, 2024, the Company has 9,157,496 warrants outstanding.

8. Equity-Based Compensation

The Company recorded equity-based compensation expense related to all equity-based awards, which was allocated as follows in the consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024 and 2023 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Research and development expense	$	4,050	$	2,838	$	7,581	$	5,483
General and administrative expense		5,261		3,980		9,895		7,505
	$	9,311	$	6,818	$	17,476	$	12,988

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The following table summarizes the Company’s unrecognized equity-based compensation expense as of June 30, 2024:



	As of June 30, 2024
		Unrecognized Expense (in thousands)	Weighted Average Remaining Period of Recognition (years)
Restricted Stock Units	$	35,116	2.8
Stock Options		42,470	2.6
	$	77,586

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity for the current year:


		Weighted
		Average Grant
	Number of Units	Date Fair Value
Restricted stock units as of December 31, 2023	2,089,552	$	11.92
Granted	1,647,159	$	14.98
Vested	(601,170)	$	12.16
Forfeited	(150,878)	$	12.38
Restricted stock units as of June 30, 2024	2,984,663	$	13.54

The total fair value of restricted stock units vested during the six months ended June 30, 2024 was $8.2 million.

Stock Options

The following table summarizes the Company’s stock option activity for the current year:


				Weighted
		Weighted		Average
	Number of	Average		Remaining	Aggregate
	Shares	Exercise Price		Contractual Term	Intrinsic Value
				(in years)	(in thousands)
Outstanding as of December 31, 2023	7,300,953	$	15.00	7.90	$	52,299
Granted	2,196,217	$	14.98
Exercised	(53,910)	$	6.09
Cancelled	(275,708)	$	17.91
Outstanding as of June 30, 2024	9,167,552	$	14.96	7.86	$	3,529
Options exercisable as of June 30, 2024	4,473,458	$	16.82	6.75	$	2,506

Using the Black-Scholes option pricing model, the weighted average fair value of options granted during the six months ended June 30, 2024 was $11.50.

The following weighted average assumptions were used in determining the fair value of options granted in the six months ended June 30, 2024 and 2023:


	Six Months Ended
	June 30,
	2024		2023
Risk-free interest rate	4.18	%	3.84	%
Expected dividend yield	0.0	%	0.0	%
Expected term (years to liquidity)	5.98		6.13
Expected volatility	91.35	%	90.51	%

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9. Commitments and Contingencies

Operating Lease

In November 2019, the Company entered into a lease of office and laboratory space at 301 Binney Street in Cambridge, Massachusetts to be used as its new corporate headquarters (the “Lease”). The expiration date of the Lease was originally in August 2025 and included an option to extend the term by two years. The base rent under the original Lease was $6.9 million per year, subject to an annual increase of 3.5%, and the Company was subject to a free-rent period through mid-August 2020. Variable lease payments include the Company’s allocated share of costs incurred and expenditures made by the landlord in the operation and management of the building. The Lease included incentives of $14.1 million in the form of an allowance for tenant improvements related to the design and build out of the space. In connection with the Lease, the Company has secured a letter of credit for $2.3 million which renews automatically each year. The Lease commencement date, for accounting purposes, was reached in September 2020.

In May 2024, the Company entered into the First Amendment (the “Lease Amendment”) to the Lease to extend the term for approximately two years, commencing on August 19, 2025 (the “First Extension Term”) with the base rent to start at approximately $6.2 million per year, followed by a 3% annual increase. Pursuant to the Lease Amendment, the Company also has an option to extend the term of the Lease by five years, upon the expiration of the First Extension Term.

Other information related to the Lease is as follows (in thousands, except lease term and discount rate):


	For Three Months Ended		For Six Months Ended
	June 30,		June 30,
	2024		2024
Lease Cost:
Operating lease cost	$	1,751	$	3,576
Variable lease cost		363		723
Total lease cost	$	2,114	$	4,299


	For Six Months Ended
	June 30,
	2024
Other information:
Operating cash flows used for operating leases	$	3,963
Weighted average remaining lease term		3.2
Weighted average incremental borrowing rate		13.1	%

Legal Proceedings

The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company was not subject to any material legal proceedings during the six months ended June 30, 2024 and 2023.

10. Debt

On October 16, 2020 (the “Closing Date”) the Company entered into a Loan and Security Agreement with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) for $50.0 million (the “Loan and Security Agreement”). Tranche 1 of $25.0 million was funded on the Closing Date. The Company had an additional $25.0 million in loan proceeds available under Tranche 2 which was funded in December 2021, in conjunction with the Company entering into the First Amendment to Loan and Security Agreement with Oxford and SVB. The Loan and Security Agreement was to mature on May 1, 2025 and required interest-only payments through November 2022, with principal payments to commence in December 2022. Pursuant to the Loan and Security Agreement, the Company was required to maintain cash in an SVB account equal to the lesser of 100% of the Company’s consolidated cash or 105% of the dollar amount of the outstanding debt.

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On November 10, 2022, the Company entered into the Second Amendment to the Loan and Security Agreement ( “Amendment 2”) to increase the Company’s borrowing capacity under the Loan and Security Agreement to an amount up to $100.0 million, comprised of the original $50.0 million loan which remains outstanding and two additional $25.0 million tranches. The first $25.0 million tranche available under Amendment 2, was available at the Company’s discretion through December 2023 upon achievement of certain development and business performance milestones. The Company did not exercise this tranche. The second $25.0 million tranche available under Amendment 2, may be available upon the Company’s request, at Oxford and SVB’s discretion. Amendment 2 also extended the interest-only payment period for an additional 24 months through November 2024, with principal payments to commence in December 2024. The maturity of the loan was extended to November 2027.

Effective upon Amendment 2, the interest rate on the unpaid principal is the greater of the Wall Street Journal prime rate plus 4.60% or 9.35% per annum. Prepayment is permitted and may include a pre-payment fee ranging from

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