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    ERAS   US29479A1088

ERASCA, INC.

(ERAS)
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ERASCA : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

08/26/2021 | 04:49pm EDT
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and with our audited consolidated financial
statements and notes thereto and management's discussion and analysis of
financial condition and results of operations for the year ended December 31,
2020, included in our Prospectus dated July 15, 2021 filed pursuant to Rule
424(b) under the Securities Act of 1933, as amended (the Securities Act), with
the Securities Exchange Commission (SEC) on July 16, 2021 (the Prospectus).



Cautionary Note Regarding Forward-Looking Statements




This Quarterly Report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange
Act). All statements other than statements of historical facts contained in this
Quarterly Report, including statements regarding our future results of
operations and financial position, business strategy, research and development
plans, the anticipated timing, costs, design and conduct of our ongoing and
planned preclinical studies and planned clinical trials for our product
candidates, the timing and likelihood of regulatory filings and approvals for
our product candidates, our ability to commercialize our product candidates, if
approved, the impact of the COVID-19 pandemic on our business, the pricing and
reimbursement of our product candidates, if approved, the potential to develop
future product candidates, the potential benefits of strategic collaborations
and our intent to enter into any strategic arrangements, the timing and
likelihood of success, plans and objectives of management for future operations
and future results of anticipated product development efforts, are
forward-looking statements. In some cases, you can identify forward-looking
statements by terms such as "may," "will," "should," "could," "expect,"
"intend," "target," "plan," "anticipate," "believe," "estimate," "predict,"
"potential," "continue," or the negative of these terms or other similar
expressions. These forward-looking statements are only predictions. We have
based these forward-looking statements largely on our current expectations and
projections about future events and financial trends that we believe may affect
our business, financial condition and results of operations. These
forward-looking statements speak only as of the date of this Quarterly Report
and are subject to a number of risks, uncertainties and assumptions, including
those described in Part II, Item 1A, "Risk Factors." The events and
circumstances reflected in our forward-looking statements may not be achieved or
occur, and actual results could differ materially from those projected in the
forward-looking statements. Except as required by applicable law, we do not plan
to publicly update or revise any forward-looking statements contained herein,
whether as a result of any new information, future events, changed circumstances
or otherwise.



Overview



We are a clinical-stage precision oncology company singularly focused on
discovering, developing, and commercializing therapies for patients with
RAS/MAPK pathway-driven cancers. Molecular alterations in RAS, the most
frequently mutated oncogene, and the MAPK pathway, one of the most frequently
altered signaling pathways in cancer, account for approximately 5.5 million new
patients diagnosed globally each year. Our company was co-founded by leading
pioneers in precision oncology and RAS targeting to create novel therapies and
combination regimens designed to comprehensively shut down the RAS/MAPK pathway
for the treatment of cancer. We have assembled what we believe to be the
deepest, wholly-owned or controlled RAS/MAPK pathway-focused pipeline in the
industry, comprising 11 modality-agnostic programs aligned with our three
therapeutic strategies of: (1) targeting key upstream and downstream signaling
nodes in the RAS/MAPK pathway; (2) targeting RAS directly; and (3) targeting
escape routes that emerge in response to treatment.







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The following figure shows the RAS/MAPK pathway and the manner in which the three therapeutic strategies listed above seek to comprehensively, and perhaps synergistically, shut down the RAS/MAPK pathway.





                     [[Image Removed: img196842958_0.jpg]]





The target breadth and molecular diversity represented in our pipeline enable us
to pursue a systematic, data-driven clinical development effort to identify
single agent and combination approaches with the goal of prolonging survival in
a wide range of patient populations with high unmet needs. Our modality-agnostic
approach aims to allow us to selectively and potently inhibit or degrade
critical signaling nodes with small molecule therapeutics, large molecule
therapeutics, and protein degraders. Our purpose-built pipeline includes two
clinical-stage programs (ERK and SHP2 inhibitors), two preclinical-stage
programs (CNS-penetrant KRAS G12C and EGFR inhibitors), and seven
discovery-stage programs targeting other key oncogenic drivers. We believe our
world-class team's capabilities and experience, further guided by our scientific
advisory board, which includes the world's leading experts in the RAS/MAPK
pathway, uniquely position us to achieve our bold mission of erasing cancer.



Our lead product candidates are ERAS-007 (our oral ERK1/2 inhibitor)
and ERAS-601 (our oral SHP2 inhibitor), which together comprise our first
MAPKlamp to target upstream and downstream nodes of the RAS/MAPK pathway.
ERAS-007 is the first prong of our first MAPKlamp. We are pursuing a broad
clinical development plan for ERAS-007, which we refer to as our HERKULES series
of clinical trials, across multiple tumor types that includes both monotherapy
and combinations with approved and investigational agents, such as RTK, SHP2,
RAS, RAF, and/or cell cycle inhibitors. The first four HERKULES
Phase 1b/2 proof-of-concept (POC) clinical trials will explore both tissue
agnostic and tissue specific indications in patients with solid tumors and
hematologic malignancies, including non-small cell lung cancer (NSCLC),
colorectal cancer (CRC), and acute myeloid leukemia. In May 2021, we dosed the
first patient in HERKULES-1, a Phase 1b/2 clinical trial evaluating ERAS-007 as
a single agent and in combination with ERAS-601 (our first MAPKlamp) in advanced
solid tumors. We are planning to dose the first patient in HERKULES-2, a Phase
1b/2 clinical trial for ERAS-007/MAPKlamp in combination with various agents in
patients with NSCLC, in the third quarter of 2021. We are planning to dose the
first patient in HERKULES-3, a Phase 1b/2 clinical trial
for ERAS-007/MAPKlamp in combination with various agents in patients with CRC,
in the second half of 2021. Finally, in the first quarter of 2022, we plan to
dose the first patient in HERKULES-4, a Phase 1b/2 clinical trial
for ERAS-007/MAPKlamp in combination with various agents in patients with
hematologic malignancies. While providing POC data, these trials may be expanded
to enable potential accelerated approvals in their respective indications.





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The second prong of our first MAPKlamp, ERAS-601, is designed to be a potent and
selective oral inhibitor of SHP2, a convergent node for upstream RTK signaling
and a critical "on/off switch" that activates RAS-GTP signaling. SHP2 also
drives tumor cell proliferation and development of resistance. ERAS-601 is
designed to block oncogenic signal transduction and delay the onset of
therapeutic resistance, and thereby serve as a backbone of combination therapy.
In the fourth quarter of 2020, we initiated FLAGSHP-1, a Phase 1 clinical trial
for ERAS-601 in patients with advanced solid tumors. We expect to file an
investigational new drug application (IND) with the U.S. Food and Drug
Administration (FDA) for ERAS-3490, the development candidate nominated from our
CNS-penetrant ERAS-1 KRAS G12C inhibitor program, in the second half of 2022. We
are conducting IND-enabling studies for ERAS-801, our CNS-penetrant EGFR
inhibitor, and expect to file an IND for development in refractory glioblastoma
multiforme in the first quarter of 2022. We are also advancing seven other
programs targeting key oncogenic drivers in the RAS/MAPK pathway, which we will
need to successfully progress through discovery and IND-enabling activities
prior to advancing these programs into clinical development, if at all.



We do not own or operate, and currently have no plans to establish, any
manufacturing facilities. We rely, and expect to continue to rely, on third
parties for the manufacture of our product candidates for preclinical and
clinical testing, as well as for commercial manufacture if any of our product
candidates obtain marketing approval. We are working with our current
manufacturers to ensure that we will be able to scale up our manufacturing
capabilities to support our clinical plans. We are also in the process of
locating and qualifying additional manufacturers to build redundancies into our
supply chain. In addition, we rely on third parties to package, label, store,
and distribute our product candidates, and we intend to rely on third parties
for our commercial products if marketing approval is obtained. We believe that
this strategy allows us to maintain a more efficient infrastructure by
eliminating the need for us to invest in our own manufacturing facilities,
equipment, and personnel while also enabling us to focus our expertise and
resources on the design and development of our product candidates.



Since our inception in 2018, we have devoted substantially all of our resources
to organizing and staffing our company, business planning, raising capital,
identifying, acquiring, and in-licensing our product candidates, establishing
our intellectual property portfolio, conducting research, preclinical studies
and clinical trials, establishing arrangements with third parties for the
manufacture of our product candidates and related raw materials, and providing
general and administrative support for these operations. We do not have any
products approved for sale and have not generated any revenue. As of June 30,
2021, we have raised a total of $320.4 million to fund our operations, comprised
primarily of gross proceeds from the sale and issuance of convertible preferred
stock. As of June 30, 2021, we had cash, cash equivalents and investments of
$198.7 million. In July 2021, we completed our initial public offering (IPO) of
21,562,500 shares of our common stock at a price to the public of $16.00 per
share, including the exercise in full by the underwriters of their option to
purchase 2,812,500 additional shares of our common stock. Including the option
exercise, our aggregate net proceeds from the offering were $317.7 million, net
of underwriting discounts, commissions and estimated offering costs.



We have incurred significant operating losses since inception. Our net losses
were $28.2 million and $5.5 million for the three months ended June 30, 2021 and
2020, respectively, and $46.2 million and $29.1 million for the six months ended
June 30, 2021 and 2020, respectively. As of June 30, 2021, we had an accumulated
deficit of $161.6 million. We expect our expenses and operating losses will
increase substantially for the foreseeable future, particularly if and as we
conduct our ongoing and planned clinical trials and preclinical studies;
continue our research and development activities; utilize third parties to
manufacture our product candidates and related raw materials; hire additional
personnel; acquire, in-license, or develop additional product candidates; expand
and protect our intellectual property; and incur additional costs associated
with being a public company. If we obtain regulatory approval for any of our
product candidates, we expect to incur significant commercialization expenses
related to product sales, marketing, manufacturing, and distribution. In
addition, as our product candidates progress through development and toward
commercialization, we will need to make milestone payments to the licensors and
other third parties from whom we have in-licensed or acquired our product
candidates. Our net losses may fluctuate significantly from quarter-to-quarter
and year-to-year, depending on the timing of our clinical trials and preclinical
studies and our expenditures on other research and development activities.



Based upon our current operating plans, we believe that our existing cash, cash
equivalents and investments, together with the net proceeds received from our
IPO, will be sufficient to fund our operations for at least the next 24 months.
We do not expect to generate any revenues from product sales until we
successfully complete development and obtain regulatory approval for one or more
of our product candidates, which we expect will take a number of years and may
never occur. Accordingly, until such time as we can generate significant revenue
from sales of our product candidates, if ever, we expect to finance our cash
needs through equity offerings, debt financings or other capital sources,
including potential collaborations, licenses, and other similar arrangements.
However, we may be unable to raise additional funds or enter into such other
arrangements when needed on favorable terms or at all. Our failure to raise
capital or enter into such other arrangements when needed would have a negative
impact on our financial condition and could force us to delay, limit, reduce, or
terminate our research and development programs



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or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.




The COVID-19 worldwide pandemic has presented substantial public health and
economic challenges and is affecting our employees, patients, physicians and
other healthcare providers, communities and business operations, as well as the
US and global economies and financial markets. To date, we have not experienced
material disruptions in our business operations. However, while it is not
possible at this time to estimate the impact that COVID-19 could have on our
business in the future, particularly as we advance our product candidates
through clinical development, the continued spread of COVID-19 and the measures
taken by the governmental authorities, and any future epidemic disease
outbreaks, could: disrupt the supply chain and the manufacture or shipment of
drug substances and finished drug products for our product candidates for use in
our research, preclinical studies and clinical trials; delay, limit or prevent
our employees and CROs from continuing research and development activities;
impede our clinical trial initiation and recruitment and the ability of patients
to continue in clinical trials, including the risk that participants enrolled in
our clinical trials will contract COVID-19 or other epidemic disease while the
clinical trial is ongoing, which could impact the results of the clinical trial,
including by increasing the number of observed adverse events; impede testing,
monitoring, data collection and analysis and other related activities; any of
which could delay our preclinical studies and clinical trials and increase our
development costs, and have a material adverse effect on our business, financial
condition and results of operations. The extent to which the COVID-19 pandemic
impacts our results will depend on future developments that are highly uncertain
and cannot be predicted, including new information that may emerge concerning
the severity of the virus and the actions to contain its impact.



Our acquisition and license agreements




In November 2020, we entered into an Agreement and Plan of Merger and an Amended
and Restated License Agreement (the Asana Agreements), pursuant to which we
acquired an exclusive, worldwide license to certain intellectual property rights
relating to inhibitors of ERK1 and ERK2 owned or controlled by Asana to develop
and commercialize ERAS-007 and certain other related compounds for all
applications.



Under the Asana Agreements, we made an upfront payment of $20 million and issued
4,000,000 shares of our Series B-2 convertible preferred stock at a price of
$7.50 per share to Asana. We are obligated to make future milestone payments of
up to $90 million upon the achievement of various development and regulatory
milestones and to issue 3,888,889 shares of common stock upon the achievement of
a development milestone. We are not obligated to pay royalties on the net sales
of ERAS-007.



We have entered into additional in-license and acquisition agreements pursuant
to which we in-licensed or acquired certain intellectual property rights related
to our product candidates and development programs, including license agreements
with NiKang Therapeutics, Inc. (NiKang), Katmai Pharmaceuticals, Inc. (Katmai)
and University of California, San Francisco (the Regents), under which we were
granted certain intellectual property rights related to ERAS-601, ERAS-801 and
ERAS-2/3, respectively, and an asset purchase agreement with Emerge Life
Sciences, Pte. Ltd. (ELS) under which we acquired certain intellectual property
rights related to ERAS-12.



For additional information regarding the Asana Agreements as well as these and
other additional agreements, see the section titled "Business-Our acquisition
and license agreements" in our Prospectus.



Components of results of operations



Revenue



We do not expect to generate any revenue from the sale of products unless and
until such time that our product candidates have advanced through clinical
development and regulatory approval, if ever. If we fail to complete preclinical
and clinical development of product candidates or obtain regulatory approval for
them, our ability to generate future revenues, and our results of operations and
financial position would be adversely affected.





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Operating expenses



Research and development



Research and development expenses consist of external and internal costs
associated with our research and development activities, including our discovery
and research efforts and the preclinical and clinical development of our product
candidates. Research and development costs are expensed as incurred. Our
research and development expenses include:



• external costs, including expenses incurred under arrangements with third
parties, such as CROs, contract manufacturers, consultants and our scientific
advisors; and


• internal costs, including:

• employee-related expenses, including salaries, benefits, and stock-based compensation for those individuals involved in research and development efforts;

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

• facilities and depreciation, which include direct and allocated expenses for rent of facilities and depreciation of equipment.

The following table summarizes our research and development expenses incurred for the following periods (in thousands):



                                       Three months ended June 30,            Six months ended June 30,
                                         2021                2020             2021                2020
ERAS-007(1)                         $        6,511       $          -     $       8,855       $           -
ERAS-601                                     3,203              1,420             6,354               2,138
Other discovery and preclinical              7,884              4,443            14,634               8,279

programs

Total research and development $ 17,598$ 5,863 $

     29,843       $      10,417




(1)

ERAS-007 was acquired in November 2020.


We expect our research and development expenses to increase substantially for
the foreseeable future as we continue to conduct our ongoing research and
development activities, conduct clinical trials and advance our preclinical
research programs toward clinical development, particularly as more of our
product candidates move into later stages of development which typically cost
more. The process of conducting clinical trials and preclinical studies
necessary to obtain regulatory approval is costly and time-consuming. We may
never succeed in achieving marketing approval for any of our product candidates.

The timelines and costs with research and development activities are uncertain,
can vary significantly for each product candidate and program and are difficult
to predict. We anticipate we will make determinations as to which product
candidates and programs to pursue and how much funding to direct to each product
candidate and program on an ongoing basis in response to preclinical and
clinical results, regulatory developments, ongoing assessments as to each
product candidate's and program's commercial potential, and our ability to enter
into collaborations, to the extent we determine the resources or expertise of a
collaborator would be beneficial for a given product candidate or program. We
will need to raise substantial additional capital in the future. In addition, we
cannot forecast which product candidates and programs may be subject to future
collaborations, when such arrangements will be secured, if at all, and to what
degree such arrangements would affect our development plans and capital
requirements.

Our development costs may vary significantly based on factors such as:

• the number and scope of preclinical and IND-enabling studies and clinical trials;


• per patient trial costs;

• the number of trials required for approval;

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• the number of sites included in the trials;

• the countries in which the trials are conducted;

• the length of time required to enroll eligible patients;

• the number of patients that participate in the trials;

• the number of doses that patients receive;

• the drop-out or discontinuation rates of patients;

• potential additional safety monitoring requested by regulatory agencies;

• the duration of patient participation in the trials and follow-up;

• the cost and timing of manufacturing our product candidates;

• the phase of development of our product candidates;

• the efficacy and safety profile of our product candidates;

• the timing, receipt and terms of any approvals from applicable regulatory authorities;

• maintaining a continued acceptable safety profile of our products candidates following approval, if any;

• significant and changing government regulation and regulatory guidance;

• the impact of any interruptions to our operations or to those of the third parties with whom we work due to the ongoing COVID-19 pandemic; and

• the extent to which we establish additional collaboration, license or other arrangements.

In-process research and development


In-process research and development expenses include rights acquired as part of
asset acquisitions or in-licenses to develop and commercialize product
candidates. Upfront payments that relate to the acquisition of a new drug
compound, as well as pre-commercial milestone payments, are immediately expensed
as in-process research and development in the period in which they are incurred,
provided that the new drug compound did not also include processes or activities
that would constitute a "business" as defined under US generally accepted
accounting principles (US GAAP), the drug has not achieved regulatory approval
for marketing and, absent obtaining such approval, has no established
alternative future use.



In-process research and development expenses consist primarily of our upfront
payment and issuance of our Series B-2 convertible preferred stock to Asana in
connection with ERAS-007, our upfront and milestone payments to NiKang in
connection with ERAS-601, our upfront payment to Katmai in connection with
ERAS-801, our upfront payment and issuance of our common stock to ELS in
connection with ERAS-12 and issuance of our common stock to the Regents in
connection with ERAS-2/3.



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General and administrative


General and administrative expenses consist primarily of employee-related
expenses, including salaries, benefits and stock-based compensation, for
employees in our finance, accounting, legal, information technology, business
development and support functions. Other general and administrative expenses
include allocated facility and depreciation related costs not otherwise included
in research and development expenses and professional fees for auditing, tax,
intellectual property and legal services. Costs related to filing and pursuing
patent applications are recognized as general and administrative expenses as
incurred since recoverability of such expenditures is uncertain.

We expect our general and administrative expenses will increase substantially
for the foreseeable future as we continue to increase our general and
administrative headcount to support our continued research and development
activities and, if any product candidates receive marketing approval,
commercialization activities, as well as to support our operations generally. We
also expect to incur increased costs associated with operating as a public
company. These increased costs will likely include increased expenses related to
audit, legal, regulatory and tax services associated with maintaining compliance
with exchange listing and SEC requirements, director and officer insurance
premiums and investor relations costs associated with operating as a public
company.

Other income (expense), net

Interest income

Interest income consists primarily of interest earned on our cash, cash equivalents and investments.

Change in fair value of preferred stock purchase right liability


Our issuance of shares of our Series B-1 convertible preferred stock in April
and August 2020 potentially obligated us to issue 13,175,191 shares of our
Series B-2 convertible preferred stock at a price of $7.50 per share in an
additional closing to certain purchasers of our Series B-1 convertible preferred
stock, upon the achievement of certain milestones set forth in the Series B
financing purchase agreement. We determined our obligation to issue these shares
of Series B-2 convertible preferred stock represented a freestanding financial
instrument that required liability accounting. This freestanding preferred stock
purchase right liability for the Series B-2 convertible preferred stock was
recorded at fair value upon issuance and was subsequently remeasured to fair
value at each reporting date. Changes in the fair value of the preferred stock
purchase right liability were recognized in the consolidated statements of
operations and comprehensive loss until the obligation for the Series B-2 shares
was fulfilled upon the Series B-2 issuance in January 2021.

Results of operations

Comparison of the three months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020 (in thousands):



                                          Three months ended June 30,
                                           2021                 2020           Change
Operating expenses:
Research and development              $        17,598$       5,863$  11,735
In-process research and development             5,488                   -         5,488
General and administrative                      5,098               1,421         3,677
Total operating expenses                       28,184               7,284        20,900
Loss from operations                          (28,184 )            (7,284 )     (20,900 )
Total other income (expense), net                 (30 )             1,793        (1,823 )
Net loss                              $       (28,214 )$      (5,491 )$ (22,723 )






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Research and development expenses




Research and development expenses were $17.6 million for the three months ended
June 30, 2021 compared to $5.9 million for the three months ended June 30, 2020.
The increase of $11.7 million was primarily driven by a $4.7 million increase in
expenses incurred in connection with clinical trials and preclinical studies, a
$4.0 million increase in personnel costs due to increased headcount to support
increased development activities, and a $2.8 million increase in outsourced
services and consulting.

In-process research and development expenses




In-process research and development expenses were $5.5 million for the three
months ended June 30, 2021 related to the issuance of 944,945 shares of our
common stock at a price of $5.81 per share or a total fair value of $5.5 million
in connection with the amendment to our in-license agreement with the Regents.
There were no in-process research and development expenses for the three months
ended June 30, 2020.

General and administrative expenses




General and administrative expenses were $5.1 million for the three months ended
June 30, 2021 compared to $1.4 million for the three months ended June 30, 2020.
The increase of $3.7 million was primarily driven by increases of $2.3 million
in personnel costs, $0.6 million in legal fees and $0.3 million in audit fees.

Other income (expense), net



Other income (expense), net was $(30,000) for the three months ended June 30,
2021 compared to $1.8 million for the three months ended June 30, 2020. The
decrease of $1.8 million was primarily related to the change in fair value of
the preferred stock purchase right liability of $1.8 million as a result of the
obligation of the Series B-2 shares being fulfilled upon the Series B-2 issuance
in January 2021.

Comparison of the six months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020 (in thousands):



                                        Six months ended June 30,
                                          2021               2020         Change
Operating expenses:
Research and development              $      29,843$   10,417$  19,426
In-process research and development           9,168           17,670        (8,502 )
General and administrative                    8,780            3,032         5,748
Total operating expenses                     47,791           31,119        16,672
Loss from operations                        (47,791 )        (31,119 )     (16,672 )
Total other income (expense), net             1,560            1,970          (410 )
Net loss                              $     (46,231 )$  (29,149 )$ (17,082 )

Research and development expenses




Research and development expenses were $29.8 million for the six months ended
June 30, 2021 compared to $10.4 million for the six months ended June 30, 2020.
The increase of $19.4 million was primarily driven by a $6.7 million increase in
personnel costs due to increased headcount to support increased development
activities, a $6.5 million increase in expenses incurred in connection with
clinical trials and preclinical studies and a $5.8 million increase in
outsourced services and consulting.





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In-process research and development expenses




In-process research and development expenses were $9.2 million for the six
months ended June 30, 2021 compared to $17.7 million for the six months ended
June 30, 2020. In-process research and development expenses for the six months
ended June 30, 2021 related to the issuance of 944,945 shares of our common
stock at a price of $5.81 per share or a total fair value of $5.5 million in
connection with the amendment to our in-license agreement with the Regents and a
$2.0 million upfront payment and issuance of 500,000 shares of our common stock
at a price of $3.36 per share or a total fair value of $1.7 million in
connection with the ELS asset acquisition. In-process research and development
expenses for the six months ended June 30, 2020 related to a $5.0 million
upfront payment and a $7.0 million milestone payment in connection with the
in-license agreement with NiKang and a $5.7 million upfront payment in
connection with the in-license agreement with Katmai.

General and administrative expenses




General and administrative expenses were $8.8 million for the six months ended
June 30, 2021 compared to $3.0 million for the six months ended June 30, 2020.
The increase of $5.7 million was primarily driven by increases of $3.6 million
in personnel costs, $0.9 million in legal fees and $0.4 million in audit fees.

Other income (expense), net



Other income (expense), net was $1.6 million for the six months ended June 30,
2021 compared to $2.0 million for the six months ended June 30, 2020. The
decrease of $0.4 million was primarily related to the decrease of $0.2 million
in interest and accretion income earned on our cash, cash equivalents and
investments and a decrease of $0.1 million in the change in fair value of the
preferred stock purchase right liability.

Liquidity and capital resources

Sources of liquidity


From our inception through June 30, 2021, we have received aggregate gross
proceeds of $320.4 million from the sale of shares of our convertible preferred
stock. In July 2021, we completed our IPO of 21,562,500 shares of our common
stock at a price to the public of $16.00 per share, including the exercise in
full by the underwriters of their option to purchase 2,812,500 additional shares
of our common stock. Including the option exercise, our aggregate net proceeds
from the offering were $317.7 million, net of underwriting discounts,
commissions and estimated offering costs.

Future capital requirements


As of June 30, 2021, we had cash, cash equivalents and investments of $198.7
million, which did not include net proceeds of $317.7 million received in July
2021 from the sale of shares in our IPO. Based upon our current operating plans,
we believe that our existing cash, cash equivalents and investments, together
with the net proceeds from our IPO, will be sufficient to fund our operations
for at least the next 24 months. However, our forecast of the period of time
through which our financial resources will be adequate to support our operations
is a forward-looking statement that involves risks and uncertainties, and actual
results could vary materially. We have based this estimate on assumptions that
may prove to be wrong, and we could deplete our capital resources sooner than we
expect. Additionally, the process of conducting preclinical studies and testing
product candidates in clinical trials is costly, and the timing of progress and
expenses in these studies and trials is uncertain.

Our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to:


• the type, number, scope, progress, expansions, results, costs and timing of
discovery, preclinical studies and clinical trials of our product candidates
which we are pursuing or may choose to pursue in the future, including the costs
of any third-party products used in our combination clinical trials that are not
covered by such third party or other sources;



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• the costs and timing of manufacturing for our product candidates, including commercial manufacturing if any product candidate is approved;

• the costs, timing and outcome of regulatory review of our product candidates;

• the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

• our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

• the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;


• the timing and amount of the milestone or other payments we must make to the
licensors and other third parties from whom we have in-licensed or acquired our
product candidates or technologies;

• the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;


• our ability to achieve sufficient market acceptance, coverage and adequate
reimbursement from third-party payors and adequate market share and revenue for
any approved products;

• patients' willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors;

• any delays and cost increases that result from the COVID-19 pandemic;

• the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; and

• costs associated with any products or technologies that we may in-license or acquire.


We have no other committed sources of capital. Until we can generate a
sufficient amount of product revenue to finance our cash requirements, if ever,
we expect to finance our future cash needs primarily through equity offerings,
debt financings or other capital sources, including potential collaborations,
licenses and other similar arrangements. However, we may be unable to raise
additional funds or enter into such other arrangements when needed on favorable
terms or at all. To the extent that we raise additional capital through the sale
of equity or convertible debt securities, the ownership interest of our
stockholders will be or could be diluted, and the terms of these securities may
include liquidation or other preferences that adversely affect the rights of our
common stockholders. Debt financing, if available, may involve agreements that
include covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring
dividends. If we raise additional funds through other collaborations or
licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, 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 when needed,
we may be required to delay, limit, reduce or terminate our research and
development programs or other operations, or grant rights to develop and market
product candidates to third parties that we would otherwise prefer to develop
and market ourselves.



                                       39
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Cash flows


The following table shows a summary of our cash flows for the periods presented
(in thousands):



                                                           Six months ended June 30,
                                                           2021                2020

Net cash (used in) provided by:

  Operating activities                                 $     (33,899 )$     (12,115 )
  Investing activities                                         4,298             (38,621 )
  Financing activities                                       120,717             125,492
Net increase in cash, cash equivalents and
restricted cash                                        $      91,116$      74,756


Operating activities



Cash used in operating activities was $33.9 million during the six months ended
June 30, 2021, primarily resulting from a net loss of $46.2 million, partially
reduced by in-process research and development expenses of $9.2 million, which
is reflected in noncash and investing activities, stock-based compensation of
$2.4 million, changes in operating assets and liabilities of $2.0 million and
depreciation expense of $0.3 million, partially offset by a $1.6 million change
in fair value of the preferred stock purchase right liability. Net cash provided
by changes in operating assets and liabilities consisted primarily of increases
in accounts payable, accrued expenses and other current liabilities of $5.6
million, partially offset by an increase in prepaid expenses and other current
and long-term assets of $3.5 million.



Cash used in operating activities was $12.1 million during the six months ended
June 30, 2020, primarily resulting from a net loss of $29.1 million, partially
reduced by in-process research and development expenses of $17.7 million, which
is reflected in investing activities, changes in operating assets and
liabilities of $0.7 million, depreciation expense of $0.3 million and
stock-based compensation expense of $0.2 million, partially offset by a $1.8
million change in fair value of the preferred stock purchase right liability.
Net cash provided by changes in operating assets and liabilities consisted
primarily of increases in accrued expenses and other current liabilities of $1.5
million, partially offset by a decrease in accounts payable of $0.5 million and
an increase in prepaid expenses and other current and long-term assets of $0.2
million.

Investing activities



Net cash provided by investing activities was $4.3 million during the six months
ended June 30, 2021 as compared to cash used in investing activities of $38.6
million during the six months ended June 30, 2020. The increase in cash provided
by investing activities of $42.9 million was primarily the result of additional
maturities of investments of $23.1 million, a decrease in in-process research
and development of $11.7 million and a decrease in purchases of investments of
$8.1 million.

Financing activities



Net cash provided by financing activities was $120.7 million during the six
months ended June 30, 2021 as compared to $125.5 million during the six months
ended June 30, 2020. During the six months ended June 30, 2021, we received
$119.4 million from the sale of shares of our Series B-2 convertible preferred
stock, net of issuance costs and $1.3 million from the exercise of stock
options. During the six months ended June 30, 2020, we received $125.0 million
from the sale of shares of our Series B-1 convertible preferred stock, net of
issuance costs, and $0.5 million from the exercise of stock options.

Contractual obligations and commitments

As of June 30, 2021, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in "Management's discussion and analysis of financial condition and results of operations - Contractual obligations and commitments," included in the Prospectus.




                                       40

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Off-balance sheet arrangements


During the periods presented, we did not have, nor do we currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.

Critical accounting policies and estimates


This management discussion and analysis of financial condition and results of
operations is based on our condensed consolidated financial statements, which
have been prepared in accordance with US GAAP. The preparation of these
consolidated financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenue and expenses.
On an ongoing basis, we evaluate these estimates and judgments. We base our
estimates on historical experience and on various assumptions that we believe to
be reasonable under the circumstances. These estimates and assumptions form the
basis for making judgments about the carrying values of assets and liabilities
and the recording of revenue and expenses that are not readily apparent from
other sources. Actual results may differ materially from these estimates. As of
June 30, 2021, there have been no material changes to our critical accounting
policies and estimates from those disclosed in "Management's discussion and
analysis of financial condition and results of operations - Critical accounting
policies and estimates," included in the Prospectus.

Recently issued and adopted accounting pronouncements


A description of recently issued accounting pronouncements that may potentially
impact our financial position and results of operations is disclosed in Note 2
to our consolidated financial statements in Part I, Item 1 of this Quarterly
Report on Form 10-Q.

Emerging growth company and smaller reporting company status


As an emerging growth company under the JOBS Act, we can take advantage of an
extended transition period for complying with new or revised accounting
standards. This allows an emerging growth company to delay the adoption of
certain accounting standards until those standards would otherwise apply to
private companies. We have elected to avail ourselves of this exemption from new
or revised accounting standards and, therefore, our consolidated financial
statements may not be comparable to companies that comply with new or revised
accounting pronouncements as of public company effective dates. We also intend
to rely on other exemptions provided by the JOBS Act, including without
limitation, not being required to comply with the auditor attestation
requirements of Section 404(b) of Sarbanes-Oxley.

We will remain an emerging growth company until the earliest of (i) the last day
of the fiscal year following the fifth anniversary of the consummation of our
IPO; (ii) the last day of the fiscal year in which we have total annual gross
revenue of at least $1.07 billion; (iii) the last day of the fiscal year in
which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2
under the Exchange Act, which would occur if the market value of our common
stock held by non-affiliates exceeded $700.0 million as of the last business day
of the second fiscal quarter of such year; or (iv) the date on which we have
issued more than $1.0 billion in nonconvertible debt securities during the prior
three-year period.

We are also a smaller reporting company as defined in the Exchange Act. We may
continue to be a smaller reporting company even after we are no longer an
emerging growth company. We may take advantage of certain of the scaled
disclosures available to smaller reporting companies and will be able to take
advantage of these scaled disclosures for so long as our voting and non-voting
common stock held by non-affiliates is less than $250.0 million measured on the
last business day of our second fiscal quarter, or our annual revenue is less
than $100.0 million during the most recently completed fiscal year and our
voting and non voting common stock held by non-affiliates is less than $700.0
million measured on the last business day of our second fiscal quarter.





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