PART I [Business](index=6&type=section&id=Item%201.%20Business) Adicet Bio develops allogeneic gamma delta T cell therapies for cancer, with lead candidates ADI-001 for NHL and ADI-002 for solid tumors - Adicet Bio is a biotechnology company developing allogeneic gamma delta T cell therapies, which are **"off-the-shelf" treatments for cancer and other diseases**[24](index=24&type=chunk) - The lead product candidate, ADI-001, targets **Non-Hodgkin's Lymphoma (NHL)**, with its IND cleared in October 2020 and a Phase 1 trial initiated in Q1 2021[25](index=25&type=chunk)[30](index=30&type=chunk) - The second product candidate, ADI-002, targets **solid tumors expressing GPC3**, with an IND filing planned for late 2021 and clinical trial initiation in 2022[31](index=31&type=chunk)[36](index=36&type=chunk) - The company utilizes a proprietary **T cell receptor-like antibody (TCRL) platform** to target intracellular tumor antigens, critical for treating solid tumors[32](index=32&type=chunk) - A key strategic partnership is a **five-year collaboration with Regeneron**, initiated in 2016, for engineered gamma delta immune cell therapeutics, with Regeneron having options to license candidates[34](index=34&type=chunk)[127](index=127&type=chunk) - The company relies on **third-party contract manufacturing organizations (CMOs)** for cGMP-compliant manufacture of its product candidates, lacking its own facility[142](index=142&type=chunk)[6](index=6&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including limited operating history, substantial net losses, reliance on lead candidates, novel technology challenges, and internal control weaknesses - The business is highly dependent on the success of its two lead product candidates, **ADI-001 and ADI-002**, with failure to obtain regulatory approval and commercialize them significantly harming the business[252](index=252&type=chunk)[2](index=2&type=chunk) - The company's gamma delta T cell candidates represent a **novel approach to cancer treatment**, creating significant challenges in manufacturing, efficacy, regulatory approval, and market acceptance[255](index=255&type=chunk)[2](index=2&type=chunk) - The company has incurred net losses every period since inception and anticipates substantial future losses, with an accumulated deficit of **$106.5 million as of December 31, 2020**[246](index=246&type=chunk)[247](index=247&type=chunk) - **Material weaknesses in internal control over financial reporting** have been identified, related to insufficient experienced accounting professionals, lack of formal policies, and inadequate segregation of duties[341](index=341&type=chunk)[342](index=342&type=chunk)[4](index=4&type=chunk) - The company relies on a collaboration with Regeneron; **termination or breach of this agreement would materially harm business prospects**, and the company is subject to exclusivity obligations[343](index=343&type=chunk)[351](index=351&type=chunk)[4](index=4&type=chunk) - The company does not operate its own manufacturing facility and relies on **third-party CMOs**, exposing it to risks of production delays, quality control issues, and supply chain disruptions[294](index=294&type=chunk)[6](index=6&type=chunk) - The **COVID-19 pandemic may adversely affect business operations**, including potential disruptions to the supply chain and the conduct of clinical trials[313](index=313&type=chunk)[314](index=314&type=chunk)[4](index=4&type=chunk) [Unresolved Staff Comments](index=87&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are **no unresolved staff comments**[454](index=454&type=chunk) [Properties](index=87&type=section&id=Item%202.%20Properties) The company leases office and laboratory facilities in Boston, Menlo Park, and Redwood City, with principal executive offices in Boston - Principal executive offices are located at **500 Boylston Street, 13th Floor, Boston, MA 02116**, with a lease expiring on July 31, 2026[454](index=454&type=chunk) - The company also leases office and laboratory space in **Menlo Park, CA** (lease expires March 31, 2022) and has a new lease for a facility in **Redwood City, CA**, with occupancy expected in Q2 2022[454](index=454&type=chunk) [Legal Proceedings](index=87&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, with prior merger-related lawsuits dismissed or settled - The company is **not currently a party to any material legal proceedings**[455](index=455&type=chunk) - Seven lawsuits filed in connection with the 2020 merger were either dismissed or settled for **$0.2 million** in the fourth quarter of 2020[767](index=767&type=chunk) [Mine Safety Disclosures](index=87&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures, rendering this item not applicable - This item is **not applicable**[455](index=455&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=88&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Adicet Bio's common stock trades on Nasdaq under 'ACET', with no cash dividends paid or intended, and a **$15.0 million** private placement completed in February 2021 - The company's common stock trades on **The Nasdaq Global Market under the symbol "ACET"**[457](index=457&type=chunk) - The company has **never declared or paid cash dividends** and intends to retain future earnings to fund business development[458](index=458&type=chunk) - In February 2021, the company raised **$15.0 million** through a private placement of **1,153,840 shares** of common stock at **$13.00 per share** to existing investors[459](index=459&type=chunk) [Reserved](index=88&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=89&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's financial condition is characterized by net losses, with a **$36.8 million** net loss in 2020, relying on equity financing and collaboration revenue, significantly improved by recent public and private offerings Results of Operations (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Change | % Change | |:---|---:|---:|---:|---:| | Revenue – related party | $17,903 | $995 | $16,908 | 1699% | | Research and development | $34,334 | $23,691 | $10,643 | 45% | | General and administrative | $22,760 | $8,692 | $14,068 | 162% | | **Loss from operations** | **($39,191)** | **($31,388)** | **($7,803)** | **25%** | | **Net loss** | **($36,678)** | **($28,138)** | **($8,540)** | **30%** | - The significant increase in 2020 revenue was primarily due to achieving a **$10.0 million milestone** under the Regeneron Agreement and increased R&D activities, leading to higher proportional performance revenue recognition[491](index=491&type=chunk) - R&D expenses rose by **$10.6 million (46%)** in 2020 due to increased personnel costs, higher CRO/CMO fees for ADI-001 manufacturing and preclinical activities, and merger-related costs[493](index=493&type=chunk) - G&A expenses increased by **$14.1 million (162%)** in 2020, mainly driven by **$7.1 million** in professional fees related to the merger and a **$5.1 million** increase in personnel expenses[494](index=494&type=chunk) Summary Statement of Cash Flows (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Net cash used in operating activities | ($41,552) | ($27,882) | ($18,180) | | Net cash provided by (used in) investing activities | $115,217 | ($47,931) | ($16,058) | | Net cash provided by financing activities | $303 | $76,945 | $11,046 | - As of December 31, 2020, the company had cash, cash equivalents, and marketable debt securities of **$94.6 million**, augmented in February 2021 by **$137.5 million** gross proceeds from a public offering and **$15.0 million** from a private placement[510](index=510&type=chunk)[517](index=517&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=105&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk on its **$94.6 million** in cash and investments, but a 10% rate change is not expected to be material - The company's market risk is primarily from potential adverse changes in interest rates affecting its **$94.6 million** in cash, cash equivalents, and marketable debt securities as of December 31, 2020[558](index=558&type=chunk) - Due to the short-term maturities and low-risk profile of its investments, a **10% change in interest rates** is not expected to materially impact the fair value of its holdings or future interest income[558](index=558&type=chunk) [Financial Statements and Supplementary Data](index=105&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the consolidated financial statements and the independent auditor's report, included from page F-1 to F-43 - The company's consolidated financial statements and the report of its independent registered public accounting firm are included in the report[560](index=560&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=105&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - There were **no changes in or disagreements with accountants** on accounting and financial disclosure[560](index=560&type=chunk) [Controls and Procedures](index=105&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of December 31, 2020, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management, including the CEO and CFO, concluded that **disclosure controls and procedures were not effective** as of December 31, 2020[564](index=564&type=chunk) - **Material weaknesses** were identified in internal control over financial reporting, including: lack of sufficient experienced accounting staff, lack of formal accounting policies and procedures, ineffective controls over segregation of duties, and lack of controls to account for complex transactions[563](index=563&type=chunk) - A **remediation plan is in progress**, including hiring a permanent VP, Corporate Controller and a senior manager for technical accounting, implementing formal training, and deploying a new ERP system (Microsoft 365 Business Central) in January 2021[567](index=567&type=chunk) [Other Information](index=107&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - There is **no other information to report**[569](index=569&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=108&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding directors, executive officers, and corporate governance is **incorporated by reference** from the forthcoming 2021 Proxy Statement[571](index=571&type=chunk) [Executive Compensation](index=108&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding executive compensation is **incorporated by reference** from the forthcoming 2021 Proxy Statement[573](index=573&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=108&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding security ownership is **incorporated by reference** from the forthcoming 2021 Proxy Statement[574](index=574&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=108&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding related transactions and director independence is **incorporated by reference** from the forthcoming 2021 Proxy Statement[575](index=575&type=chunk) [Principal Accountant Fees and Services](index=108&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding principal accountant fees and services is **incorporated by reference** from the forthcoming 2021 Proxy Statement[576](index=576&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=109&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Annual Report on Form 10-K, including consolidated financial statements and exhibits - The report includes the company's **consolidated financial statements**[578](index=578&type=chunk) - An **index of exhibits** filed with the report is provided[579](index=579&type=chunk) [Form 10-K Summary](index=109&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has elected not to include a summary of the Form 10-K - The company elected **not to include summary information**[580](index=580&type=chunk) Financial Statements [Consolidated Balance Sheets](index=113&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2020, total assets increased to **$153.8 million**, total liabilities were **$44.0 million**, and stockholders' equity improved to **$109.8 million**, reflecting the resTORbio merger Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | |:---|---:|---:| | **Assets** | | | | Cash and cash equivalents | $84,330 | $10,607 | | Total current assets | $100,336 | $64,186 | | Goodwill | $20,089 | $0 | | **Total assets** | **$153,835** | **$81,587** | | **Liabilities & Equity** | | | | Total current liabilities | $22,479 | $14,865 | | Total liabilities | $44,008 | $27,870 | | Total redeemable convertible preferred stock | $0 | $114,083 | | Total stockholders' equity (deficit) | $109,827 | ($60,366) | | **Total liabilities & stockholders' equity (deficit)** | **$153,835** | **$81,587** | [Consolidated Statements of Operations and Comprehensive Loss](index=114&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For 2020, the company reported a net loss of **$36.7 million** on revenues of **$17.9 million**, an increased loss driven by a **76% rise** in operating expenses due to pipeline advancement and merger costs Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Revenue—related party | $17,903 | $995 | $8,181 | | Research and development | $34,334 | $23,691 | $14,717 | | General and administrative | $22,760 | $8,692 | $8,428 | | **Total operating expenses** | **$57,094** | **$32,383** | **$23,145** | | **Loss from operations** | **($39,191)** | **($31,388)** | **($14,964)** | | **Net loss** | **($36,678)** | **($28,138)** | **($9,299)** | | Net loss per share | ($5.01) | ($13.15) | ($4.78) | [Consolidated Statements of Cash Flows](index=116&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For 2020, net cash used in operating activities was **$41.6 million**, while investing activities provided **$115.2 million**, resulting in a **$74.0 million** net increase in cash, cash equivalents, and restricted cash Consolidated Cash Flow Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Net cash used in operating activities | ($41,552) | ($27,882) | ($18,180) | | Net cash provided by (used in) investing activities | $115,217 | ($47,931) | ($16,058) | | Net cash provided by financing activities | $303 | $76,945 | $11,046 | | **Net increase (decrease) in cash, cash equivalents and restricted cash** | **$73,968** | **$1,132** | **($23,192)** |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |--------------------------------------------------------------------------------|-------------------------------| | For the transition period from \nCommission File No. 001 ...

```markdown PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for the period ended June 30, 2020, reflect a significant reduction in operating losses compared to the prior year, driven by decreased research and development expenses following the discontinuation of a key clinical trial. The balance sheet shows a decline in assets due to cash consumption, while the company's overall financial position is heavily influenced by a pending merger with Adicet Bio, Inc. and a recent workforce reduction [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, the company's total assets decreased to $74.3 million from $93.9 million at year-end 2019, primarily due to the use of cash and the maturation of all marketable securities. Total liabilities also saw a significant reduction to $3.6 million from $12.2 million, mainly from settling accounts payable and accrued liabilities. Consequently, total stockholders' equity declined to $70.7 million from $81.7 million Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2020 (in millions) | December 31, 2019 (in millions) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $70.9 | $33.8 | | Marketable securities | $0 | $57.7 | | Total current assets | $73.7 | $93.3 | | **Total assets** | **$74.3** | **$93.9** | | **Liabilities & Equity** | | | | Total current liabilities | $3.6 | $12.2 | | **Total liabilities** | **$3.6** | **$12.2** | | **Total stockholders' equity** | **$70.7** | **$81.7** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a significantly lower net loss for both the three and six months ended June 30, 2020, compared to the same periods in 2019. The net loss for the second quarter was $5.6 million, down from $18.3 million year-over-year, primarily due to a substantial decrease in Research and Development expenses from $16.6 million to $1.8 million. General and Administrative expenses saw a moderate increase Statement of Operations Summary (in millions) | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1.8 | $16.6 | $6.6 | $25.4 | | General and administrative | $3.9 | $2.6 | $6.4 | $5.5 | | **Total operating expenses** | **$5.7** | **$19.2** | **$13.0** | **$30.9** | | Loss from operations | ($5.7) | ($19.2) | ($13.0) | ($30.9) | | **Net loss** | **($5.6)** | **($18.3)** | **($12.6)** | **($29.4)** | | Net loss per share | ($0.15) | ($0.51) | ($0.35) | ($0.91) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from $81.7 million at December 31, 2019, to $70.7 million at June 30, 2020. The decline was primarily driven by the net loss of $12.6 million for the six-month period, which was partially offset by $1.7 million in stock-based compensation expense - The accumulated deficit grew from **($154.1) million** at the end of 2019 to **($166.8) million** by June 30, 2020, reflecting the ongoing net losses[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2020, net cash used in operating activities was $20.4 million, a decrease from $26.2 million in the prior-year period. The company generated $57.5 million from investing activities through the maturity of marketable securities, a reversal from the $9.7 million used in 2019. Financing activities were minimal in 2020, in contrast to 2019 when the company raised $50.4 million from stock offerings. This resulted in a net increase in cash of $37.1 million Cash Flow Summary (in millions) | Activity | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | ($20.4) | ($26.2) | | Net cash provided by (used in) investing activities | $57.5 | ($9.7) | | Net cash (used in) provided by financing activities | ($0.002) | $50.4 | | **Net increase in cash** | **$37.1** | **$14.5** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide critical context to the financial statements, highlighting the company's strategic pivot. Key events include the failure of the PROTECTOR 1 Phase 3 study in November 2019, leading to the discontinuation of RTB101 development for respiratory illness. This triggered a workforce reduction and a search for strategic alternatives, culminating in a merger agreement with Adicet Bio, Inc. in April 2020. The notes also detail license agreements, stock compensation plans, and litigation related to the pending merger - In November 2019, the company announced that its PROTECTOR 1 Phase 3 study of RTB101 did not meet its primary endpoint, leading to the cessation of its development for clinically symptomatic respiratory illness[21](index=21&type=chunk) - On April 28, 2020, resTORbio entered into a merger agreement with Adicet Bio, Inc., under which Adicet will become a wholly-owned subsidiary. The company's future operations are highly dependent on the success of this merger[23](index=23&type=chunk)[24](index=24&type=chunk) - Following the Phase 3 study failure, the company implemented a restructuring plan, reducing its workforce by **10 employees** in late 2019 and early 2020. As of June 30, 2020, all related restructuring charges had been paid[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - The company is facing **seven putative class action lawsuits** related to the proposed merger with Adicet, alleging that the proxy statement contains material misrepresentations and/or omissions[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategic shift following the failure of the PROTECTOR 1 Phase 3 study, which led to halting development of RTB101 for respiratory illness and Parkinson's disease. The company initiated a review of strategic alternatives, resulting in the pending merger with Adicet Bio. A new clinical trial for RTB101 as a COVID-19 prophylaxis was initiated. The financial analysis shows a significant decrease in R&D expenses, while G&A expenses rose due to merger-related costs. The company's liquidity of $70.9 million in cash is deemed sufficient for near-term operations, but future success is contingent on the merger - Following the failure of its Phase 3 study for respiratory illness, the company stopped that program and a Phase 1b/2a trial in Parkinson's disease. It has since pivoted to study RTB101 for COVID-19 prophylaxis in older adults[81](index=81&type=chunk)[82](index=82&type=chunk) - In February 2020, the company hired JMP Securities to explore strategic alternatives, leading to the merger agreement with Adicet Bio, Inc. on April 28, 2020. The transaction is expected to close in the second half of 2020[85](index=85&type=chunk)[86](index=86&type=chunk) Comparison of Operating Expenses (in millions) | Expense Category | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $1.8 | $16.6 | $6.6 | $25.4 | | General & Administrative | $3.9 | $2.6 | $6.4 | $5.5 | - The decrease in R&D expenses was due to the cessation of major clinical trials. The increase in G&A expenses was primarily driven by professional services fees related to the pending merger with Adicet[107](index=107&type=chunk)[108](index=108&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure stems from potential changes in interest rates, which could affect interest income on its $70.9 million of cash and cash equivalents. The company also has minor exposure to foreign currency fluctuations from contracts with global research and manufacturing organizations, but it does not currently engage in hedging activities. Inflation is not considered to have a material effect on operations - The main market risk is interest rate risk on the company's cash and cash equivalents of **$70.9 million**[129](index=129&type=chunk) - The company is subject to some foreign currency risk through its global contracts but does not hedge this exposure[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of June 30, 2020, the company's management, including the Chief Executive Officer and principal financial officer, concluded that the disclosure controls and procedures were effective at a reasonable assurance level. There were no material changes in the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[132](index=132&type=chunk)[134](index=134&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[135](index=135&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is currently involved in multiple lawsuits filed by purported stockholders in connection with the proposed merger with Adicet Bio, Inc. These actions, including a putative class action, generally allege that the company's proxy statement filed with the SEC contains material misrepresentations and omissions regarding the merger process and financial analyses. The lawsuits seek to enjoin the merger and claim damages - Multiple stockholder lawsuits, including the 'Merger Actions', have been filed against the company, its directors, and Adicet concerning the proposed merger[138](index=138&type=chunk) - The lawsuits allege violations of the Exchange Act, claiming the proxy statement misrepresents or omits material information related to financial projections, analyses by JMP Securities, and the merger process[138](index=138&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, with a primary focus on the pending merger with Adicet and the COVID-19 pandemic. Key risks include the potential failure to complete the merger, which could harm the stock price and business, and may result in a $6.1 million termination fee. The pendency of the merger creates uncertainty that could disrupt business and employee retention. Other risks include litigation related to the merger, the possibility that the Contingent Value Rights (CVRs) issued to stockholders will expire worthless, and potential business disruptions from the COVID-19 pandemic affecting clinical trials and operations - There is a significant risk that the merger with Adicet may not be completed, which could adversely affect the company's stock price and operations. A termination fee of **$6.1 million** may be payable to Adicet under certain circumstances[140](index=140&type=chunk)[144](index=144&type=chunk) - The company faces lawsuits arising from the proposed merger, which could delay or prevent its consummation and divert management's attention[158](index=158&type=chunk)[159](index=159&type=chunk) - The Contingent Value Rights (CVRs) to be issued to stockholders are contingent on the successful commercialization of RTB101 for a COVID-19 indication and may expire without any payment[162](index=162&type=chunk)[163](index=163&type=chunk) - The COVID-19 pandemic poses a risk of business interruption, potentially delaying clinical trial enrollment and disrupting operations due to factors like healthcare resource diversion and travel restrictions[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=33&type=section&id=Other%20Items%20(Items%202%2C%203%2C%204%2C%205%2C%206)) The company reported no unregistered sales of equity securities, defaults upon senior securities, or mine safety disclosures for the period. No other material information was disclosed under Item 5. Item 6 provides an index of the exhibits filed with this Quarterly Report on Form 10-Q - Items 2, 3, 4, and 5 are noted as 'Not applicable' or have no information to report[171](index=171&type=chunk) ```

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38359 resTORbio, Inc. (Exact name of registrant as specified in its charter) Delaware 81-3305277 (State or other jurisdiction of inco ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38359 resTORbio, Inc. (Exact name of registrant as specified in its charter) Delaware 81-3305277 (State or other jurisdiction of incorpo ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents unaudited condensed consolidated financial statements and management's discussion and analysis for the period [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, showing increased net loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $122.0 million from $109.9 million, driven by higher cash, while liabilities and equity also grew | Financial Metric | Sep 30, 2019 (in thousands) | Dec 31, 2018 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $23,621 | $7,042 | | Marketable securities | $93,641 | $100,986 | | Total current assets | $121,281 | $109,534 | | Total assets | $121,963 | $109,939 | | **Liabilities & Equity** | | | | Total current liabilities | $12,193 | $5,716 | | Total liabilities | $12,199 | $5,735 | | Total stockholders' equity | $109,764 | $104,204 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Net loss significantly increased to $24.4 million for Q3 2019 and $53.8 million for nine months, primarily due to higher R&D expenses | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $22,118 | $6,765 | $47,523 | $26,716 | | General and administrative | $3,043 | $2,267 | $8,498 | $6,629 | | **Total operating expenses** | **$25,161** | **$9,032** | **$56,021** | **$33,345** | | **Net loss** | **($24,448)** | **($8,407)** | **($53,849)** | **($31,857)** | | Net loss per share | ($0.68) | ($0.30) | ($1.51) | ($1.23) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations increased to $48.0 million, offset by $56.5 million from financing, resulting in a $16.6 million cash increase | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($48,036) | ($27,805) | | Net cash provided by (used in) investing activities | $8,155 | ($92,626) | | Net cash provided by financing activities | $56,460 | $89,938 | | **Net increase (decrease) in cash** | **$16,579** | **($30,493)** | | Cash at end of period | $23,621 | $22,856 | [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Financial%20Statements) Details accounting policies, financing activities including $49.8 million from public offering, and a $2.5 million milestone payment to Novartis - The company completed a public offering in March/April 2019, raising net proceeds of approximately **$49.8 million**. Additionally, an at-the-market (ATM) offering program was established, selling approximately 688,000 shares for net proceeds of **$6.7 million** through September 30, 2019[23](index=23&type=chunk)[24](index=24&type=chunk) - As of September 30, 2019, the company had **$117.3 million** in cash, cash equivalents, and marketable securities, which management believes is sufficient to fund operations for at least the next twelve months[25](index=25&type=chunk) - Under the license agreement with Novartis, the company made a **$2.5 million** milestone payment in May 2019 upon initiating a Phase 3 clinical trial. Future potential payments include up to **$1.8 million** for clinical milestones, **$42 million** for regulatory milestones, and **$125 million** for commercial milestones, plus tiered royalties[52](index=52&type=chunk)[53](index=53&type=chunk) Stock-Based Compensation | Expense Category | Three Months Ended Sep 30, 2019 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :--- | :--- | :--- | | Research and development | $633 | $1,409 | | General and administrative | $569 | $1,399 | | **Total stock-based compensation** | **$1,202** | **$2,808** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses the company's clinical programs for RTB101, increased R&D expenses, higher net loss, and liquidity position of $117.3 million [Overview](index=21&type=section&id=Overview) Introduces resTORbio as a clinical-stage biopharmaceutical company developing RTB101 for aging-related diseases, including Phase 3 and 1b/2a trials - The company's lead product candidate, RTB101, is being evaluated in a Phase 3 program (PROTECTOR 1 & 2) to reduce clinically symptomatic respiratory illness in adults 65 and older. PROTECTOR 1 has completed enrollment of 1,024 patients, with top-line data expected in early Q1 2020[87](index=87&type=chunk) - A Phase 1b/2a clinical trial of RTB101 for Parkinson's disease was initiated in April 2019. The trial will enroll 45 patients to evaluate safety and tolerability, with data expected in 2020[88](index=88&type=chunk) - The company expects to incur increasing operating losses as it advances its clinical programs, expands its pipeline, and prepares for potential commercialization[96](index=96&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) R&D expenses significantly increased to $22.1 million for Q3 and $47.5 million for nine months, driven by clinical trial costs Three Months Ended September 30 | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Research and development | $22,118 | $6,765 | | General and administrative | $3,043 | $2,267 | | **Net loss** | **($24,448)** | **($8,407)** | - The increase in R&D expenses for Q3 2019 was primarily driven by **$17.0 million** in costs related to clinical trials, including the ongoing Phase 3 program, compared to **$2.6 million** for the Phase 2b trial in the same period of 2018[118](index=118&type=chunk) Nine Months Ended September 30 | Metric (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Research and development | $47,523 | $26,716 | | General and administrative | $8,498 | $6,629 | | **Net loss** | **($53,849)** | **($31,857)** | - The increase in R&D expenses for the nine-month period was primarily due to **$30.6 million** in clinical trial costs and a **$2.5 million** milestone payment, compared to **$17.3 million** in clinical trial costs in the prior year period[123](index=123&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company held $117.3 million in cash and equivalents, funded by equity offerings, sufficient for operations through 2020 - As of September 30, 2019, the company had **$117.3 million** in cash, cash equivalents, and marketable securities and an accumulated deficit of **$125.2 million**[129](index=129&type=chunk) - Management believes existing cash will be sufficient to fund operating expenses and capital expenditure requirements through 2020, including the completion of the PROTECTOR Phase 3 program[131](index=131&type=chunk) Cash Flow Summary | Cash Flow Summary (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($48,036) | ($27,805) | | Net cash provided by (used in) investing activities | $8,155 | ($92,626) | | Net cash provided by financing activities | $56,460 | $89,938 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate sensitivity on $117.3 million in cash and securities, with minor foreign currency exposure - The company's main market risk is interest rate sensitivity on its **$117.3 million** portfolio of cash and short-term marketable securities. A 100 basis point change in interest rates is not expected to have a material effect on the portfolio's fair market value[147](index=147&type=chunk) - The company is subject to fluctuations in foreign currency rates through its contracts with global CROs and manufacturers but has not engaged in hedging activities[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Based on an evaluation as of September 30, 2019, the Chief Executive Officer and Vice President, Finance concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[152](index=152&type=chunk) - No changes occurred in the company's internal control over financial reporting during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, internal controls[153](index=153&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) Covers legal proceedings, risk factors, equity sales, and other miscellaneous disclosures [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2019, no material adverse legal proceedings were pending against the company - As of September 30, 2019, the company was not party to any legal proceedings expected to have a material adverse impact on its financial position, results of operations, or cash flow[155](index=155&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for 2018 - There have been no material changes to the risk factors set forth in the company's Annual Report on Form 10-K for the year ended December 31, 2018[156](index=156&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the use of $81.8 million from the January 2018 IPO proceeds for clinical trials and general corporate purposes - The company's January 2018 IPO generated aggregate net proceeds of approximately **$89.4 million**. As of September 30, 2019, approximately **$81.8 million** of these proceeds have been used to advance clinical trial programs and for general corporate purposes[158](index=158&type=chunk)[159](index=159&type=chunk) [Other Items (Items 3, 4, 5, 6)](index=33&type=section&id=Other%20Items%20(Items%203,%204,%205,%206)) Items 3, 4, and 5 are reported as not applicable or none, while Item 6 lists the exhibits filed - Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information) are all reported as not applicable or none[159](index=159&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | --- | |---------------------------------------------------------------------------------------|--------------------------------------------------------------------------|-------- ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, financial instruments, and other relevant disclosures for the periods ended March 31, 2019 and 2018 [Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202019%20and%20December%2031%2C%202018) | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Total Assets | $145,080 | $109,939 | | Total Liabilities | $4,624 | $5,735 | | Total Stockholders' Equity | $140,456 | $104,204 | | Cash & Cash Equivalents | $7,181 | $7,042 | | Marketable Securities | $135,910 | $100,986 | - Total assets increased by **$35.1 million**, primarily driven by a **$34.9 million** increase in marketable securities[9](index=9&type=chunk) - Total stockholders' equity increased by **$36.3 million**, while total liabilities decreased by **$1.1 million**[9](index=9&type=chunk)[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2019 and 2018](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $8,852 | $8,106 | | General and administrative | $2,839 | $2,094 | | Total operating expenses | $11,691 | $10,200 | | Net loss | $(11,069) | $(9,859) | | Net loss per share, basic and diluted| $(0.38) | $(0.46) | - Net loss increased by **$1.2 million**, from **$9.9 million** in Q1 2018 to **$11.1 million** in Q1 2019, primarily due to higher operating expenses[12](index=12&type=chunk) - Total operating expenses rose by **$1.5 million**, with both R&D and G&A contributing to the increase[12](index=12&type=chunk) [Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) for the three months ended March 31, 2019 and 2018](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity%20(Deficit)%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018) | Metric | December 31, 2018 (in thousands) | March 31, 2019 (in thousands) | | :----------------------------------- | :------------------------------- | :---------------------------- | | Total Stockholders' Equity | $104,204 | $140,456 | | Additional Paid-In Capital | $175,635 | $222,882 | | Accumulated Deficit | $(71,393) | $(82,462) | - Stockholders' equity increased by **$36.3 million**, primarily driven by **$46.6 million** in net proceeds from a public offering[14](index=14&type=chunk) - Accumulated deficit increased by **$11.1 million**, reflecting the net loss for the period[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202019%20and%202018) | Cash Flow Activity | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :--------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities| $(12,049) | $(7,304) | | Net cash used in investing activities| $(34,628) | $(278) | | Net cash provided by financing activities| $46,816 | $89,938 | | Net increase in cash and cash equivalents| $139 | $82,356 | | Cash and cash equivalents at end of period| $7,181 | $135,705 | - Net cash used in operating activities increased to **$12.0 million** in Q1 2019 from **$7.3 million** in Q1 2018[17](index=17&type=chunk) - Investing activities resulted in a net cash outflow of **$34.6 million** in Q1 2019, primarily due to purchases of marketable securities[17](index=17&type=chunk) - Financing activities provided **$46.8 million** in Q1 2019 from a public offering, compared to **$89.9 million** from the IPO in Q1 2018[17](index=17&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Organization](index=8&type=section&id=1.%20Organization) - resTORbio, Inc. is a clinical-stage biopharmaceutical company developing innovative medicines targeting aging-related diseases, primarily involved in research and development[19](index=19&type=chunk)[20](index=20&type=chunk) - The company has not generated product revenue and has an accumulated deficit of **$82.5 million** as of March 31, 2019[20](index=20&type=chunk)[22](index=22&type=chunk) - As of March 31, 2019, the company had **$143.1 million** in cash, cash equivalents, and marketable securities, which is believed to be sufficient to fund operations for at least the next twelve months[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, reflecting management's estimates, with no material changes in significant accounting policies during Q1 2019[23](index=23&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) | Description | March 31, 2019 (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :---------------------------------------- | :---------------------------- | :--------------------- | :--------------------- | :--------------------- | | Money market funds | $7,150 | $7,150 | $— | $— | | U.S. treasury securities (marketable) | $135,910 | $135,910 | $— | $— | | Total | $143,091 | $143,091 | $— | $— | - All assets measured at fair value (cash, money market funds, U.S. treasury securities) are classified as **Level 1**, indicating unadjusted, quoted prices in active markets[29](index=29&type=chunk) - The company is evaluating new accounting pronouncements (ASU 2016-02, 2016-18, 2017-11, 2018-07) but does not expect a material impact from most on its consolidated financial statements[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [3. Marketable Securities](index=11&type=section&id=3.%20Marketable%20Securities) | Description | Amortized Cost (in thousands) | Unrealized Gains (in thousands) | Unrealized Losses (in thousands) | Fair Value (in thousands) | | :---------------------------------------- | :---------------------------- | :------------------------------ | :------------------------------- | :------------------------ | | U.S. government agency securities and treasuries | $135,878 | $32 | $— | $135,910 | - As of March 31, 2019, marketable securities totaled **$135.9 million**, primarily U.S. government agency securities and treasuries, all classified as available-for-sale and maturing within one year or less[37](index=37&type=chunk)[39](index=39&type=chunk) [4. Property and equipment, net](index=11&type=section&id=4.%20Property%20and%20equipment%2C%20net) | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Total property and equipment, net | $318 | $321 | | Depreciation and amortization expense (Q1) | $27 | $9 | - Net property and equipment decreased slightly to **$318,000** as of March 31, 2019, from **$321,000** at December 31, 2018[40](index=40&type=chunk) - Depreciation and amortization expense increased to **$27,000** for the three months ended March 31, 2019, from **$9,000** in the prior year period[40](index=40&type=chunk) [5. Accrued Liabilities](index=12&type=section&id=5.%20Accrued%20Liabilities) | Accrued Liability | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :---------------------------------- | :---------------------------- | :------------------------------- | | Accrued payroll and related expenses| $557 | $1,189 | | Accrued research and development expenses| $524 | $1,028 | | Other | $164 | $510 | | Total accrued liabilities | $1,245 | $2,727 | - Total accrued liabilities decreased by **$1.48 million** to **$1.25 million** at March 31, 2019, primarily due to reductions in accrued payroll and R&D expenses[42](index=42&type=chunk) [6. License Agreements](index=12&type=section&id=6.%20License%20Agreements) - The company holds an exclusive, field-restricted, worldwide license from Novartis for RTB101 alone or in combination with everolimus[43](index=43&type=chunk) - The agreement includes potential milestone payments of up to **$4.3 million** for clinical, **$42 million** for regulatory, and **$125 million** for commercial achievements, plus tiered royalties[46](index=46&type=chunk) - A **$2.5 million** milestone payment was triggered in May 2019 upon the initiation of a Phase 3 clinical trial for the first indication[47](index=47&type=chunk) [7. Research Funding Agreement](index=12&type=section&id=7.%20Research%20Funding%20Agreement) - The company has a research funding agreement with the Silverstein Foundation to partially fund preclinical and Phase 2 clinical trial expenses for RTB101 in Parkinson's Disease[48](index=48&type=chunk) - An upfront sum of **$0.5 million** was received in 2018, which is recognized as a reduction to research and development expenses as qualifying expenses are incurred[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) [8. Preferred Stock and Common Stock](index=13&type=section&id=8.%20Preferred%20Stock%20and%20Common%20Stock) - As of March 31, 2019, the company had **10,000,000** shares of preferred stock authorized with none issued, and **35,255,344** common shares issued and outstanding[9](index=9&type=chunk)[52](index=52&type=chunk) | Metric | March 31, 2019 | December 31, 2018 | | :--------------------------------------- | :------------- | :---------------- | | Options issued and outstanding | 1,706,317 | 1,122,677 | | Unvested restricted stock units | 24,960 | 24,960 | | Options available for future grants | 1,889,155 | 1,350,582 | | Shares available for issuance under 2018 ESPP | 555,583 | 275,030 | | Total shares reserved for future issuance| 4,176,015 | 2,773,249 | - The total number of shares reserved for future issuance under equity plans increased to **4.18 million** as of March 31, 2019, from **2.77 million** at December 31, 2018[52](index=52&type=chunk) [9. Stock-based Compensation](index=13&type=section&id=9.%20Stock-based%20Compensation) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total stock-based compensation expense| $663 | $1,181 | | Research and development | $277 | $625 | | General and administrative | $386 | $556 | - Total stock-based compensation expense decreased by **$0.5 million** to **$0.7 million** for Q1 2019[58](index=58&type=chunk) - The company granted **604,440** stock options in Q1 2019 with a weighted-average exercise price of **$8.58**[59](index=59&type=chunk) - As of March 31, 2019, total unrecognized compensation expense for unvested options, restricted stock, and restricted stock units was approximately **$10.9 million**, to be recognized over weighted-average periods ranging from **0.05 to 3.30 years**[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[67](index=67&type=chunk) [10. Commitments and Contingencies](index=16&type=section&id=10.%20Commitments%20and%20Contingencies) - The company is not a party to any litigation and has no contingency reserves established for litigation liabilities as of March 31, 2019[69](index=69&type=chunk) [11. Net Loss per Share](index=16&type=section&id=11.%20Net%20Loss%20per%20Share) - Basic and diluted net loss per share are computed using the two-class method; due to net losses, no income allocation or dilution from share-based awards was applied[70](index=70&type=chunk) | Potentially Dilutive Securities | As of March 31, 2019 | As of March 31, 2018 | | :------------------------------ | :------------------- | :------------------- | | Options issued and outstanding | 1,706,317 | 667,590 | - Potentially dilutive securities, totaling **1,706,317** options, were excluded from diluted net loss per share calculation as their inclusion would have been anti-dilutive[71](index=71&type=chunk) [12. Related Party Transactions](index=17&type=section&id=12.%20Related%20Party%20Transactions) - The company has an intellectual property license agreement with Novartis, an affiliate of which is a shareholder[73](index=73&type=chunk) - A research funding agreement exists with the Silverstein Foundation, a related party, from which **$0.5 million** was received in Q1 2018, but no funds were received in Q1 2019[74](index=74&type=chunk) [13. Subsequent Event](index=17&type=section&id=13.%20Subsequent%20Event) - In April 2019, the company amended its multi-year office lease for a new 7-year term, with an initial annual base rent of **$0.6 million**[75](index=75&type=chunk) - In May 2019, the company was awarded a 5-year grant of up to **$1.5 million** from the National Institutes of Health[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of resTORbio's business, clinical development progress, and detailed analysis of its financial condition and results of operations for the three months ended March 31, 2019. It highlights the company's lead product candidate, RTB101, in Phase 3 trials for respiratory tract infections and a Phase 1b/2a trial for Parkinson's disease, along with its liquidity position and future funding needs [Overview](index=18&type=section&id=Overview) - resTORbio is a clinical-stage biopharmaceutical company developing innovative medicines targeting the biology of aging, with lead product candidate **RTB101**, an oral TORC1 inhibitor[79](index=79&type=chunk) - Initiated Phase 3 program (**PROTECTOR 1 and 2**) in May 2019 to evaluate **RTB101 10mg once daily** for reducing clinically symptomatic respiratory illness in elderly subjects (65+ excluding smokers/COPD), with top-line data expected in **mid-2020**[79](index=79&type=chunk)[85](index=85&type=chunk) - Initiated a Phase 1b/2a clinical trial of **RTB101** alone or in combination with sirolimus for Parkinson's disease in April 2019, with data expected in **2020**[80](index=80&type=chunk) - Phase 2 clinical trials showed **RTB101 10mg once daily** improved immune function and reduced incidence of laboratory-confirmed RTIs by **30.6%** and severe RTI symptoms by **52.1%** in high-risk elderly patients[82](index=82&type=chunk) - The company has incurred significant net losses (**$11.1 million** in Q1 2019) and has an accumulated deficit of **$82.5 million** as of March 31, 2019, with no product revenue generated to date[89](index=89&type=chunk) - A public offering in March 2019 generated approximately **$46.6 million** in net proceeds, expected to fund operations through **2020**[88](index=88&type=chunk)[90](index=90&type=chunk) [Novartis License Agreement](index=21&type=section&id=Novartis%20License%20Agreement) - The company holds an exclusive, worldwide license from Novartis for **RTB101** and its combination with everolimus, covering composition of matter, formulations, and methods of use[93](index=93&type=chunk) - The agreement includes potential milestone payments of up to **$4.3 million** for clinical, **$42 million** for regulatory, and **$125 million** for commercial achievements, plus tiered royalties[96](index=96&type=chunk) - A **$2.5 million** milestone payment was triggered in May 2019 upon the initiation of a Phase 3 clinical trial for the first indication[97](index=97&type=chunk) [Financial Operations Overview](index=21&type=section&id=Financial%20Operations%20Overview) - The company has not generated any revenue from product sales and does not expect to until **RTB101** receives regulatory approval and is commercialized[98](index=98&type=chunk) - Research and development expenses are expensed as incurred and are expected to increase substantially as product candidates advance through clinical development and manufacturing[100](index=100&type=chunk)[103](index=103&type=chunk) - General and administrative expenses are expected to increase due to anticipated headcount growth and costs associated with operating as a public company[108](index=108&type=chunk) - Other income, net, primarily consists of interest income earned on cash, cash equivalents, and marketable securities[109](index=109&type=chunk) [Revenue](index=21&type=section&id=Revenue) - The company has not generated any revenue from product sales and does not expect to until regulatory approval and commercialization of **RTB101**[98](index=98&type=chunk) [Operating Expenses](index=22&type=section&id=Operating%20Expenses) - Research and development expenses include personnel, third-party contract organizations, clinical trial sites, preclinical/clinical material production, and lab expenses, all expensed as incurred[100](index=100&type=chunk)[102](index=102&type=chunk) - R&D expenses are expected to increase substantially due to continued investment in product candidates, manufacturing, and clinical trials[103](index=103&type=chunk) - General and administrative expenses are expected to increase due to anticipated headcount and costs associated with operating as a public company[108](index=108&type=chunk) [Other Income, Net](index=23&type=section&id=Other%20Income%2C%20Net) - Other income, net, primarily consists of interest income earned on cash, cash equivalents, and marketable securities[109](index=109&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) | Metric | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $8,852 | $8,106 | | General and administrative | $2,839 | $2,094 | | Total operating expenses | $11,691 | $10,200 | | Net loss | $(11,069) | $(9,859) | | Other income, net | $631 | $341 | - Net loss increased to **$11.1 million** in Q1 2019 from **$9.9 million** in Q1 2018, driven by a **$1.5 million** increase in total operating expenses[110](index=110&type=chunk) [Comparison of the Three Months Ended March 31, 2019 and 2018](index=23&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031%2C%202019%20and%202018) - Research and development expenses increased by **$0.7 million** to **$8.9 million** in Q1 2019, primarily due to higher costs from third-party contract organizations, clinical trials, preclinical studies, and personnel[112](index=112&type=chunk) - General and administrative expenses increased by **$0.7 million** to **$2.8 million** in Q1 2019, mainly due to increased personnel and professional services fees (intellectual property, legal, accounting, insurance, and consulting)[113](index=113&type=chunk) - Other income, net, increased to **$0.6 million** in Q1 2019 from **$0.3 million** in Q1 2018, primarily from interest income[114](index=114&type=chunk) [Liquidity, Capital Resources and Plan of Operations](index=24&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Plan%20of%20Operations) - The company completed a public offering in March 2019, generating approximately **$46.6 million** in net proceeds[115](index=115&type=chunk) - As of March 31, 2019, the company had **$143.1 million** in cash, cash equivalents, and marketable securities, and an accumulated deficit of **$82.5 million**[116](index=116&type=chunk) - Existing capital is expected to fund operations through **2020**, including the completion of a pivotal Phase 3 clinical program for **RTB101** and an NDA filing[118](index=118&type=chunk) - The company will require additional financing for future development and operations, with no current credit facility or committed sources of capital, and failure to raise capital could negatively impact business plans[118](index=118&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) | Cash Flow Activity | Three Months Ended March 31, 2019 (in thousands) | Three Months Ended March 31, 2018 (in thousands) | | :--------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities| $(12,049) | $(7,304) | | Net cash used in investing activities| $(34,628) | $(278) | | Net cash provided by financing activities| $46,816 | $89,938 | - Cash used in operating activities increased to **$12.0 million** in Q1 2019, primarily due to the net loss and changes in operating assets and liabilities[123](index=123&type=chunk) - Cash used in investing activities was **$34.6 million** in Q1 2019, mainly for purchases of marketable securities (**$77.1 million**) offset by maturities (**$42.5 million**)[124](index=124&type=chunk) - Cash provided by financing activities was **$46.8 million** in Q1 2019 from the public offering, compared to **$89.9 million** in Q1 2018 from the IPO[125](index=125&type=chunk) [Contractual Obligations and Other Commitments](index=26&type=section&id=Contractual%20Obligations%20and%20Other%20Commitments) - There have been no material changes to the company's contractual obligations and commitments since those reported in the Annual Report on Form 10-K for the year ended December 31, 2018[127](index=127&type=chunk) [Off-Balance Sheet Arrangements](index=26&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company does not have any off-balance sheet arrangements or holdings in variable interest entities[128](index=128&type=chunk) [Critical Accounting Polices and Estimates](index=26&type=section&id=Critical%20Accounting%20Polices%20and%20Estimates) - The financial statements are prepared under U.S. GAAP, requiring management estimates and assumptions, particularly for accrued research and development costs[129](index=129&type=chunk)[130](index=130&type=chunk) - Research and development costs are expensed as incurred, including personnel, lab supplies, and fees paid to third parties[131](index=131&type=chunk)[132](index=132&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=26&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) - The company is evaluating the potential effects of ASU 2016-02 (Leases), ASU 2016-18 (Cash Flows), ASU 2017-11 (Down Round Features), and ASU 2018-07 (Share-Based Payment Accounting)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) - Most new pronouncements are not expected to have a material impact on the consolidated financial statements[135](index=135&type=chunk)[136](index=136&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate sensitivity on its investment portfolio and foreign currency fluctuations from global contracts - The company's primary market risk exposure is interest rate sensitivity on its **$143.1 million** in short-term marketable securities (U.S. treasury securities and money market funds)[138](index=138&type=chunk) - An immediate **100 basis point** change in interest rates is not expected to materially affect the fair value of the investment portfolio due to its short-term duration and low risk profile[138](index=138&type=chunk) - The company is subject to foreign currency fluctuations from global contracts but has not engaged in hedging activities[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of March 31, 2019[143](index=143&type=chunk) - There were no material changes in internal control over financial reporting during the fiscal quarter ended March 31, 2019[144](index=144&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is not currently involved in any legal proceedings expected to have a material adverse impact on its financial condition - As of March 31, 2019, the company was not a party to any legal proceedings expected to have a material adverse impact on its financial position, results of operations, or cash flow[146](index=146&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018[147](index=147&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the proceeds from the company's initial public offering (IPO) and how those funds have been utilized since its closing - The company closed its initial public offering (IPO) on **January 30, 2018**, issuing **6,516,667** shares of common stock at **$15.00 per share**, generating approximately **$89.4 million** in net proceeds[148](index=148&type=chunk)[149](index=149&type=chunk) - As of March 31, 2019, approximately **$48.9 million** of the IPO proceeds have been used to advance product candidates through clinical trial programs, for working capital, and general corporate purposes[150](index=150&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - Not applicable[150](index=150&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[150](index=150&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - None[150](index=150&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report, including various agreements, certifications, and XBRL documents - The Exhibit Index includes amendments to offer letters and office leases, certifications of principal officers, and XBRL taxonomy documents[151](index=151&type=chunk)[152](index=152&type=chunk) [Signatures](index=31&type=section&id=Signatures) This section contains the official signatures of the company's principal executive and financial officers, certifying the report - The report is signed by Chen Schor, President and Chief Executive Officer, and John J. McCabe, Vice President, Finance, on May 15, 2019[154](index=154&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38359 resTORbio, Inc. (Exact name of registrant as specified in its charter) Delaware 81-3305277 (State or other jurisdiction of incorpo ...