Neoleukin Therapeutics, Inc. (NLTX) Q2 2020 Earnings Conference Call August 12, 2020 4:30 PM ET Company Participants Julie Rathbun - Communications Jonathan Drachman - Chief Executive Officer Bob Ho - Chief Financial Officer Daniel-Adriano Silva - Head of Research Carl Walkey - Vice President of Corporate Development Umut Ulge - Vice President of Clinical Development Conference Call Participants Tyler Van Buren - Piper Sandler Greg Harrison - Bank of America Securities Robert Burns - H.C. Wainwright Mara Go ...

PART I. FINANCIAL INFORMATION (Unaudited) Presents unaudited financial statements and management's discussion and analysis [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and stockholders' equity, along with explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position at specific dates Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $129,596 | $143,093 | $(13,497) | | Total current assets | $130,997 | $143,596 | $(12,599) | | Operating lease right-of-use assets | $9,646 | $770 | $8,876 | | Total assets | $145,324 | $147,023 | $(1,699) | | Total current liabilities | $6,320 | $4,743 | $1,577 | | Total liabilities | $16,625 | $5,336 | $11,289 | | Total stockholders' equity | $128,699 | $141,687 | $(12,988) | | Accumulated deficit | $(317,917) | $(299,529) | $(18,388) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations Highlights | Operating Expense | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :------------------ | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Research and development | $4,843 | $(1,995) | $10,341 | $(1,891) | | General and administrative | $4,926 | $2,423 | $8,499 | $4,978 | | Total operating expenses | $9,769 | $428 | $18,840 | $3,087 | | Net loss | $(9,746) | $(1) | $(18,388) | $(2,209) | | Net loss per common stock – basic and diluted | $(0.20) | $- | $(0.37) | $(0.09) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights | Cash Flow Activity | Six Months Ended June 30, 2020 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | | :----------------- | :------------------------------------ | :------------------------------------ | | Operating activities | $(15,234) | $(4,226) | | Investing activities | $(1,079) | $- | | Financing activities | $3,691 | $(4) | | Net change in cash, cash equivalents and restricted cash | $(12,619) | $(4,228) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Shows changes in equity accounts over specific periods [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides additional details and explanations for the financial statements - The Company entered into a new lease agreement for approximately **33,300 square feet** of office space in Seattle, Washington, for its future principal executive offices and a laboratory, commencing January 15, 2020, and expiring December 1, 2028. This lease includes a tenant improvement allowance of **$8.0 million**[36](index=36&type=chunk) - The Company terminated its Vancouver, Canada office lease on June 30, 2020, incurring an early termination fee of **$0.5 million** and recognizing a loss of **$0.3 million** in general and administrative expenses, along with a **$0.2 million** loss on disposal of associated leasehold improvements[38](index=38&type=chunk) - Total stock-based compensation expense for the six months ended June 30, 2020, was **$1.705 million**, with **$0.629 million** allocated to R&D and **$1.076 million** to G&A[40](index=40&type=chunk) - On July 7, 2020, the Company completed a public offering of common stock and pre-funded warrants, generating aggregate net proceeds of **$71.4 million**[54](index=54&type=chunk) - On July 31, 2020, the Company sold its Canadian subsidiary, Aquinox Pharmaceuticals (Canada) Inc., for **$8.2 million** in cash consideration[55](index=55&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Neoleukin Therapeutics, Inc.'s business, including its de novo protein design technology and lead product candidate NL-201, and discusses the financial condition and results of operations for the periods ended June 30, 2020 - Neoleukin Therapeutics is a biopharmaceutical company creating next-generation immunotherapies for cancer, inflammation, and autoimmunity using de novo protein design technology[59](index=59&type=chunk) - The lead product candidate, NL-201, is an IL-2/IL-15 immunotherapy designed to selectively stimulate CD8+ T cells and NK cells while avoiding regulatory T cells, showing significant tumor growth inhibition in preclinical models[62](index=62&type=chunk) - The company expects to administer NL-201 as monotherapy by intravenous injection in patients with relapsed and refractory solid tumors for initial clinical development[63](index=63&type=chunk) - Research and development expenses increased significantly to **$4.8 million** for the three months and **$10.3 million** for the six months ended June 30, 2020, compared to credits in the prior year, primarily due to IND-enabling activities for NL-201 and other Neoleukin technologies[74](index=74&type=chunk) - General and administrative expenses rose to **$4.9 million** for the three months and **$8.5 million** for the six months ended June 30, 2020, driven by increased personnel costs, professional service fees post-merger, and one-time costs related to the Vancouver office lease termination[77](index=77&type=chunk) - As of June 30, 2020, the company had an accumulated deficit of **$317.9 million** and cash and cash equivalents of **$129.6 million**. Following a July 2020 public offering, net proceeds of **$71.4 million** are expected to fund operations into **2023**[69](index=69&type=chunk)[79](index=79&type=chunk) - Net cash used in operating activities increased to **$15.2 million** for the six months ended June 30, 2020, from **$4.2 million** in the prior year, mainly due to higher operating expenses for NL-201 development[81](index=81&type=chunk) - The COVID-19 pandemic has led to a work-from-home policy and discontinued travel, but business-critical R&D work continues. No delay in development plans is currently expected, but the potential for impact is acknowledged[64](index=64&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=18&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section assesses the company's exposure to market risks, specifically interest rate risk and foreign currency risk - The company's exposure to market risk for changes in interest rates primarily relates to its investment portfolio, with **$110.1 million** in U.S. government money market funds as of June 30, 2020. A hypothetical **1%** increase in interest rates would have an immaterial impact on the fair value of this portfolio[91](index=91&type=chunk) - Foreign currency risk relates to Canadian operations and bank balances in foreign currencies. Foreign exchange gains/losses were insignificant for the three and six months ended June 30, 2020 and 2019, as the impact of exchange rate changes on the foreign currency portfolio was offset by its impact on foreign currency liabilities[92](index=92&type=chunk) [Item 4. Controls and Procedures](index=18&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, providing reasonable assurance for timely and accurate financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[95](index=95&type=chunk) - The company completed the transition of accounting and financial reporting operations from its Vancouver, British Columbia office to its new headquarters in Seattle, Washington. No other material changes in internal control over financial reporting were identified during the period[96](index=96&type=chunk) PART II. OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=20&type=section&id=Item%201.%20Legal%20Proceedings) The company may be subject to legal claims, actions, and complaints from time to time, including those involving employment or intellectual property - The company may from time to time be named as a party to legal claims, actions and complaints, including matters involving employment, intellectual property or others[98](index=98&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could materially harm the company's business, operating results, and financial condition [Risks Related to Our Financial Position and Capital Needs](index=20&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Capital%20Needs) Discusses risks associated with funding operations and capital requirements - The company will require substantial additional capital to finance operations and product development, with existing cash and recent offering proceeds expected to fund operations into **2023**. Failure to obtain financing could delay or terminate development[100](index=100&type=chunk)[101](index=101&type=chunk)[103](index=103&type=chunk) - The company has incurred significant losses since inception, with a net loss of **$18.4 million** for the six months ended June 30, 2020, and an accumulated deficit of **$317.9 million**. It expects to continue incurring losses for the foreseeable future[105](index=105&type=chunk) [Risks Related to Discovery, Development and Commercialization](index=24&type=section&id=Risks%20Related%20to%20Discovery%2C%20Development%20and%20Commercialization) Covers risks inherent in drug discovery, development, and market introduction - All product candidates, including NL-201, are in preclinical or drug discovery stages, with no products yet approved. The success of the business is heavily dependent on the Neoleukin platform and NL-201, which are unproven technologies in humans[118](index=118&type=chunk)[122](index=122&type=chunk)[132](index=132&type=chunk)[135](index=135&type=chunk) - Clinical trials are lengthy, expensive, and uncertain, with high failure rates. Delays in patient enrollment, regulatory approvals, or unforeseen adverse events could significantly increase costs and delay commercialization[137](index=137&type=chunk)[140](index=140&type=chunk)[144](index=144&type=chunk) - The biopharmaceutical market is highly competitive, with many companies having greater resources. NL-201, if approved, will face competition from existing treatments and other IL-2/IL-15 agonists in development[169](index=169&type=chunk)[171](index=171&type=chunk) [Risks Related to Our Reliance on Third Parties](index=35&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) Addresses risks stemming from dependence on external partners for key operations - The company relies on third-party manufacturers and CROs for preclinical studies, clinical trials, and product supply. Loss of these partners or their failure to comply with regulations could delay development and adversely affect the business[176](index=176&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) [Risks Related to Our Business and Operations](index=41&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Operations) Outlines general business and operational challenges - The COVID-19 pandemic could adversely impact preclinical development, clinical trials, manufacturing, and overall business operations due to potential disruptions in supply chains, regulatory processes, and clinical site activities[204](index=204&type=chunk)[205](index=205&type=chunk) [Risks Related to Intellectual Property](index=47&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Focuses on risks related to patents and proprietary rights - The company's success depends on obtaining and maintaining patent protection for its product candidates and technology. The patent process is expensive, time-consuming, and uncertain, with risks of invalidation, unenforceability, or insufficient breadth of protection[230](index=230&type=chunk)[234](index=234&type=chunk)[237](index=237&type=chunk) [Risks Related to Ownership of Our Common Stock](index=52&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Details risks pertinent to holding the company's common stock - The company's stock price is volatile and may decline due to various factors, including clinical trial results, regulatory actions, competition, and general market conditions. Principal stockholders and management exert significant control over matters subject to stockholder approval[250](index=250&type=chunk)[252](index=252&type=chunk)[255](index=255&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[277](index=277&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[278](index=278&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Not applicable[279](index=279&type=chunk) [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - Not applicable[280](index=280&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including lease agreements, restricted stock unit agreements, and certifications from the Chief Executive Officer and Chief Financial Officer, along with XBRL taxonomy documents Exhibits List | Number | Description | | :----- | :---------- | | 10.1 | First Amendment, dated June 18, 2020, to Lease Agreement, dated September 23, 2019, by and between Neoleukin Therapeutics, Inc. and ARE-Eastlake Avenue No. 3, LLC. | | 10.2 | Forms of Restricted Stock Unit Agreement and Restricted Stock Unit Grant Notice for Registrant's 2014 Equity Incentive Plan. | | 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a). | | 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a). | | 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | | 101.INS| XBRL Instance Document | | 101.SCH| XBRL Taxonomy Extension Schema Document. | | 101.CAL| XBRL Taxonomy Extension Calculation Linkbase Document. | | 101.DEF| XBRL Taxonomy Extension Definition Linkbase Document. | | 101.LAB| XBRL Taxonomy Extension Labels Linkbase Document. | | 101.PRE| XBRL Taxonomy Extension Presentation Linkbase Document. | SIGNATURES Contains the required signatures for the filing

[PART I. FINANCIAL INFORMATION (Unaudited)](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION%20%28Unaudited%29) This section presents the unaudited financial information for Neoleukin Therapeutics, Inc. for the three months ended March 31, 2020 and 2019 [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Neoleukin Therapeutics' unaudited condensed consolidated financial statements and accompanying notes for Q1 2020 and 2019 Condensed Consolidated Balance Sheets (March 31, 2020 vs. December 31, 2019) | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $153,051 | $147,023 | | Total liabilities | $15,931 | $5,336 | | Total shareholders' equity | $137,120 | $141,687 | | Cash and cash equivalents | $139,417 | $143,093 | | Operating lease right-of-use assets | $10,300 | $770 | | Non-current operating lease liabilities | $10,182 | $447 | | Additional paid-in capital | $445,291 | $441,216 | | Accumulated deficit | $(308,171) | $(299,529) | Condensed Consolidated Statements of Operations and Comprehensive Loss (Three Months Ended March 31, 2020 vs. 2019) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Research and development expenses | $5,498 | $104 | | General and administrative expenses | $3,573 | $2,555 | | Total operating expenses | $9,071 | $2,659 | | Other income, net | $429 | $451 | | Net loss | $(8,642) | $(2,208) | | Net loss per common stock - basic and diluted | $(0.18) | $(0.09) | | Basic and diluted weighted average common stock outstanding | 49,168,451 | 23,537,368 | Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2020 vs. 2019) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :---------------------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(6,440) | $(2,756) | | Net cash used in investing activities | $(107) | $0 | | Net cash provided by (used in) financing activities | $3,390 | $(2) | | Net change in cash, cash equivalents and restricted cash | $(3,168) | $(2,759) | | Cash, cash equivalents and restricted cash, end of period | $139,925 | $74,169 | Condensed Consolidated Statements of Stockholders' Equity (Three Months Ended March 31, 2020 vs. 2019) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Balances, December 31 | $141,687 | $72,672 | | Options exercised | $3,392 | $0 | | Stock-based compensation | $683 | $1,078 | | Net loss | $(8,642) | $(2,208) | | Balances, March 31 | $137,120 | $71,542 | [Note 1. Nature of operations](index=7&type=section&id=Note%201.%20Nature%20of%20operations) This note describes Neoleukin Therapeutics, Inc.'s business as a biopharmaceutical company focused on developing immunotherapies using de novo protein design technology - Neoleukin Therapeutics, Inc. is a biopharmaceutical company developing next-generation immunotherapies for cancer, inflammation, and autoimmunity[22](index=22&type=chunk) - The company utilizes de novo protein design technology to create proteins with specific pharmaceutical properties, aiming for superior therapeutic benefits over native proteins[22](index=22&type=chunk) - The company was formed on August 8, 2019, through the merger of Aquinox Pharmaceuticals, Inc. and Former Neoleukin Therapeutics, Inc.[23](index=23&type=chunk) [Note 2. Summary of significant accounting policies](index=7&type=section&id=Note%202.%20Summary%20of%20significant%20accounting%20policies) This note outlines the significant accounting policies used in preparing the unaudited financial statements, including estimates, lease accounting, and stock-based compensation - Financial statements are unaudited, presented in U.S. dollars, and prepared in accordance with U.S. GAAP and SEC rules for interim financial information[25](index=25&type=chunk) - Management makes estimates and assumptions for stock-based compensation, depreciation/amortization, and accruals[27](index=27&type=chunk) - Operating and finance leases are recognized as right-of-use assets and liabilities based on the estimated present value of lease payments over the lease term[28](index=28&type=chunk)[29](index=29&type=chunk) - Stock-based compensation for options is estimated using the Black-Scholes model, and RSUs are valued at the closing stock price on the grant date[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - Basic and diluted net loss per common stock includes pre-funded warrants due to their full vesting and exercisability for nominal cash[34](index=34&type=chunk) - Money market funds totaled **$118.2 million** as of March 31, 2020, classified as Level 1 financial instruments[36](index=36&type=chunk) - The company is assessing the impact of ASU 2019-12 "Simplifying the Accounting for Income Taxes," effective for fiscal years beginning after December 15, 2020[37](index=37&type=chunk) [Note 3. Cash, cash equivalents and restricted cash](index=8&type=section&id=Note%203.%20Cash%2C%20cash%20equivalents%20and%20restricted%20cash) This note details the components of cash, cash equivalents, and restricted cash, including changes and specific allocations - Restricted cash of **$0.5 million** (March 31, 2020) is held as collateral for an irrevocable letter of credit for the New Seattle Lease[38](index=38&type=chunk) - Cash, cash equivalents, and restricted cash totaled **$139.9 million** as of March 31, 2020, compared to **$143.093 million** cash and cash equivalents at December 31, 2019[10](index=10&type=chunk)[39](index=39&type=chunk) - Money market funds increased from **$40.0 million** (December 31, 2019) to **$118.2 million** (March 31, 2020)[36](index=36&type=chunk)[39](index=39&type=chunk) [Note 4. Lease liabilities](index=8&type=section&id=Note%204.%20Lease%20liabilities) This note describes the company's lease agreements, including existing and new Seattle leases, and their financial impact - The company has an existing office lease in Seattle (6,272 sq ft, expires Oct 2021) and a new Seattle lease (33,300 sq ft, commenced Jan 2020, rent starts Dec 2020, expires Dec 2028)[40](index=40&type=chunk)[41](index=41&type=chunk) - A **$0.5 million** irrevocable letter of credit was issued for the new Seattle lease security deposit in January 2020[41](index=41&type=chunk) - Operating lease right-of-use assets increased from **$0.8 million** (Dec 31, 2019) to **$10.3 million** (March 31, 2020), primarily due to the New Seattle Lease[44](index=44&type=chunk) Total Net Lease Cost (Three Months Ended March 31, 2020 vs. 2019) | (in thousands) | 2020 | 2019 | | :--------------- | :--- | :--- | | Total net lease cost | $642 | $79 | - Non-current operating lease liabilities increased from **$447 thousand** (Dec 31, 2019) to **$10,182 thousand** (March 31, 2020)[10](index=10&type=chunk)[46](index=46&type=chunk) [Note 5. Stockholders' equity](index=10&type=section&id=Note%205.%20Stockholders%27%20equity) This note details changes in stockholders' equity, including authorized shares, common stock outstanding, and stock-based compensation - Authorized share capital includes **100,000,000** common stock and **5,000,000** preferred stock[47](index=47&type=chunk) - Common stock outstanding increased from **37,996,849 shares** (Dec 31, 2019) to **38,386,160 shares** (March 31, 2020)[47](index=47&type=chunk) - **10,925,481** pre-funded warrants were exchanged for common stock in December 2019, exercisable at **$0.000001 per share**[48](index=48&type=chunk) - **290,700** stock options were granted in Q1 2020 with an average exercise price of **$7.63**[52](index=52&type=chunk) - **376,311 shares** of common stock were issued upon exercise of options in Q1 2020, generating **$3.392 million** in proceeds[18](index=18&type=chunk)[53](index=53&type=chunk) - **75,000** restricted stock units were granted in Q1 2020 with a grant date fair value of **$6.44 per share**[54](index=54&type=chunk) - Total unrecognized stock-based compensation cost was **$9.8 million** as of March 31, 2020, expected to be recognized over a weighted-average period of **3.36 years**[57](index=57&type=chunk) [Note 6. Restructuring](index=12&type=section&id=Note%206.%20Restructuring) This note outlines the company's restructuring plans and associated charges incurred to reduce operating costs and align the workforce - Restructuring plans in July 2018 and November 2018 aimed to reduce operating costs and align the workforce after the failure of the rosiptor Phase 3 clinical trial[58](index=58&type=chunk)[59](index=59&type=chunk) - Aggregate restructuring charges of **$7.4 million** (2018-2019) and **$1.6 million** (2019) were incurred and paid for clinical trial closing, contract cancellations, office closure, and severance[58](index=58&type=chunk)[59](index=59&type=chunk) - Immaterial restructuring costs were incurred and paid for the three months ended March 31, 2020[60](index=60&type=chunk) - Restructuring costs in Q1 2019 were **$0.1 million** for R&D and **$0.2 million** for G&A[60](index=60&type=chunk) [Note 7. Other income, net](index=12&type=section&id=Note%207.%20Other%20income%2C%20net) This note provides a breakdown of other income and expenses, including interest income and foreign exchange gains Other Income, Net (Three Months Ended March 31, 2020 vs. 2019) | (in thousands) | 2020 | 2019 | | :--------------- | :--- | :--- | | Interest income | $434 | $450 | | Foreign exchange gains | $15 | $2 | | Other expenses | $(20) | $(1) | | Total other income, net | $429 | $451 | - Interest income decreased due to lower interest rates, partially offset by higher cash and investment balances[81](index=81&type=chunk) [Note 8. Net loss per common stock](index=12&type=section&id=Note%208.%20Net%20loss%20per%20common%20stock) This note explains the calculation of basic and diluted net loss per common stock, including the treatment of pre-funded warrants and anti-dilutive securities - Basic and diluted net loss per common stock is computed by dividing net loss by the weighted-average number of common stock outstanding, including **10,925,481** pre-funded warrants[62](index=62&type=chunk) - Outstanding stock options (**5,344,927**) and restricted stock units (**134,000**) were excluded from the computation for Q1 2020 as their inclusion would be anti-dilutive[63](index=63&type=chunk)[64](index=64&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Neoleukin's financial condition and results for Q1 2020, covering business, COVID-19 impact, operating expenses, liquidity, and capital [Overview](index=13&type=section&id=Overview) This overview introduces Neoleukin as a biopharmaceutical company leveraging de novo protein design for immunotherapies, highlighting its lead product candidate NL-201 - Neoleukin is a biopharmaceutical company focused on de novo protein design technology for immunotherapies in cancer, inflammation, and autoimmunity[67](index=67&type=chunk) - The lead product candidate, NL-201, is a de novo protein mimicking IL-2 and IL-15 for cancer treatment, showing higher activity and lower toxicity in preclinical studies compared to native IL-2[68](index=68&type=chunk) - The company was formed through a merger on August 8, 2019, and its head office is in Seattle, Washington[69](index=69&type=chunk) [COVID-19 Impact](index=13&type=section&id=COVID-19%20Impact) This section details the company's response to the COVID-19 pandemic, including operational adjustments and potential impacts on development timelines - Implemented a work-from-home policy and discontinued work-related travel as of March 9, 2020, due to COVID-19[71](index=71&type=chunk) - Business-critical R&D work has continued, adhering to guidelines to ensure employee safety[71](index=71&type=chunk) - No expected delay for NL-201 IND application, but potential for impact acknowledged; evaluating geographic diversity for clinical trial sites[72](index=72&type=chunk) - Preclinical data on NL-201 and de novo protein technology platform to be presented at AACR Virtual Annual Meeting II in June 2020[73](index=73&type=chunk) - Utilizing research and computational bandwidth to investigate de novo protein technology application toward COVID-19[73](index=73&type=chunk) [Results of Operations](index=14&type=section&id=Results%20of%20Operations) This section analyzes the company's operating expenses and other income for the three months ended March 31, 2020, compared to the prior year Operating Expenses (Three Months Ended March 31, 2020 vs. 2019) | Expense Category | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | | Research and development | $5,498 | $104 | | General and administrative | $3,573 | $2,555 | | Total operating expenses | $9,071 | $2,659 | - Research and development expenses increased significantly due to IND-enabling activities for NL-201 and advancement of other Neoleukin technologies[78](index=78&type=chunk) - General and administrative expenses increased primarily due to higher employee count after the merger[80](index=80&type=chunk) - Net other income decreased slightly due to lower interest rates, partially offset by higher cash balances[81](index=81&type=chunk) [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, funding outlook, and future capital requirements to support operations and growth - Accumulated deficit of **$308.2 million** as of March 31, 2020[82](index=82&type=chunk) - Cash and cash equivalents totaled **$139.4 million** as of March 31, 2020[75](index=75&type=chunk) - Existing cash and cash equivalents are expected to fund operating expenses and capital expenditures through **2022**[75](index=75&type=chunk)[87](index=87&type=chunk) - Net cash used in operating activities increased to **$6.4 million** in Q1 2020 from **$2.8 million** in Q1 2019, primarily due to increased NL-201 development costs[83](index=83&type=chunk)[84](index=84&type=chunk) - Net cash provided by financing activities was **$3.4 million** in Q1 2020, mainly from stock option exercises[83](index=83&type=chunk)[86](index=86&type=chunk) - The company will need to raise substantial additional capital through equity, debt, or collaborations to support ongoing operations and growth[74](index=74&type=chunk)[87](index=87&type=chunk) [Contractual Obligations and Commitments](index=16&type=section&id=Contractual%20Obligations%20and%20Commitments) This section states that there have been no material changes to the company's contractual commitments since the last annual report - No material changes to contractual commitments since the December 31, 2019 Annual Report on Form 10-K[89](index=89&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=16&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section highlights the reliance on estimates and judgments in financial statements and confirms no material changes to accounting policies - Financial statements require estimates and judgments affecting reported amounts of assets, liabilities, revenue, and expenses[90](index=90&type=chunk) - No material changes to significant accounting policies during the three months ended March 31, 2020[90](index=90&type=chunk) [Recent Accounting Pronouncements](index=17&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2(g) for details on recently issued and adopted accounting standards - Refer to Note 2(g) for information on recently issued and adopted accounting standards[91](index=91&type=chunk) [Off-Balance Sheet Arrangements](index=17&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms that the company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[92](index=92&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures since the 2019 10-K, with primary exposures in interest rate and foreign currency risks - No material changes to quantitative and qualitative disclosures about market risks compared to the Annual Report on Form 10-K for the year ended December 31, 2019[93](index=93&type=chunk) [Interest rate risk](index=17&type=section&id=Interest%20rate%20risk) This section addresses the company's exposure to interest rate fluctuations, primarily concerning its investment portfolio - Exposure to market risk for changes in interest rates relates primarily to the investment portfolio, with **$118.2 million** in U.S. government securities as of March 31, 2020[94](index=94&type=chunk) - A hypothetical **1% increase** in interest rates is estimated to have an immaterial impact on the fair value of the investment portfolio[94](index=94&type=chunk) [Foreign Currency Risk](index=17&type=section&id=Foreign%20Currency%20Risk) This section discusses the company's foreign currency risk, mainly from Canadian operations, and its current hedging strategy - Exposure to foreign currency risk primarily relates to Canadian operations, including payments to vendors and suppliers[95](index=95&type=chunk) - The company does not currently hedge against foreign currency risk[95](index=95&type=chunk) - Foreign exchange gains (losses) were insignificant for the three months ended March 31, 2020 and 2019[95](index=95&type=chunk) [Item 4. Controls and Procedures](index=17&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2020, while transitioning accounting operations to Seattle [Evaluation of disclosure controls and procedures.](index=17&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures.) This section confirms management's conclusion on the effectiveness of disclosure controls and procedures as of March 31, 2020 - Management, with the participation of the principal executive officer and principal financial officer, concluded that disclosure controls and procedures were effective as of March 31, 2020[96](index=96&type=chunk)[98](index=98&type=chunk) - Disclosure controls and procedures are designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[98](index=98&type=chunk) [Changes in internal control over financial reporting.](index=17&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting.) This section addresses changes in internal control, specifically the transition of accounting operations to Seattle - The company is transitioning accounting and financial reporting operations from Vancouver, British Columbia, to its new headquarters in Seattle, Washington[99](index=99&type=chunk) - No other changes in internal control over financial reporting were identified that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[99](index=99&type=chunk) [PART II. OTHER INFORMATION](index=18&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, and other disclosures [Item 1. Legal Proceedings](index=18&type=section&id=Item%201.%20Legal%20Proceedings) The company may face legal claims, actions, and complaints, including those related to employment or intellectual property - The company may from time to time be named as a party to legal claims, actions, and complaints, including matters involving employment, intellectual property, or others[101](index=101&type=chunk) [Item 1A. Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks to Neoleukin's business, operating results, and financial condition, covering financial, development, third-party, operational, intellectual property, and stock ownership aspects [Risks Related to Our Financial Position and Capital Needs](index=18&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Capital%20Needs) This section highlights the company's need for substantial additional capital to fund operations and the risks associated with potential funding shortfalls - The company requires substantial additional capital to finance operations, research and development, preclinical testing, clinical trials, regulatory approvals, manufacturing, marketing, and sales capabilities[103](index=103&type=chunk)[104](index=104&type=chunk) - As of March 31, 2020, the company had **$139.4 million** in cash and cash equivalents, expected to fund operations through **2022**, but future capital requirements are uncertain[104](index=104&type=chunk)[75](index=75&type=chunk) - Failure to obtain necessary financing could lead to delays, reductions, or termination of research and development programs and preclinical studies or clinical trials, or corporate restructuring activities[106](index=106&type=chunk) - The company has incurred significant losses in every quarter since inception, with a net loss of **$8.6 million** for the three months ended March 31, 2020, and an accumulated deficit of **$308.2 million**[108](index=108&type=chunk) - The company currently has no source of product revenue and may never become profitable; its ability to generate revenue depends on the successful commercialization of any products developed[111](index=111&type=chunk) [Risks Related to Discovery, Development and Commercialization](index=20&type=section&id=Risks%20Related%20to%20Discovery%2C%20Development%20and%20Commercialization) This section details the inherent risks in developing and commercializing product candidates, including preclinical failure, regulatory hurdles, and clinical trial delays - All product candidates, including NL-201, are in preclinical or earlier stages of development, and the risk of failure is high, with no regulatory approvals obtained yet[120](index=120&type=chunk) - NL-201 is a de novo protein, and this new class of therapeutics has not been previously tested in humans, posing risks of immunologic reactions or unforeseen interactions[130](index=130&type=chunk)[136](index=136&type=chunk) - Preclinical and clinical development is a lengthy, complex, and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future trial results[138](index=138&type=chunk) - Delays in clinical trials can arise from various factors, including inability to generate sufficient preclinical data, regulatory disagreements, patient enrollment issues, or unforeseen safety concerns, leading to increased costs and delayed revenue generation[140](index=140&type=chunk)[141](index=141&type=chunk)[143](index=143&type=chunk) - Failure to obtain regulatory approval in international jurisdictions would prevent any future product candidates from being marketed outside the United States[146](index=146&type=chunk) - Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for obtaining marketing approval and affect product prices[147](index=147&type=chunk)[151](index=151&type=chunk) [Risks Related to Our Reliance on Third Parties](index=31&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) This section addresses risks associated with relying on third parties for clinical trials, manufacturing, and potential collaboration agreements - The company intends to rely on third-party clinical investigators, CROs, and consultants for preclinical studies and clinical trials, which reduces control over timing, quality, and other aspects of these activities[171](index=171&type=chunk) - Reliance on third-party contract manufacturers for drug substances, products, and services exposes the company to risks of supply limitations, quality issues, and regulatory non-compliance[174](index=174&type=chunk)[175](index=175&type=chunk) - Manufacturing biopharmaceuticals is complex and susceptible to product loss due to contamination, equipment failure, and scaling difficulties, which could delay clinical trials or commercialization[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) - Future collaboration agreements may not lead to development or commercialization of product candidates, as collaborators have significant discretion over resource allocation and may pursue competing products[184](index=184&type=chunk)[187](index=187&type=chunk) - Conflicts with collaborators could arise concerning data interpretation, milestone achievement, or intellectual property, potentially delaying or preventing product development and commercialization[189](index=189&type=chunk) [Risks Related to Our Business and Operations](index=39&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Operations) This section covers operational risks, including the impact of COVID-19, organizational growth, personnel retention, regulatory compliance, and cybersecurity - The COVID-19 outbreak could adversely impact preclinical development activities and planned clinical trials due to potential disruptions in the supply chain, regulatory processes, and patient enrollment[193](index=193&type=chunk) - The company needs to grow its organization and manage expansion, which requires continuous improvement of operational, financial, and management controls[197](index=197&type=chunk) - Success depends on the ability to attract and retain qualified key management and technical personnel in a highly competitive market[198](index=198&type=chunk)[199](index=199&type=chunk) - Relationships with healthcare professionals and third-party payors are subject to extensive anti-kickback, fraud and abuse, privacy, and transparency laws, which could expose the company to significant penalties for non-compliance[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) - Product liability lawsuits against the company could result in substantial liabilities, decreased demand for products, and significant reputational harm[205](index=205&type=chunk) - Future acquisitions could disrupt business, cause dilution to stockholders, and pose numerous operational and financial risks, including integration challenges[207](index=207&type=chunk) - Computer system failures or security breaches could adversely affect business operations and result in the loss, misappropriation, or unauthorized access to confidential information[209](index=209&type=chunk) - Business disruptions from natural disasters or other events could seriously harm future revenues and financial condition[210](index=210&type=chunk) - The ability to use U.S. net operating losses (NOLs) to offset future taxable income will be subject to certain limitations due to historical ownership changes[211](index=211&type=chunk) - Recent tax reform legislation (Tax Cuts and Jobs Act) could adversely affect the company's business and financial condition[212](index=212&type=chunk) [Risks Related to Intellectual Property](index=44&type=section&id=Risks%20Related%20to%20Intellectual%20Property) This section discusses the critical importance of obtaining and maintaining robust patent protection and safeguarding trade secrets for the company's product candidates and technology - The company's success depends on its ability to obtain, maintain, and enforce patent protection for its product candidates, Neoleukin platform technology, and other proprietary technologies[213](index=213&type=chunk) - There is no guarantee that pending patent applications will result in issued patents, or that issued patents will not be found invalid, unenforceable, or too narrow to provide meaningful protection[215](index=215&type=chunk)[216](index=216&type=chunk) - The patent prosecution process is expensive, time-consuming, and unpredictable, with varying standards applied by patent offices globally[215](index=215&type=chunk)[219](index=219&type=chunk) - Failure to protect the confidentiality of trade secrets, including unpatented know-how and proprietary information, would harm the company's business and competitive position[225](index=225&type=chunk) - Protecting intellectual property rights throughout the world is prohibitively expensive, and foreign laws may not protect these rights to the same extent as U.S. laws[227](index=227&type=chunk)[228](index=228&type=chunk) [Risks Related to Ownership of Our Common Stock](index=48&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) This section addresses risks related to the volatility of common stock, control by principal stockholders, potential dilution, and anti-takeover provisions - The trading price of the company's common stock has been and will likely continue to be volatile, influenced by factors such as competitive products, regulatory actions, clinical trial results, and general market conditions[231](index=231&type=chunk)[234](index=234&type=chunk) - Principal stockholders, directors, and management beneficially own a majority of the outstanding voting stock, enabling them to exert significant control over matters requiring stockholder approval[236](index=236&type=chunk) - Future sales and issuances of common stock or rights to purchase common stock, including under equity incentive plans, could result in additional dilution of existing stockholders' percentage ownership and cause the stock price to fall[247](index=247&type=chunk) - Provisions in the company's charter documents and Delaware law may have anti-takeover effects, which could discourage an acquisition even if beneficial to stockholders[249](index=249&type=chunk)[250](index=250&type=chunk) - Exclusive forum provisions in the restated certificate of incorporation and amended and restated bylaws may limit a stockholder's ability to bring claims in a judicial forum they find favorable[251](index=251&type=chunk)[253](index=253&type=chunk) - If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the business, the stock price and trading volume could decline[254](index=254&type=chunk) [Item 2. Unregistered Sale of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sale%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds during the reporting period - None[255](index=255&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[256](index=256&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[257](index=257&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - Not applicable[258](index=258&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including amended bylaws, an employment agreement, certifications, and XBRL documents - Includes Amended and Restated Bylaws (Exhibit 3.1), Employment Agreement for Robert Ho (Exhibit 10.1), CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1), and XBRL Instance Document and Taxonomy Extensions (Exhibits 101.INS, SCH, CAL, DEF, LAB, PRE)[260](index=260&type=chunk) [SIGNATURES](index=55&type=section&id=SIGNATURES) This section contains the official signatures of the company's principal executive and financial officers - The report was signed on May 6, 2020, by Jonathan G. Drachman, President and Chief Executive Officer, and Robert Ho, Chief Financial Officer[264](index=264&type=chunk)[265](index=265&type=chunk)

Neoleukin Therapeutics, Inc. (NLTX) Q4 2019 Earnings Conference Call March 12, 2020 4:30 PM ET Company Participants Julie Rathbun - Communications Jonathan Drachman - CEO, President & Interim Chairman Kamran Alam - Interim CFO, VP, Finance & Corporate Secretary Conference Call Participants Tyler Van Buren - Piper Sandler & Co. Charles Zhu - Guggenheim Securities Arlinda Lee - Canaccord Genuity Operator Good afternoon, and thank you for joining us today for the Neoleukin Therapeutics Conference Call. [Operat ...

Table of Contents 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 number: 001-36327 Neoleukin Therapeutics, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdic ...

neoleukin" THERAPEUTICS De novo proteins for immunotherapy ̸ January 2020 Forward Looking Statements Certain of the statements made in these slides and the accompanying oral presentation are forward looking, including those relating to Neoleukin's business, strategy, future operations, advancement of its product candidates and product pipeline, clinical development of its product candidates, including expectations regarding timing of regulatory submissions and initiation of clinical trials, regulatory requi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Neoleukin Therapeutics, Inc. (Exact name of registrant as specified in its charter) Delaware 98-0542593 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) (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, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 For the transition period from to Commission file number: 001-36327 Aquinox Pharmaceuticals, Inc. (Exact name of registrant as specified in its charter) Delaware 98-0542593 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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, 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 number: 001-36327 Aquinox Pharmaceuticals, Inc. (Exact name of registrant as specified in its charter) Delaware 98-054259 ...

Table of Contents 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 number: 001-36327 Aquinox Pharmaceuticals, Inc. (Exact name of registrant as specified in its charter) Delaware 98-0542593 (St ...