Scholar Rock(SRRK) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents unaudited consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed notes for Q1 2025 and FY 2024 Consolidated Balance Sheets The consolidated balance sheets show a decrease in total assets and stockholders' equity from December 31, 2024, to March 31, 2025, primarily driven by a reduction in cash, cash equivalents, and marketable securities Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $407,553 | $474,922 | | Total liabilities | $95,220 | $106,288 | | Total stockholders' equity | $312,333 | $368,634 | | Cash and cash equivalents | $137,926 | $177,878 | | Marketable securities | $226,449 | $259,400 | Consolidated Statements of Operations and Comprehensive Loss The company reported an increased net loss for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to higher operating expenses, particularly in general and administrative costs and research and development Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Research and development | $48,678 | $43,094 | | General and administrative | $28,412 | $15,325 | | Total operating expenses | $77,090 | $58,419 | | Loss from operations | $(77,090) | $(58,419) | | Other income (expense), net | $2,367 | $1,566 | | Net loss | $(74,723) | $(56,853) | | Net loss per share, basic and diluted | $(0.67) | $(0.59) | - Net loss increased by $17.87 million (31.4%) from $56.85 million in Q1 2024 to $74.72 million in Q1 2025[15][109] Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from $368.6 million at December 31, 2024, to $312.3 million at March 31, 2025, primarily due to the net loss incurred during the period, partially offset by equity-based compensation expense and proceeds from stock option exercises Consolidated Statements of Stockholders' Equity (in thousands) | Metric | December 31, 2024 (in thousands) | March 31, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Stockholders' Equity | $368,634 | $312,333 | | Net loss | $(74,723) | N/A | | Equity-based compensation expense | N/A | $13,413 | | Exercise of stock options | N/A | $5,038 | Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased in Q1 2025 compared to Q1 2024, while investing activities provided cash, mainly from marketable securities. Financing activities provided less cash in Q1 2025, influenced by debt refinancing and stock option exercises Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash used in operating activities | $(78,675) | $(49,785) | | Net cash provided by investing activities | $34,554 | $33,384 | | Net cash provided by financing activities | $4,169 | $6,525 | | Net decrease in cash, cash equivalents and restricted cash | $(39,952) | $(9,876) | | Cash, cash equivalents and restricted cash, end of period | $140,333 | $94,386 | - Net cash used in operating activities increased by $28.89 million, from $49.78 million in Q1 2024 to $78.67 million in Q1 2025[21][123][124] Notes to Consolidated Financial Statements Provides detailed disclosures on business, accounting policies, financial instruments, equity, debt, and other financial details, offering crucial context to the financial statements 1. Nature of the Business Scholar Rock is a late-stage biopharmaceutical company focused on neuromuscular diseases, cardiometabolic disorders, and cancer, leveraging its TGFβ superfamily biology platform - Apitegromab for SMA: Positive top-line results from pivotal Phase 3 SAPPHIRE trial announced October 2024. U.S. BLA submitted January 2025 (priority review, PDUFA target action date September 22, 2025). EMA MAA submitted March 2025. Commercial launch in U.S. expected Q4 2025, Europe in 2026[23][85] - SRK-439 for cardiometabolic disorders (including obesity): Preclinical data supports potential to increase lean mass with GLP-1 RA. IND submission planned Q3 2025. Phase 2 EMBRAZE proof-of-concept trial with apitegromab initiated May 2024, enrollment completed September 2024, top-line results expected Q2 2025[24][88][91] - SRK-181 for checkpoint inhibitor-resistant cancers: Phase 1 DRAGON trial enrollment completed December 2023. Safety, efficacy, and biomarker data presented June 2024 (ASCO) and November 2024 (SITC), showing encouraging responses in heavily pretreated patients[25][26][92] - The Company believes existing cash, cash equivalents, and marketable securities at March 31, 2025, will fund operations for at least one year from the financial statements' issuance date[31] 2. Summary of Significant Accounting Policies Significant accounting policies remain consistent with 2024 Annual Report; recent ASUs are noted, with no material impact from ASU 2023-07 - No material changes to significant accounting policies from the 2024 Annual Report on Form 10-K[32] - ASU 2023-07 (Segment Reporting) adopted, no material impact on financial position or results of operations[37] - ASU 2023-09 (Income Tax Disclosures) effective January 1, 2025, not early adopted, impact on disclosures being evaluated[38] - ASU 2024-03 (Expense Disaggregation) effective after December 15, 2026, impact on disclosures being evaluated[39] 3. Fair Value of Financial Assets and Liabilities Financial assets measured at fair value are primarily Level 1, with no transfers between levels; debt carrying value approximates fair value Fair Value of Financial Assets (in thousands) | Asset Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------- | :----------------------------- | :----------------------------- | | Money market funds (Level 1) | $87,071 | $97,290 | | U.S. treasury obligations (Level 1) | $31,907 | $63,171 | | Marketable securities (U.S. treasury & government agency securities) (Level 1) | $226,449 | $259,400 | | Total assets at fair value | $345,427 | $419,861 | - All financial assets measured at fair value are categorized as Level 1, indicating valuation using quoted market prices[40] 4. Marketable Securities Marketable securities, classified as available-for-sale, include U.S. treasury and government agency securities, with some unrealized losses considered temporary Marketable Securities (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------- | :----------------------------- | :----------------------------- | | Estimated Fair Value of Marketable Securities | $226,449 | $259,400 | | Aggregate Fair Value of Securities with Unrealized Losses | $51,000 | $23,900 | | Number of Investments with Unrealized Losses | 11 | 12 | - Unrealized losses are considered temporary, and the company has the ability and intent to hold these investments until recovery of amortized cost or maturity[43] 5. Prepaid Expenses and Other Assets Prepaid expenses and other current assets significantly increased from December 2024 to March 2025, mainly due to prepaid external R&D expenses Prepaid Expenses and Other Assets (in thousands) | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Prepaid external R&D expenses | $13,739 | $7,716 | | Total prepaid expenses and other current assets | $20,872 | $13,887 | | Total other long-term assets | $2,857 | $2,945 | 6. Accrued Expenses Accrued expenses decreased from December 2024 to March 2025, primarily due to lower accrued payroll, partially offset by increased professional services and R&D Accrued Expenses (in thousands) | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Accrued external R&D expense | $12,853 | $12,116 | | Accrued payroll and related expenses | $8,386 | $14,776 | | Accrued professional services expense | $5,652 | $3,296 | | Total accrued expenses | $27,640 | $31,067 | 7. Common Stock Authorized common stock increased to 300 million shares; a public offering raised $324.4 million net, and 26.04 million warrants remain outstanding - Authorized common stock increased from 150 million to 300 million shares in June 2024[47] - October 2024 public offering: Issued 10,265,488 common shares and pre-funded warrants for 353,983 shares, raising approximately $324.4 million net[48] - ATM program: Sold 619,290 shares for $5.2 million net proceeds as of March 31, 2025; no sales in Q1 2025[49] Outstanding Warrants as of March 31, 2025 | Warrants | Outstanding as of March 31, 2025 | | :----------------- | :----------------------------- | | Pre-funded warrants | 17,362,147 | | Common warrants | 8,678,664 | 8. Equity-Based Compensation Equity-based compensation expense significantly increased in Q1 2025 due to headcount and award modifications, with $134.95 million unrecognized expense remaining Equity-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Research and development expense | $4,035 | $3,531 | | General and administrative expense | $9,378 | $4,633 | | Total equity-based compensation | $13,413 | $8,164 | Unrecognized Equity-Based Compensation Expense (in thousands) | Award Type | Unrecognized Expense (in thousands) | Weighted Average Remaining Period of Recognition (years) | | :---------------- | :-------------------------------- | :------------------------------------------------------- | | RSUs | $63,427 | 2.7 | | Stock options | $71,527 | 2.6 | | Total | $134,954 | N/A | - Total fair value of RSUs vested during Q1 2025 was $28.3 million[53] 9. Commitments and Contingencies The company's primary commitment is an amended operating lease for its Cambridge headquarters, with no material legal proceedings during the period - Lease for corporate headquarters extended in May 2024 for approximately two years, with an option for a five-year extension[57] Lease Metrics (in thousands) | Lease Metric | Three Months Ended March 31, 2025 | | :------------------------------------ | :-------------------------------- | | Operating lease cost | $1,714 (in thousands) | | Variable lease cost | $392 (in thousands) | | Total lease cost | $2,106 (in thousands) | | Weighted average remaining lease term | 2.4 years | | Weighted average incremental borrowing rate | 13.1% | - No material legal proceedings during the three months ended March 31, 2025 and 2024[59] 10. Debt An Amended and Restated Loan and Security Agreement with Oxford Finance LLC provides up to $200.0 million, extending interest-only payments through March 2029 - Amended and Restated Loan and Security Agreement with Oxford Finance LLC provides up to $200.0 million in term loans[69] - Interest-only payment period extended through March 2029, with principal payments commencing April 2029[69] - Annual interest rate is the greater of (i) 1-Month CME Term SOFR (min 3%) plus (b) 5.5%[70] 11. Net Loss per Share Basic and diluted net loss per share are identical due to the net loss, rendering 21.67 million common stock equivalents anti-dilutive - Basic and diluted net loss per share are the same because the company incurred a net loss, making potentially dilutive securities anti-dilutive[71][72] Common Stock Equivalents Excluded from Diluted EPS Calculation | Common Stock Equivalents | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------- | :-------------------------------- | :-------------------------------- | | RSUs | 3,701,687 | 3,089,689 | | Stock options | 9,287,577 | 9,048,138 | | Warrants | 8,678,664 | 9,157,496 | | Total | 21,667,928 | 21,295,323 | 12. Segment Reporting The company operates as a single segment, with CODM reviewing consolidated financials; operating expenses increased, particularly for SMA and cardiometabolic/obesity R&D - The company operates as a single segment, with the CODM reviewing consolidated financial information[74] Operating Expense Categories (in thousands) | Operating Expense Category | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Employee related expense | $22,938 | $16,080 | | External R&D expense - SMA | $17,074 | $16,201 | | External R&D expense - oncology | $1,110 | $2,747 | | External R&D expense - cardiometabolic/obesity | $6,348 | $4,032 | | External expense - G&A | $8,942 | $5,001 | | Employee related equity-based compensation expense | $13,413 | $8,164 | | Net loss | $74,723 | $56,853 | 13. Subsequent Events Effective April 27, 2025, new CEO, President of R&D, COO, and CFO were appointed, receiving new equity awards - David Hallal appointed CEO, Akshay Vaishnaw as President of Research and Development, R. Keith Woods as COO, and Vikas Sinha as CFO, effective April 27, 2025[76] - New executives received stock options, RSUs, and PSUs as part of their appointments[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis covers financial condition, operational results, biopharmaceutical focus, recent developments, operating expenses, liquidity, capital resources, and critical accounting estimates Overview Scholar Rock is a late-stage biopharmaceutical company developing treatments for neuromuscular diseases, cardiometabolic disorders, and cancer, expecting continued operating losses - Scholar Rock is a late-stage biopharmaceutical company focused on neuromuscular diseases, cardiometabolic disorders, and other serious diseases, utilizing a proprietary platform for monoclonal antibodies targeting latent growth factors[82] - Key product candidates: Apitegromab (SMA, potential in other neuromuscular disorders and obesity), SRK-439 (cardiometabolic disorders), SRK-181 (checkpoint inhibitor-resistant cancers), SRK-373 (fibrotic diseases), SRK-256 (iron-restricted anemias)[83][89] - The company has incurred significant operating losses since inception, with a net loss of $74.7 million for Q1 2025 and an accumulated deficit of $997.4 million as of March 31, 2025. Expects continued significant losses[94] Recent Developments The company amended its Loan and Security Agreement, increasing borrowing capacity and extending interest-only payments, alongside a significant management transition - Amended and Restated Loan and Security Agreement with Oxford Finance LLC on February 10, 2025, for up to $200.0 million, extending interest-only payments through March 2029[97] - Effective April 27, 2025, David Hallal appointed CEO, Akshay Vaishnaw as President of Research & Development, R. Keith Woods as COO, and Vikas Sinha as CFO[98] Financial Operations Overview Outlines R&D, G&A, and Other Income (Expense), Net; R&D costs are expensed as incurred, G&A expected to rise for commercialization, and other income is primarily interest Research and Development R&D expenses, including employee costs and third-party activities, are expensed as incurred and are expected to remain substantial as product candidates advance - R&D expenses are expensed as incurred and include employee costs, third-party research, clinical trials, manufacturing, and regulatory compliance[99][100] - R&D costs are expected to remain substantial due to ongoing development of apitegromab (SMA, obesity), SRK-439, and pipeline expansion[103][112] General and Administrative G&A expenses cover employee-related costs, facility, legal, and professional services, projected to increase with apitegromab's commercialization infrastructure build-out - G&A expenses include employee-related costs (salaries, benefits, equity-based compensation), facility costs, legal fees, and professional services[106] - G&A expenses are expected to increase as the company invests in commercialization infrastructure for apitegromab[106][113] Other Income (Expense), Net Other income (expense), net, primarily reflects interest income from cash, cash equivalents, and marketable securities, offset by interest expense on debt - Other income (expense), net, is mainly interest income from cash, cash equivalents, and marketable securities, offset by interest expense on debt[108] Results of Operations Total operating expenses increased by 32.0%, leading to a 31.4% higher net loss in Q1 2025, driven by significant increases in R&D and G&A expenses Summary of Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------- | | Total operating expenses | $77,090 | $58,419 | $18,671 | 32.0% | | Loss from operations | $(77,090) | $(58,419) | $(18,671) | 32.0% | | Other income (expense), net | $2,367 | $1,566 | $801 | 51.1% | | Net loss | $(74,723) | $(56,853) | $(17,870) | 31.4% | Research and Development Expenses R&D expense increased by 13.0% to $48.7 million in Q1 2025, driven by higher external costs for apitegromab and SRK-439, and increased employee-related costs Research and Development Expenses (in thousands) | R&D Expense Category | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change ($) | Change (%) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------- | :--------- | | Apitegromab | $19,301 | $18,248 | $1,053 | 5.8% | | SRK-181 | $1,110 | $2,747 | $(1,637) | (59.6)% | | SRK-439 | $4,279 | $1,985 | $2,294 | 115.6% | | Other early programs and unallocated costs | $1,455 | $741 | $714 | 96.4% | | Total external costs | $26,145 | $23,721 | $2,424 | 10.2% | | Employee compensation and benefits | $18,110 | $14,928 | $3,182 | 21.3% | | Total R&D expense | $48,678 | $43,094 | $5,584 | 13.0% | - Increase in apitegromab costs primarily due to drug supply manufacturing, partially offset by decreased clinical trial costs for TOPAZ and SAPPHIRE[110] - SRK-439 preclinical and manufacturing development costs increased by 115.6%[110] - SRK-181 costs decreased by 59.6% as Phase 1 DRAGON trial enrollment completed[110][112] General and Administrative Expenses G&A expense surged by 85.4% to $28.4 million in Q1 2025, driven by increased employee-related costs, equity-based compensation, and professional service fees - General and administrative expense increased by $13.1 million (85.4%) to $28.4 million in Q1 2025[109][113] - Key drivers: $4.2 million increase in employee-related costs, $4.7 million increase in non-cash equity-based compensation, and $4.0 million increase in professional service fees[113] Other Income (Expense), Net Other income (expense), net, increased by $0.8 million (51.1%) in Q1 2025, primarily due to higher interest income from increased cash balances - Other income (expense), net, increased by $0.8 million (51.1%) to $2.37 million in Q1 2025, driven by higher interest income[109][114] Liquidity and Capital Resources Liquidity decreased in Q1 2025, with $364.4 million in cash, cash equivalents, and marketable securities; additional financing will be required for full development and commercialization Sources of Liquidity The company funds operations through equity, collaborations, and debt; total cash, cash equivalents, and marketable securities decreased by $72.9 million in Q1 2025 - Primary funding sources: equity financings, research collaborations, and debt facilities[115] Cash, Cash Equivalents, and Marketable Securities (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $137,926 | $177,878 | | Marketable securities | $226,449 | $259,400 | | Total cash, cash equivalents and marketable securities | $364,375 | $437,278 | - Total cash, cash equivalents, and marketable securities decreased by $72.9 million in Q1 2025, primarily due to cash used in operations[116] - Amended and Restated Loan and Security Agreement with Oxford provides up to $200 million in borrowing capacity[120] Cash Flows Net cash used in operating activities significantly increased to $78.7 million in Q1 2025, while investing activities provided cash, and financing activities provided less cash Cash Flow Activities (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash used in operating activities | $(78,675) | $(49,785) | | Net cash provided by investing activities | $34,554 | $33,384 | | Net cash provided by financing activities | $4,169 | $6,525 | | Net decrease in cash, cash equivalents and restricted cash | $(39,952) | $(9,876) | - Net cash used in operating activities increased by $28.89 million YoY, driven by higher net loss and changes in operating assets/liabilities[123][124] - Net cash provided by financing activities in Q1 2025 was primarily from stock option exercises and debt refinancing, partially offset by debt extinguishment[126] Funding Requirements Existing capital is expected to fund operations into 2027, but substantial additional capital is required for full development and commercialization, to be sought through various financing methods - Existing cash, cash equivalents, and marketable securities are expected to fund operations into 2027[128] - Additional capital is required to complete clinical development and commercialization for current programs[128] - Future funding requirements are highly uncertain and depend on factors like clinical trial costs, manufacturing, regulatory review, and commercialization activities[128][129][376][378] - Plans to finance future cash needs through equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements[131][377] Critical Accounting Estimates No material changes to critical accounting estimates from the 2024 Annual Report on Form 10-K were reported - No material changes to critical accounting estimates from the 2024 Annual Report on Form 10-K[134] Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements during the periods presented or currently - No off-balance sheet arrangements during the periods presented or currently[135] Recent Accounting Pronouncements Reviewed recently issued accounting standards; no material impact on financial statements other than as disclosed in Note 2 - Reviewed all recently issued standards; no material impact on financial statements other than as disclosed in Note 2[136] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Scholar Rock Holding Corporation is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[137] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls over financial reporting - Disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025[139] - No material changes in internal controls over financial reporting occurred during the three months ended March 31, 2025[140] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings or claims that are reasonably expected to have a material adverse effect on its business - No material legal proceedings or claims that would individually or in aggregate have a material adverse effect on the business[141] Item 1A. Risk Factors Outlines significant risks that could materially and adversely affect Scholar Rock's business, financial condition, and results of operations, spanning development, regulatory, commercial, operational, IP, financial, and stock volatility Summary of the Material Risks Associated with Our Business The company faces numerous material risks, including unpredictable regulatory approval, commercialization challenges, development uncertainties, reliance on third parties, IP protection issues, ongoing net losses, and stock price volatility - Regulatory approval process is lengthy, time-consuming, and unpredictable, potentially delaying or preventing approval of product candidates[144] - Lack of prior commercialization experience and challenges in building commercial infrastructure for apitegromab could negatively impact business[144] - Reliance on third-party manufacturers and clinical trial conductors poses risks of supply limitations, interruptions, or quality issues[150] - Difficulty in protecting intellectual property rights and potential infringement claims from third parties could harm business[150] - History of net losses and future capital requirements necessitate additional financing, which may not be available on acceptable terms[150] Risks Related to Product Development, Regulatory Approval and Commercialization Substantial risks include lengthy regulatory approval, commercialization challenges, clinical trial delays, unpredictable early-stage results, reliance on third parties, limited benefits of special designations, and market acceptance issues - Regulatory approval process is lengthy, time-consuming, and inherently unpredictable; failure to obtain or delays in approval for apitegromab, SRK-181, SRK-439, and future candidates are significant risks[151] - The company has no prior commercialization experience and is building sales, marketing, and distribution capabilities for apitegromab, which, if unsuccessful, could negatively impact its launch[154][155] - Product development is expensive and uncertain; delays in clinical trials due to various factors (e.g., trial design, enrollment, safety issues, regulatory requirements) could increase costs and jeopardize commercialization[163][165][171] - Preclinical and early-stage clinical trial results may not be predictive of future outcomes, and interim data are subject to change, potentially leading to setbacks in later stages[173][176][177] - Reliance on third parties (CROs, manufacturers) for clinical trials and preclinical studies introduces risks if they fail to meet contractual duties, deadlines, or regulatory requirements[181][187] - Orphan Drug, Rare Pediatric Disease, Fast Track, and PRIME designations do not guarantee faster development, approval, or market exclusivity, and their benefits may be limited or revoked[189][190][193][197][200] - Even if approved, product candidates may fail to achieve market acceptance due to factors like efficacy, safety, pricing, reimbursement, and competition[214] Risks Related to Our Business and Operations Operational risks include reliance on third-party manufacturers, scaling challenges, supply chain disruptions, managing growth, retaining personnel, regulatory compliance, cybersecurity, product liability, and business interruptions - Reliance on a limited number of third-party contract manufacturers for all product supplies (clinical and commercial) creates risks of supply limitations, interruptions, or quality issues[227] - Scaling manufacturing processes for commercial supply is a challenge, and failure to do so in a timely or cost-effective manner could delay development and commercialization[233][235] - Economic uncertainty, geopolitical instability, high inflation, and tariffs could adversely impact supply chains, development, and financial results[237][239] - Challenges in managing organizational growth, recruiting, and retaining highly skilled personnel, especially during management transitions, could impair development and commercialization efforts[240][243][244][246] - Internal computer systems and those of third-party contractors are vulnerable to security breaches, incidents, or compromises, risking data loss, operational disruption, and legal liability[247][248] - Misconduct by employees or third parties, including noncompliance with regulatory standards (e.g., FDA, EMA, anti-kickback, fraud and abuse laws), could lead to significant penalties, reputational harm, and operational restrictions[249][251] - Ongoing healthcare legislative and regulatory reforms, including pricing and reimbursement changes, could adversely affect market demand, pricing, and profitability of products[252][295][298] - Failure to comply with health care privacy and data protection laws (e.g., HIPAA, EU GDPR, UK GDPR, CCPA) could result in enforcement actions, litigation, and adverse publicity[256][258][260][261][264][267] - The use of artificial intelligence (AI) presents risks including security risks to confidential information, intellectual property infringement, and increased regulatory burden (e.g., EU AI Act)[268][269][270][273] - Non-compliance with international laws (e.g., FCPA, export control) could lead to substantial penalties and restrict global operations[274][277] - Failure to comply with environmental, health, and safety laws could result in fines, penalties, or costly clean-up liabilities[278][280] - Product liability lawsuits, if brought against the company, could result in substantial liabilities, limit commercialization, and exhaust insurance/capital resources[282][283][285] - Concentration of laboratory operations in one location and reliance on third parties for clinical trials and manufacturing facilities expose the company to business interruptions from natural disasters or other unforeseen events[286][287][289] - Coverage and reimbursement for product candidates, if approved, may be limited or unavailable, making it difficult to sell profitably and impacting revenue[290][294][302] - Inability to enter into or maintain successful collaborations with third parties could adversely affect product discovery, development, and commercialization[303][304][306][308] Risks Related to Intellectual Property Success relies on protecting IP; challenges include costly patenting, infringement claims, licensing difficulties, evolving patent laws, and inadequate trade secret protection - Commercial success depends on obtaining and maintaining patent, trademark, and trade secret protection for proprietary technologies and product candidates[310] - Patenting is expensive, time-consuming, and uncertain; patent applications may not result in issued patents, or issued patents may be challenged, narrowed, or invalidated[313][314] - Third-party claims of intellectual property infringement could lead to expensive litigation, substantial damages, injunctions, or the need to obtain costly licenses[337][338][342] - Dependence on in-licensed intellectual property means failure to comply with license obligations or termination of licenses could result in loss of significant rights[322] - Inability to obtain or maintain necessary rights to develop future product candidates on acceptable terms could hinder business growth[327][328][329] - Changes in patent law (e.g., America Invents Act, Supreme Court rulings) could diminish the value of patents, increasing uncertainty and costs[331][332][335][336] - Inadequate protection of trade secrets, including through disclosure or independent development by competitors, would harm competitive position[364][366] - Limited foreign intellectual property rights mean inability to protect inventions globally, potentially allowing competitors to use technologies in other jurisdictions[356] - Patent terms may be inadequate, and inability to obtain patent term extensions or data exclusivity could allow competitors to enter the market sooner[361][363] Risks Related to Our Financial Condition and Capital Requirements The company expects continued net losses, requiring substantial additional capital; NOL carryforwards may be limited, and financial services industry risks and loan restrictions impact flexibility - The company has incurred net losses since inception ($74.7 million in Q1 2025, accumulated deficit of $997.4 million as of March 31, 2025) and anticipates continued losses[371] - Substantial additional capital is required to fund operations, complete product development, and commercialization, beyond existing cash, cash equivalents, and marketable securities (expected to last into 2027)[374][375] - Ability to use net operating loss carryforwards ($512.6 million federal, $498.8 million state as of Dec 31, 2024) and tax credit carryforwards may be limited by ownership changes under Section 382 of the Code[381] - Adverse developments in the financial services industry (e.g., bank failures, liquidity problems) could impair access to funding sources and negatively impact financial condition[382][385][386] - Potential for losses on marketable securities due to interest rate increases or deteriorating economic conditions, despite a focus on capital preservation[389][390] - Terms of the Amended and Restated Loan and Security Agreement place restrictions on operating and financial flexibility; default could accelerate repayment obligations[391][392][393] Risks Related to Our Common Stock Stock price is highly volatile, no dividends are planned, significant insider ownership exists, scaled disclosures may reduce investor appeal, public company costs are high, and potential dilution from warrants and ATM sales is a risk - The price of common stock is volatile, subject to fluctuations from operating results, acquisitions, collaborations, accounting changes, and litigation[395][396] - No intention to pay dividends; returns are limited to stock appreciation, and debt facility restricts dividend payments[397] - Executive officers, directors, and affiliates own approximately 9% of outstanding voting stock, allowing significant influence over stockholder approval matters[398] - As a 'smaller reporting company,' the company uses scaled disclosures, which may make its common stock less attractive to some investors and increase price volatility[399][402] - Operating as a public company incurs significant legal, accounting, and compliance costs, diverting management time[403] - Failure to maintain effective internal control over financial reporting could lead to inaccurate financial reports, fraud, and loss of investor confidence[405] - Broad discretion in the use of cash, cash equivalents, and marketable securities may not always increase investment value[408] - Anti-takeover provisions in charter documents and Delaware law could delay or prevent a change of control, limiting stock price and hindering stockholder actions[409][410] - Securities litigation is expensive and could divert management attention, harming business and stock price[414] - Exclusive forum provisions in bylaws could limit stockholders' ability to choose a favorable judicial forum for disputes[415] - Substantial number of outstanding warrants and equity awards (17.36 million pre-funded warrants, 8.68 million common warrants, 12.99 million stock options/RSUs) could result in significant dilution[416] - Sales of a substantial number of common stock shares, including through the ATM program, could cause the stock price to fall[419][420] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - No unregistered sales of equity securities during the three months ended March 31, 2025[422] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities during the three months ended March 31, 2025[424] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures during the period - No mine safety disclosures during the three months ended March 31, 2025[424] Item 5. Other Information Details Rule 10b5-1 trading plans adopted or terminated by directors and officers in Q1 2025 for stock sales and tax obligations - Several directors and officers adopted Rule 10b5-1 trading plans in February and March 2025 for the sale of common stock[425] - Plans are intended to satisfy tax obligations upon RSU vesting or for general stock sales[426][427] - Former COO and CFO, Ted Myles, terminated his trading plan in March 2025[425] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including corporate documents, loan agreements, employment agreements, equity plans, and certifications - Includes Amended and Restated Certificate of Incorporation, Amended and Restated Loan and Security Agreement, Separation Agreement, and Equity Plan amendments[429] - Certifications of Principal Executive Officer and Principal Financial Officer are filed herewith[429][430]