OnKure Therapeutics, Inc.(OKUR) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents OnKure Therapeutics, Inc.'s unaudited condensed consolidated financial statements and accompanying notes Condensed Consolidated Balance Sheets | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $83,374 | $110,761 | | Total current assets | $84,552 | $113,003 | | Total assets | $86,070 | $114,907 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | Total current liabilities | $7,597 | $10,530 | | Total liabilities | $7,904 | $11,079 | | Total stockholders' equity | $78,166 | $103,828 | | Total liabilities and stockholders' equity | $86,070 | $114,907 | Condensed Consolidated Statements of Operations and Comprehensive Loss | (in thousands, except share and per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $12,613 | $10,752 | $25,625 | $19,318 | | General and administrative | $3,711 | $3,591 | $7,699 | $4,857 | | Total operating expenses | $16,324 | $14,343 | $33,324 | $24,175 | | Loss from operations | $(16,324) | $(14,343) | $(33,324) | $(24,175) | | Interest income | $934 | $230 | $2,009 | $526 | | Net loss and comprehensive loss | $(15,390) | $(14,139) | $(31,315) | $(23,675) | | Net loss per share (Basic and diluted) | $(1.14) | $(44.82) | $(2.33) | $(75.22) | | Weighted average shares outstanding (Basic and diluted) | 13,509,080 | 315,478 | 13,466,942 | 314,747 | Condensed Consolidated Statements of Changes in Stockholders' Equity - Total stockholders' equity decreased from $103.8 million at December 31, 2024, to $78.2 million at June 30, 2025, primarily due to a net loss of $31.3 million for the six months ended June 30, 2025, partially offset by share-based compensation[28] - The accumulated deficit increased from $(154.7) million at December 31, 2024, to $(186.0) million at June 30, 2025, reflecting ongoing net losses[28] Condensed Consolidated Statements of Cash Flows | Cash Flows (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | | Operating activities | $(27,279) | $(17,102) | | Investing activities | $(31) | $(19) | | Financing activities | $(77) | $5,878 | | Net decrease in cash and cash equivalents | $(27,387) | $(11,243) | | Cash and cash equivalents, beginning of period | $110,761 | $29,876 | | Cash and cash equivalents, end of period | $83,374 | $18,633 | Notes to Condensed Consolidated Financial Statements 1. Organization and Business - OnKure Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on discovering and developing precision medicines for underserved cancers, utilizing a structure- and computational chemistry-driven drug design platform[33][109] - On October 4, 2024, Reneo Pharmaceuticals, Inc. completed a reverse recapitalization merger with Legacy OnKure, Inc., with Legacy OnKure being the accounting acquirer. Reneo changed its name to OnKure Therapeutics, Inc. and effected a 1:10 reverse stock split[8][9][34][35] - The company reported recurring losses from operations and an accumulated deficit of $186.0 million as of June 30, 2025, with cash and cash equivalents of $83.4 million. Management believes current cash resources are sufficient to fund operations for at least the next 12 months[38][41][114][115] 2. Summary of Significant Accounting Policies - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP for interim financial information and SEC rules, consolidating the Company and its wholly-owned subsidiary, OnKure, Inc[42] - The Company operates in a single operating segment: clinical research, with all equipment and property located in the United States[44][71] - Key accounting estimates include accruals for external research and development expenses and the fair value of stock options and restricted stock units[45] - Research and development costs are expensed as incurred, including employee-related expenses, third-party activities, manufacturing costs, and license fees[47] - Share-based compensation is measured at grant date fair value using the Black-Scholes model for options and recognized over the vesting period[49][50] - Cash and cash equivalents, primarily money market funds, are reported at cost approximating fair value and are classified as Level 1 inputs[54][82] - The Company recognizes right-of-use (ROU) assets and lease liabilities for operating leases with terms greater than one year, measured at the present value of unpaid lease payments using the estimated incremental borrowing rate[57][58] - The Company is evaluating the impact of recently issued accounting pronouncements, ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation), but does not anticipate a material impact from other pronouncements[59][60][61][62] 3. Merger Agreement and Concurrent Financing - On October 4, 2024, Reneo Pharmaceuticals, Inc. completed a merger with Legacy OnKure, Inc., with Legacy OnKure surviving as a wholly-owned subsidiary and being treated as the accounting acquirer in a reverse recapitalization[63][67] - In connection with the merger, 6,470,281 shares of Class A Common Stock and 686,527 shares of Class B Common Stock were issued to Legacy OnKure stockholders, and Reneo's common stock was reclassified into approximately 3,343,604 shares of Class A Common Stock[64] - A Concurrent Financing closed simultaneously with the merger, raising approximately $65.0 million in gross proceeds from the sale of 2,839,005 shares of Class A Common Stock, including the conversion of $6.0 million in convertible promissory notes and accrued interest[65] | Net Assets Acquired (in thousands) | Amount | | :--------------------------------- | :----- | | Cash and cash equivalents | $57,736 | | Short-term investments | $15,979 | | Other current assets | $690 | | Other assets | $553 | | Accrued expenses | $(9,072)| | Long-term operating lease liability| $(387) | | Net assets acquired | $65,499 | 4. Segment - The Company operates as a single reportable segment focused on clinical research, with no generated revenue and anticipated substantial expenses and operating losses[71][72] - The Chief Operating Decision Maker (CODM), comprised of the CFO and CEO, assesses financial performance using operating expenses and internal models, with segment assets and losses mirroring the Company's overall financial position[73][74] | Clinical Research Segment Operating Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Direct program expense | $7,491 | $5,680 | $15,363 | $11,033 | | Indirect program expense | $432 | $525 | $958 | $1,042 | | Workforce salaries and benefits | $4,343 | $3,832 | $8,750 | $7,188 | | Share-based compensation expense | $2,908 | $1,813 | $5,653 | $1,920 | | General corporate expenses | $1,150 | $2,493 | $2,600 | $2,992 | | Interest and other expense | $— | $26 | $— | $26 | | Segment net loss | $16,324 | $14,369 | $33,324 | $24,201 | 5. Leases - The Company leases office and lab facilities in Boulder, Colorado, expiring in December 2026 with a five-year extension option. An Irvine, California lease, assumed in the Reneo merger, was subleased in January 2025[76] | Lease Information (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $581 | $770 | | Current operating lease liabilities | $556 | $536 | | Noncurrent operating lease liabilities | $267 | $549 | | Total lease liabilities | $823 | $1,085 | | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $45 | $43 | $96 | $87 | | Variable lease expense | $29 | $47 | $74 | $94 | 6. Net Loss Per Share - Basic loss per share is calculated by dividing net loss by the weighted average common shares outstanding. Diluted net loss per share includes common stock equivalents unless their inclusion would be anti-dilutive[78] | Anti-Dilutive Securities Outstanding | June 30, 2025 | June 30, 2024 | | :----------------------------------- | :------------ | :------------ | | Outstanding common stock options | 3,054,036 | 195,841 | | Unvested restricted stock units | 59,983 | 213,819 | | Total | 3,114,019 | 409,660 | 7. Fair Value Measurements - The Company classifies its money market funds as Level 1 in the fair value hierarchy, using quoted prices in active markets, and these are included in cash and cash equivalents[82] - No assets or liabilities were transferred into or out of their fair value classifications during the six months ended June 30, 2025 and 2024[82] 8. Property and Equipment, Net | Property and Equipment, Net (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Lab equipment | $706 | $705 | | Leasehold improvements | $1,090 | $1,090 | | Computer hardware and software | $219 | $189 | | Furniture and fixtures | $160 | $160 | | Property and equipment, gross | $2,175 | $2,144 | | Less: accumulated depreciation and amortization | $(1,354) | $(1,119) | | Property and equipment, net | $821 | $1,025 | - Depreciation and amortization expense for the three months ended June 30, 2025, was $117 thousand, and for the six months ended June 30, 2025, was $235 thousand[85] 9. Accrued Expenses | Accrued Expenses (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Accrued compensation | $2,103 | $3,173 | | Accrued contract manufacturing costs | $1,384 | $1,565 | | Accrued clinical trial costs | $309 | $1,302 | | Accrued other | $864 | $986 | | Total accrued expenses | $4,660 | $7,026 | 10. Share-Based Compensation | Stock Options Activity | Number of Options | Weighted Average Exercise Price | | :--------------------- | :---------------- | :------------------------------ | | Outstanding - Dec 31, 2024 | 2,393,824 | $23.54 | | Granted | 774,400 | $4.98 | | Expired | (114,188) | $37.30 | | Outstanding - Jun 30, 2025 | 3,054,036 | $18.32 | | Exercisable - Jun 30, 2025 | 898,273 | $29.18 | | Restricted Stock Units (RSUs) Activity | Number of Shares | Weighted Average Grant Date Fair Value | | :------------------------------------- | :--------------- | :------------------------------------- | | Unvested balance - Dec 31, 2024 | 213,254 | $22.88 | | Granted | 17,054 | $3.07 | | Vested and released | (170,325) | $20.90 | | RSUs outstanding - Jun 30, 2025 | 59,983 | $22.89 | | Share-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $1,410 | $1,518 | $2,727 | $1,555 | | General and administrative | $1,498 | $295 | $2,926 | $365 | | Total | $2,908 | $1,813 | $5,653 | $1,920 | - The 2024 Employee Stock Purchase Plan (ESPP) was adopted in October 2024, incurring $55 thousand in share-based compensation expense for the three and six months ended June 30, 2025, despite no shares being issued yet[93] 11. Income Taxes - The Company has recorded a full valuation allowance against its net deferred tax assets due to the uncertainty of future profitable operations and taxable income[96] - The recently signed One Big Beautiful Bill Act, a tax reform legislation, is not expected to have a material impact on the consolidated financial statements for the six months ended June 30, 2025, given the existing full valuation allowance[97] 12. Commitments and Contingencies - Two complaints were filed in the Supreme Court of New York alleging misrepresentation and omission in the Proxy Statement/Prospectus related to the merger, seeking injunction or damages. The Company intends to vigorously defend against these actions[98][99] - The Company provides indemnification to its officers and directors, which in many cases is unlimited, but has not incurred material costs to date and has not accrued related liabilities[101][102] - Severance payments for a former officer totaled $622 thousand in R&D expense for the three months ended June 30, 2024, with $43 thousand remaining unpaid as of June 30, 2025[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of OnKure Therapeutics, Inc.'s financial condition, operating results, liquidity, and critical accounting policies Overview - OnKure is a clinical-stage biopharmaceutical company developing precision medicines for cancer, with its lead product candidate, OKI-219 (a PI3Kα H1047R inhibitor), currently in a Phase 1a/1b clinical trial for advanced breast cancer[109] - The Company completed a reverse stock split, name change, and stock reclassification as part of the merger with Legacy OnKure on October 4, 2024, and concurrently raised approximately $65.0 million through a private placement[110][111][112] - OnKure has incurred significant operating losses since inception, with net losses of $31.3 million for the six months ended June 30, 2025, and an accumulated deficit of $186.0 million. Cash and cash equivalents stood at $83.4 million as of June 30, 2025, deemed sufficient for the next 12 months[114][115] Components of Our Results of Operations - Research and development (R&D) expenses, which are expensed as incurred, include employee-related costs, fees for CROs and CMOs, non-clinical activities, regulatory operations, and facilities costs. These expenses are expected to increase substantially as product candidates advance through clinical trials[116][117][118] - General and administrative (G&A) expenses cover salaries, bonuses, share-based compensation, severance, professional fees, and other administrative costs. G&A expenses are anticipated to rise due to business growth and public company operating requirements[120][121] - Other income primarily consists of interest income from cash equivalents, while interest expense, previously from convertible notes, was eliminated upon their conversion in 2024[123][124] Results of Operations | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | | :------------- | :------------------------------- | :------------------------------- | :------- | | R&D Expenses | $12,613 | $10,752 | $1,861 | | G&A Expenses | $3,711 | $3,591 | $120 | | Other Income | $934 | $204 | $730 | | Net Loss | $(15,390) | $(14,139) | $(1,251) | - For the three months ended June 30, 2025, R&D expenses increased by $1.9 million, mainly due to higher clinical trial and outsourced manufacturing costs. G&A expenses saw a slight increase of $0.1 million, driven by personnel costs and share-based compensation, partially offset by reduced legal expenses related to the 2024 merger[126][127] | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | | :------------- | :----------------------------- | :----------------------------- | :------- | | R&D Expenses | $25,625 | $19,318 | $6,307 | | G&A Expenses | $7,699 | $4,857 | $2,842 | | Other Income | $2,009 | $500 | $1,509 | | Net Loss | $(31,315) | $(23,675) | $(7,640) | - For the six months ended June 30, 2025, R&D expenses rose by $6.3 million, primarily due to increased personnel, share-based compensation, clinical trial, and outsourced manufacturing and research expenses. G&A expenses increased by $2.8 million, driven by higher personnel costs and public company operating expenses, partially offset by lower non-recurring legal fees[130][132] - Other income significantly increased for both periods due to higher average cash and cash equivalents available for investment[128][134] Liquidity and Capital Resources - The Company has no product revenue and expects continued significant operating losses, necessitating additional capital from equity, debt financings, or collaborations to fund ongoing R&D and future commercialization efforts[135][136][140] - Current cash and cash equivalents are projected to fund operations for at least the next 12 months from the issuance date of the financial statements[137] | Cash Flows (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | | Operating activities | $(27,279) | $(17,102) | | Investing activities | $(31) | $(19) | | Financing activities | $(77) | $5,878 | - Cash used in operating activities increased to $27.3 million for the six months ended June 30, 2025, from $17.1 million in the prior year, primarily due to higher net loss and changes in operating assets and liabilities[145][146] - Cash used in financing activities for the six months ended June 30, 2025, was $77 thousand, related to merger and financing issuance costs, a decrease from $5.9 million provided in 2024 from convertible notes[149] Critical Accounting Policies and Estimates - The Company's financial statements rely on estimates and judgments, particularly for accrued research and development expenses and the fair value of stock options and restricted stock units. No material changes to critical accounting policies were reported from the prior annual report[151][152] Recent Accounting Pronouncements - The Company refers to Note 2 for a description of recent accounting pronouncements applicable to its condensed consolidated financial statements[153] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, OnKure Therapeutics, Inc. is not required to provide quantitative and qualitative disclosures about market risk - OnKure Therapeutics, Inc. is a smaller reporting company and is therefore not required to provide quantitative and qualitative disclosures about market risk[154] Item 4. Controls and Procedures Management, with the participation of the principal executive and financial officers, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[155][156] - There were no material changes in the Company's internal control over financial reporting during the three months ended June 30, 2025[157] PART II — OTHER INFORMATION Item 1. Legal Proceedings The Company may be involved in legal proceedings in the ordinary course of business, which could adversely impact its operations and financial position due to defense costs, diversion of management resources, and potential negative publicity - The Company may become involved in legal proceedings arising in the ordinary course of business, which could have an adverse impact due to defense and settlement costs, diversion of management resources, and negative publicity[160] Item 1A. Risk Factors This section details risks to OnKure's business, covering its early development stage, product dependence, clinical trials, competition, funding, intellectual property, and stock volatility - The Company is an early-stage biopharmaceutical company with no approved products, has incurred significant net losses since inception, and expects to continue incurring losses, making its future viability uncertain[163][164][167] - Success is highly dependent on OKI-219's clinical development, regulatory approval, and commercialization, which are subject to risks including trial failures, delays, and the inability to demonstrate safety and efficacy[163][179][181][182] - The Company faces substantial competition from other pharmaceutical and biotechnology companies, with multiple PI3Kα-targeted agents already approved or in clinical development[219][220][221] - OnKure will need substantial additional funding to complete product development and commercialization, with current cash resources expected to last into Q4 2026. Failure to secure additional capital could force delays or discontinuation of programs[173][175][177] - The Company relies heavily on third parties for manufacturing and clinical trials, increasing risks related to supply, quality control, regulatory compliance, and potential delays or disruptions[346][351][352] - Maintaining and enforcing intellectual property rights is critical but challenging due to complex patent laws, potential infringement claims, and the risk of trade secret misappropriation[246][247][267][285] - The market price of the Company's Class A Common Stock is expected to be volatile due to clinical trial results, regulatory actions, competition, and general market conditions[367][368] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds to report[409] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities to report[410] Item 4. Mine Safety Disclosures The Company reported no mine safety disclosures during the period - There were no mine safety disclosures to report[411] Item 5. Other Information No officers or directors adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter - No officers or directors adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter[412] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation and Bylaws, Investors' Rights Agreement, and certifications from the Principal Executive Officer and Principal Financial Officer | Exhibit Number | Description