10-Q
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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, 2024

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: 001-36510

LARIMAR THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

20-3857670

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

Three Bala Plaza East, Suite 506

19004

Bala Cynwyd, PA

(Zip Code)

(Address of principal executive offices)

 

 

(844) 511-9056

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

LRMR

The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of May 7, 2024, there were 63,802,017 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

 


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Statements made in this Quarterly Report on Form 10-Q that are not statements of historical or current facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements discuss our business, operations and financial performance and conditions, as well as our plans, objectives and expectations for our business operations and financial performance and condition. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. In addition, statements that “we believe” or similar statements reflect our beliefs and opinions on the relevant subject only. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business.

You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

uncertainties in obtaining successful non-clinical or clinical results that reliably and meaningfully demonstrate safety, tolerability and efficacy profiles that are satisfactory to the U.S. Food and Drug Administration (“FDA”), European Medicines Agency ("EMA") and other comparable regulatory authorities for marketing approval for nomlabofusp (nomlabofusp is the International Nonproprietary Name and the United States Adopted Name for CTI-1601 ) or any other product candidates that we may develop in the future and unexpected costs that may result therefrom;
our ability to continue to successfully execute our ongoing open label extension study (“OLE”), including the timing of site initiations and rate of patient enrollment, and our ability to pursue dose escalation;
uncertainties associated with the clinical development and regulatory approval for nomlabofusp, including potential delays in the commencement, enrollment and completion of clinical trials, the timing of a potential Biologics License Application (“BLA”) submission for accelerated approval, including our ability to supply to the FDA all required data for the FDA to review and accept an accelerated application, or any other product candidates that we may develop in the future;
the difficulties and expenses associated with obtaining and maintaining regulatory approval for nomlabofusp or any other product candidates we may develop in the future, and the indication and labeling under any such approval;
how long we can continue to fund our operations with our existing cash, cash equivalents and marketable securities and our estimates regarding future results of operations, financial position, research and development costs, capital requirements and our access and needs for additional financing;
our expectations regarding the use of proceeds from recent and future financings, if any;
our ability, and the ability of third-party manufacturers we engage, to optimize and scale nomlabofusp or any other product candidate’s manufacturing process and to manufacture sufficient quantities of clinical supplies, and, if approved, commercial supplies of nomlabofusp or any other product candidates that we may develop in the future and our ability to maintain our relationships and contracts with our key vendors and to identify and contract with alternate or secondary key vendors;
our ability to realize any value from nomlabofusp and/or any other product candidates we may develop in the future in light of inherent risks and difficulties involved in successfully bringing product

 


 

candidates to market and the risk that the product candidates, if approved, will not achieve broad market acceptance;
our ability to comply with regulatory requirements applicable to our business and other regulatory developments in the United States and other countries;
the size and growth of the potential markets for nomlabofusp, if approved, or any other product candidates that we may develop in the future, the rate and degree of market acceptance of nomlabofusp or any other product candidate, if approved, that we may develop in the future and our ability to serve those markets;
given competing therapies and products for the treatment of FA, our ability to obtain and maintain designations or eligibility for expedited regulatory programs, and to commercialize current and future product candidates, if approved, (including the impact of potential barriers to entry if a competitor is able to establish a strong market position before we are able to commercialize our products);
our ability to obtain and maintain patent protection and defend our intellectual property rights against third parties;
the performance and compliance with the rules and regulations of the FDA (and all other regulatory authorities) of third parties upon which we depend, including third-party contract research organizations ("CROs"), consultants, and third-party suppliers, manufacturers, distributors, and logistics providers;
our ability to recruit and retain key scientific, technical, commercial, and management personnel and to retain our executive officers;
our ability to maintain proper functionality and security of our internal computer and information systems and prevent or avoid cyber-attacks, malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption;
the extent to which geopolitical tensions, including regional conflicts around the world, adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, banking instability, economic slowdowns or recessions, health epidemics, unforeseen emergencies and other outbreaks of communicable diseases could disrupt our operations, the operations of third parties on which we rely or the operations of regulatory agencies we interact with in the development of nomlabofusp and any other product candidates that we may develop;
the potential impact of healthcare reform in the United States, including the Inflation Reduction Act of 2022, and measures being taken worldwide designed to reduce healthcare costs and limit the overall level of government expenditures.

These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements may not be achieved or occur at all. The factors that could cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K filed on March 14, 2024. All forward-looking statements are applicable only as of the date on which they were made and, except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of any unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

 


 

Larimar Therapeutics, Inc.

INDEX

 

 

 

Page

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1

 

Financial Statements (unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2024 and 2023

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

28

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

28

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

29

 

 

 

 

 

Item 1A.

 

Risk Factors

 

29

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

29

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

29

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

29

 

 

 

 

 

Item 5.

 

Other Information

 

29

 

 

 

 

 

Item 6.

 

Exhibits

 

30

 

 

 

 

 

Signatures

 

31

 

2


 

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

110,125

 

 

$

26,749

 

Short-term marketable securities

 

 

117,171

 

 

 

60,041

 

Prepaid expenses and other current assets

 

 

3,657

 

 

 

3,385

 

Total current assets

 

 

230,953

 

 

 

90,175

 

Long-term marketable securities

 

 

11,711

 

 

 

 

Property and equipment, net

 

 

604

 

 

 

684

 

Operating lease right-of-use assets

 

 

2,920

 

 

 

3,078

 

Restricted cash

 

 

1,339

 

 

 

1,339

 

Other assets

 

 

678

 

 

 

659

 

Total assets

 

$

248,205

 

 

$

95,935

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,918

 

 

$

1,283

 

Accrued expenses

 

 

10,098

 

 

 

7,386

 

Operating lease liabilities, current

 

 

825

 

 

 

837

 

Total current liabilities

 

 

12,841

 

 

 

9,506

 

Operating lease liabilities

 

 

4,520

 

 

 

4,709

 

Total liabilities

 

 

17,361

 

 

 

14,215

 

Commitments and contingencies (See Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock; $0.001 par value per share; 5,000,000 shares authorized
   as of March 31, 2024 and December 31, 2023;
no shares issued and
   outstanding as of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.001 par value per share; 115,000,000 shares
   authorized as of March 31, 2024 and December 31, 2023;
   
63,800,017 and 43,909,069 shares issued and outstanding as of
   March 31, 2024 and December 31, 2023, respectively

 

 

64

 

 

 

43

 

Additional paid-in capital

 

 

434,013

 

 

 

270,150

 

Accumulated deficit

 

 

(203,208

)

 

 

(188,554

)

Accumulated other comprehensive gain (loss)

 

 

(25

)

 

 

81

 

Total stockholders’ equity

 

 

230,844

 

 

 

81,720

 

Total liabilities and stockholders’ equity

 

$

248,205

 

 

$

95,935

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

12,939

 

 

$

4,562

 

General and administrative

 

 

3,795

 

 

 

3,075

 

Total operating expenses

 

 

16,734

 

 

 

7,637

 

Loss from operations

 

 

(16,734

)

 

 

(7,637

)

Other income, net

 

 

2,080

 

 

 

1,111

 

Net loss

 

$

(14,654

)

 

$

(6,526

)

Net loss per share, basic and diluted

 

$

(0.27

)

 

$

(0.15

)

Weighted average common shares outstanding, basic and diluted

 

 

53,553,707

 

 

 

43,897,603

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(14,654

)

 

$

(6,526

)

Other comprehensive gain (loss):

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

(106

)

 

 

31

 

Total other comprehensive gain (loss)

 

 

(106

)

 

 

31

 

Total comprehensive loss

 

$

(14,760

)

 

$

(6,495

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Gain (Loss)

 

 

Equity

 

Balances as of December 31, 2023

 

 

43,909,069

 

 

$

43

 

 

$

270,150

 

 

$

(188,554

)

 

$

81

 

 

$

81,720

 

Issuance of common stock, net

 

 

19,736,842

 

 

 

20

 

 

 

161,736

 

 

 

 

 

 

 

 

 

161,756

 

Vesting of restricted stock units

 

 

153,750

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,128

 

 

 

 

 

 

 

 

 

2,128

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(106

)

 

 

(106

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,654

)

 

 

 

 

 

(14,654

)

Balances as of March 31, 2024

 

 

63,800,017

 

 

$

64

 

 

$

434,013

 

 

$

(203,208

)

 

$

(25

)

 

$

230,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Gain (Loss)

 

 

Equity

 

Balances as of December 31, 2022

 

 

43,269,200

 

 

$

43

 

 

$

262,496

 

 

$

(151,605

)

 

$

(31

)

 

$

110,903

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,833

 

 

 

 

 

 

 

 

 

1,833

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 

 

31

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,526

)

 

 

 

 

 

(6,526

)

Balances as of March 31, 2023

 

 

43,269,200

 

 

$

43

 

 

$

264,329

 

 

$

(158,131

)

 

$

 

 

$

106,241

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(14,654

)

 

$

(6,526

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

2,128

 

 

 

1,833

 

Lease expense

 

 

(43

)

 

 

(24

)

Depreciation expense

 

 

80

 

 

 

78

 

Amortization of premium on marketable securities

 

 

(583

)

 

 

(616

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(272

)

 

 

371

 

Accounts payable

 

 

290

 

 

 

(991

)

Accrued expenses

 

 

2,662

 

 

 

(1,682

)

Other assets

 

 

(19

)

 

 

6

 

Net cash used in operating activities:

 

 

(10,411

)

 

 

(7,551

)

Cash flows from investing activities:

 

 

 

 

 

Purchase of marketable securities

 

 

(84,864

)

 

 

 

Maturities and sales of marketable securities

 

 

16,500

 

 

 

92,250

 

Net cash provided by (used in) investing activities

 

 

(68,364

)

 

 

92,250

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of equity securities, net of issuance costs

 

 

162,151

 

 

 

 

Net cash provided by financing activities

 

 

162,151

 

 

 

 

Net increase in cash, cash equivalents and restricted cash

 

 

83,376

 

 

 

84,699

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

28,088

 

 

 

28,164

 

Cash, cash equivalents and restricted cash at end of period

 

$

111,464

 

 

$

112,863

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Offering costs included in accounts payable and accrued expense

 

$

395

 

 

$

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

LARIMAR THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Description of Business and Basis of Presentation

Larimar Therapeutics, Inc., together with its subsidiary (the “Company” or “Larimar”), is a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using its novel cell penetrating peptide technology platform. Larimar's lead product candidate, nomlabofusp (nomlabofusp is the International Nonproprietary Name and the United States Adopted Name for CTI-1601 ), is a subcutaneously administered, recombinant fusion protein intended to deliver human frataxin ("FXN"), an essential protein, to the mitochondria of patients with Friedreich’s ataxia ("FA"). FA is a rare, progressive and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality.

The Company has completed two phase 1 studies of nomlabofusp, a Phase 2 dose exploration study, and recently initiated an open label extension study (“OLE”) in patients with FA.

In May 2021, after reporting positive top-line data from the Company’s Phase 1 FA program, the U.S. Food and Drug Administration (“FDA”) placed a clinical hold on the Company’s nomlabofusp clinical program after the Company notified the FDA of mortalities at the highest dose levels of a 26-week non-human primate toxicology study that was designed to support extended dosing of patients with nomlabofusp. In August 2022, the Company submitted a complete response to the clinical hold following a Type C Meeting with the FDA, and proposed as nomlabofusp's next clinical trial a Phase 2, four-week, dose exploration study in FA patients starting at the lower dose levels tested in the Company’s Phase 1 multiple-ascending dose clinical trial. In September 2022, the FDA lifted its full clinical hold on the nomlabofusp program and imposed a partial clinical hold.

In May 2023, the Company announced top-line data from its completed 25 mg cohort of a Phase 2, four-week, dose exploration trial of nomlabofusp in patients with FA and provided a complete response to the FDA in June 2023, which included unblinded safety, pharmacokinetic ("PK"), and pharmacodynamic ("PD") data from the Phase 2 trial’s completed 25 mg cohort.

In June 2023, the Company met with the FDA. Following that meeting, the Company submitted a complete response to the FDA’s partial clinical hold that included unblinded safety, PK and frataxin data from the Phase 2 trial’s completed 25 mg cohort.

In July 2023, following the FDA’s review of the Company's complete response to the partial clinical hold, the FDA cleared initiation of a second cohort at 50 mg of our four-week, placebo-controlled, Phase 2 dose exploration trial and initiation of an OLE study with daily dosing of 25 mg.

In February 2024, the Company reported positive top-line data and successful completion of their four-week, placebo-controlled Phase 2 dose exploration study of nomlabofusp in participants with FA. Nomlabofusp was generally well tolerated throughout the four-week treatment periods, had a predictable pharmacokinetic profile and let to dose dependent increases in FXN levels in all evaluated tissues (skin and buccal cells) after daily dosing of 14 days followed by every other day dosing until day 28 in the 25 mg and 50 mg cohorts. Participants in the 25 mg (n=13) and 50 mg (n=15) cohorts were randomized 2:1 to receive subcutaneous injections of nomlabofusp or placebo. The initiation of additional U.S. clinical trials evaluating nomlabofusp are contingent on FDA review of data under the partial clinical hold.

In January 2024, the Company initiated the OLE trial, discussed above, evaluating daily subcutaneous injections of 25 mg of nomlabofusp self-administered or administered by a caregiver, with the first patient dosed in March 2024. Additional patients continue to be enrolled and dosed and additional clinical sites added. Participants who completed treatment in the Phase 2 dose exploration study, or who previously completed a prior clinical trial of nomlabofusp, are potentially eligible to screen for the OLE study. The OLE study will evaluate the safety and tolerability, pharmacokinetics, and frataxin levels in peripheral tissues as well as other exploratory pharmacodynamic markers (lipid profiles and gene expression data) following long-term subcutaneous administration of nomlabofusp. Dose escalation in the OLE study is contingent on the FDA’s review of data from the 50 mg cohort of the Phase 2 study and available data from the OLE study, due to the continued partial clinical hold. Interim data is expected in the fourth quarter of 2024. In addition, clinical assessments collected during the study will be compared to data from a matched control arm derived from participants in the Friedreich’s Ataxia Clinical Outcome Measures Study (FACOMS) database.

The Company is subject to risks and uncertainties common to pre-commercial companies in the biotechnology industry, including, but not limited to, development and commercialization by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with governmental regulations, failure to secure regulatory approval for its drug candidates or any other product candidates and the

7


 

ability to secure additional capital to fund its operations. Product candidates under development will require extensive non-clinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities. Even if the Company's drug development efforts are successful, it is uncertain when, if ever, it will realize significant revenue from product sales.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Larimar and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated. The accompanying condensed consolidated financial statements have been prepared in conformity with Generally Accepted Accounting Principles ("GAAP").

The condensed consolidated balance sheet as of December 31, 2023 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2024.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of March 31, 2024, condensed consolidated results of operations for the three months ended March 31, 2024 and condensed consolidated statement of cash flows for the three months ended March 31, 2024 have been made. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

Liquidity and Capital Resources

The Company’s condensed consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Since its inception, the Company has incurred significant recurring operating losses and negative cash flows from operations. The Company has incurred net losses of $14.7 million and $6.5 million for the three months ended March 31, 2024 and 2023, respectively. In addition, as of March 31, 2024, the Company had an accumulated deficit of $203.2 million. The Company expects to continue to generate operating losses for the foreseeable future. As of March 31, 2024, the Company had approximately $239.0 million of cash, cash equivalents and marketable securities available for use to fund its operations and capital requirements.

The Company has funded its operations to date primarily with proceeds from sales of common stock and proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents and marketable securities upon the merger with Zafgen, Inc. ("Zafgen") and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

In February 2024, the Company completed an underwritten public offering in which the Company issued and sold 19,736,842 shares of its common stock at a public offering price of $8.74 per share. The Company received net proceeds of approximately $161.8 million after deducting underwriting discounts, commissions and other offering expenses.

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, "Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern", the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. As of the issuance date of these condensed consolidated financial statements, the Company expects its cash, cash equivalents and marketable securities, including its net proceeds from the February 2024 public offering, will be sufficient to fund its forecasted operating expenses and capital expenditure requirements into 2026. If the timing

8


 

of the Company's clinical assumptions are delayed or if there are other forecasted assumption changes that negatively impact its operating plan, the Company would reduce expenditures in order to further extend cash resources.

The Company has not yet commercialized any products and does not expect to generate revenue from the commercial sale of any products for several years, if at all. The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, that it will need additional capital to fund its future operating and capital requirements. Unless and until the Company can generate substantial revenue, management continuously evaluates different strategies to obtain the required funding for future operations. These strategies include seeking additional funding through a combination of public or private equity offerings, debt or royalty financings, collaborations and licensing arrangements, strategic partnerships with pharmaceutical and/or larger biotechnology companies, or other sources. The incurrence of indebtedness would result in increased fixed payment obligations and the Company may be required to agree to certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell or license intellectual property rights, minimum required cash balances and other operating restrictions that could adversely impact the Company's ability to conduct its business. Any additional fundraising efforts may divert the Company's management from their day-to-day activities, which may adversely affect its ability to develop and commercialize its product candidates.

There can be no assurance that the Company will be able to raise sufficient additional capital on acceptable terms, if at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or if the Company does not have sufficient authorized shares, the Company may be required to delay, limit, or eliminate the development of business opportunities and its ability to achieve its business objectives, its competitiveness, and its business, financial condition, and results of operations will be materially adversely affected. The Company could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and it may be required to relinquish rights to some of its technologies or product candidates or otherwise agree to terms unfavorable to it, any of which may have a material adverse effect on the Company's business, operating results and prospects. In addition, geopolitical tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, bank instability and the ability of the U.S. government to manage federal debt limits as well as the potential impact of other health crises on the global financial markets may reduce the Company's ability to access capital, which could negatively affect its liquidity and ability to continue as a going concern.

If the Company is unable to obtain sufficient funding when needed and/or on acceptable terms, the Company may be required to significantly curtail, delay or discontinue one or more of its research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion, pre commercialization efforts and/or commercial operations, which could adversely affect its business prospects, or the Company may be unable to continue operations.

2.
Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expense, the recording as prepaid expense of payments made in advance of the actual provision of goods or services, valuation of stock-based awards and valuation of leases. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions.

Research and Development Costs

Costs associated with internal research and development and external research and development services, including drug development, clinical studies and non-clinical studies, are expensed as incurred. Research and

9


 

development expenses include costs for salaries, employee benefits, subcontractors, facility-related expenses, depreciation, stock-based compensation, third-party license fees, laboratory supplies, and external costs of outside vendors engaged to conduct discovery, non-clinical and clinical development activities and clinical trials as well as to manufacture clinical trial materials, and other costs. The Company recognizes external research and development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its key service providers.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such prepaid expenses are recognized as an expense when the goods have been delivered or the related services have been performed, or when it is no longer expected that the goods will be delivered, or the services rendered.

Upfront payments, milestone payments and annual maintenance fees under license agreements are currently expensed in the period in which they are incurred.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Stock-Based Compensation

The Company measures all stock-based awards granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. Compensation expense of those awards is recognized over the requisite service period, which is the vesting period of the respective award. Typically, the Company issues awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company accounts for forfeitures as they occur.

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Prior to May 28, 2020, the Company had been a private company and lacked company-specific historical and implied volatility information for its common stock. Prior to January 1, 2023, the Company estimated its expected common stock price volatility solely based on the historical volatility of publicly traded peer companies. Beginning on January 1, 2023, based on the availability of sufficient historical trading data of the Company's own common stock on the Nasdaq Global Market to calculate accurately its volatility, the Company began blending its volatility starting from June 2020 (following its merger with Zafgen in 2020) to the date of each stock-based award, and weighing the volatility of its peer group for the amount of time from May 31, 2020 backwards so that the blended volatility equals the expected term of the related stock-based award. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield considers the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Prior to August 11, 2023, basic shares outstanding includes the weighted average effect of the Company’s prefunded warrants issued in June 2020, the exercise of which requires little or no consideration for the delivery of shares of common stock. These prefunded warrants were exercised on August 11, 2023 and the Company received cash proceeds of less than $0.1 million. Accordingly, the 628,403 shares were issued upon the exercise of these warrants and are included in issued and outstanding common stock.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares, including potentially dilutive common stock equivalents assuming the dilutive effect of outstanding stock options, outstanding restricted stock units, and unvested restricted common shares, as determined using the treasury stock method. For periods in which the Company has reported net losses (all periods since inception), diluted net loss per common share

10


 

attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, since dilutive common stock equivalents are not assumed to have been issued if their effect is antidilutive.

The Company excluded 6,555,145 and 4,974,521 common stock equivalents outstanding as of March 31, 2024 and 2023, respectively, from the computation of diluted net loss per share for the three months ended March 31, 2024 and 2023 because they had an anti-dilutive impact due to the net loss incurred for the periods presented.

Recently Issued and Adopted Accounting Pronouncements

From time to time, new accounting guidance is issued by the FASB or other standard setting bodies that is adopted by us as of the effective date or, in some cases where early adoption is permitted, in advance of the effective date. We have assessed the recently issued guidance that is not yet effective and believe the new guidance will not have a material impact on the condensed consolidated results of operations, cash flows or financial position.

3.
Fair Value Measurements and Marketable Securities

Fair Value Measurements

The Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are measured in accordance with the standards of ASC 820, "Fair Value Measurements and Disclosures", which establishes a three-level valuation hierarchy for measuring fair value and expands financial statement disclosures about fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

 

Level – 1

Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

 

Level – 2

Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

 

Level – 3

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s financial instruments consist primarily of cash, cash equivalents, marketable securities, accounts payable and accrued liabilities. For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of March 31, 2024 and December 31, 2023 were considered representative of their fair values due to their short term to maturity.

11


 

The following tables summarize the Company’s cash equivalents and marketable securities as of March 31, 2024 and December 31, 2023:

 

 

 

Total

 

 

Quoted
Prices in
Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

(in thousands)

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds invested in government securities

 

$

69,905

 

 

$

69,905

 

 

$

 

 

$

 

U.S. Treasury Bills

 

 

39,813

 

 

 

39,813

 

 

 

 

 

 

 

Total cash equivalents

 

 

109,718

 

 

 

109,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills

 

 

23,058

 

 

 

23,058

 

 

 

 

 

 

 

U.S. Government securities

 

 

79,835

 

 

 

 

 

 

79,835

 

 

 

 

Corporate bonds

 

 

25,989

 

 

 

 

 

 

25,989

 

 

 

 

Total marketable securities

 

 

128,882

 

 

 

23,058

 

 

 

105,824

 

 

 

 

Total cash equivalents and marketable securities

 

$

238,600

 

 

$

132,776

 

 

$

105,824

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds invested in government securities

 

$

24,701

 

 

$

24,701

 

 

$

 

 

$

 

Total cash equivalents

 

 

24,701

 

 

 

24,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills

 

 

17,334

 

 

 

17,334

 

 

 

 

 

 

 

U.S. Government securities

 

 

35,719

 

 

 

 

 

 

35,719

 

 

 

 

Corporate bonds

 

 

6,988

 

 

 

 

 

 

6,988

 

 

 

 

Total marketable securities

 

 

60,041

 

 

 

17,334

 

 

 

42,707

 

 

 

 

Total cash equivalents and marketable securities

 

$

84,742

 

 

$

42,035

 

 

$

42,707

 

 

$

 

The accrued interest receivable related to the Company’s investments was $1.1 million and $0.3 million as of March 31, 2024 and December 31, 2023, respectively, and is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

The Company classifies its money market funds and U.S. treasury bills, which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

The Company classifies its investments in U.S. government and agency securities, corporate commercial paper, and corporate bonds, if any, as Level 2 assets within the fair value hierarchy. The fair values of these investments are estimated by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

As of March 31, 2024 and December 31, 2023, the unrealized losses for available-for-sale investments were non-credit related, and the Company does not intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized cost basis, which may be maturity. As of March 31, 2024 and December 31, 2023, no allowances for credit losses for the Company’s

12


 

investments were recorded. During the three months ended March 31, 2024 and 2023, the Company did not recognize any impairment losses related to investments.

Marketable securities

The following table summarizes the Company's marketable securities as of March 31, 2024 and December 31, 2023.

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair Value

 

 

 

(in thousands)

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills

 

$

23,061

 

 

$

 

 

$

(3

)

 

$

23,058

 

U.S. Government securities

 

 

79,849

 

 

 

6

 

 

 

(20

)

 

 

79,835

 

Corporate bonds

 

 

25,997

 

 

 

3

 

 

 

(11

)

 

 

25,989

 

Total marketable securities

 

$

128,907

 

 

$

9

 

 

$

(34

)

 

$

128,882

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills

 

$

17,330

 

 

$

4

 

 

$

 

 

$

17,334

 

U.S. Government securities

 

 

35,653

 

 

 

66

 

 

 

 

 

 

35,719

 

Corporate bonds

 

 

6,977

 

 

 

11

 

 

 

 

 

 

6,988

 

Total marketable securities

 

$

59,960

 

 

$

81

 

 

$

 

 

$

60,041

 

No marketable securities held as of March 31, 2024 or December 31, 2023, had remaining maturities greater than two years.

As of March 31, 2024 and December 31, 2023, the Company held no investments that have been in a continuous loss position for 12 months or longer.

 

4.
Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Prepaid research and development expenses

 

$

1,786

 

 

$

1,994

 

Interest receivable

 

 

1,079

 

 

 

332

 

Prepaid insurance

 

 

448

 

 

 

682

 

Other prepaid expenses and other assets

 

 

344

 

 

 

377

 

 

$

3,657

 

 

$

3,385

 

 

5.
Fixed Assets

Fixed assets, net consisted of the following:

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

Useful Life

 

2024

 

 

2023

 

 

 

 

 

(in thousands)

 

Computer equipment

 

5 years

 

$

117

 

 

$

117

 

Lab equipment

 

5 years

 

 

1,192

 

 

 

1,192

 

Furniture and fixtures

 

7 years

 

 

555

 

 

 

555

 

Leasehold improvements

 

lease term

 

 

45

 

 

 

45

 

 

 

 

 

1,909

 

 

 

1,909

 

Less: Accumulated depreciation

 

 

 

 

(1,305

)

 

 

(1,225

)

 

 

 

$

604

 

 

$

684

 

 

13


 

 

Depreciation expense was $0.1 million for each of the three months ended March 31, 2024 and 2023. In addition, for the three months ended March 31, 2024 and 2023, there was less than $0.1 million of depreciation related to sublet assets recorded as other expense.

 

 

6.
Accrued Expenses

Accrued expenses consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Accrued research and development expenses

 

$

8,804

 

 

$

4,594

 

Accrued payroll and related expenses

 

 

788

 

 

 

2,365

 

Accrued other

 

 

506

 

 

 

427

 

 

$

10,098

 

 

$

7,386

 

 

7.
Stockholders’ Equity and Stock Options

Common Stock and Prefunded Warrants

On May 28, 2020, the Company entered into a securities purchase agreement with certain accredited investors (the “Purchasers”) for the sale by the Company in a private placement of 6,105,359 shares of the Company’s common stock and prefunded warrants to purchase an aggregate of 628,403 shares of the Company’s common stock, for a price of $11.88 per share of the common stock and $11.87 per prefunded warrant. The prefunded warrants were exercisable at an exercise price of $0.01 and were exercisable indefinitely. In August 2023, the 628,403 shares of prefunded warrants were exercised and the Company received cash proceeds of six thousand two hundred and eighty-four dollars. The private placement closed on June 1, 2020. The aggregate gross proceeds for the issuance and sale of the common stock and prefunded warrants were $80.0 million, transaction costs totaled $4.6 million and resulted in net proceeds of $75.4 million. The Company’s Registration Statement on Form S-3, filed with the SEC on June 26, 2020, registered the resale of 6,105,359 shares of common stock sold and the 628,403 shares of common stock underlying the prefunded warrants. MTS Health Partners served as placement agent to the Company in connection with the private placement. As partial compensation for these services, the Company issued MTS Health Partners 35,260 shares of common stock.

As of March 31, 2024,the Company’s Ninth Amended and Restated Certificate of Incorporation, as amended, authorized the Company to issue up to 115,000,000 shares of common stock, par value $0.001 per share, of which 63,800,017 shares were issued and outstanding, and up to 5,000,000 shares of undesignated preferred stock, par value $0.001 per share, of which no shares were issued or outstanding. The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors of the Company (the “Board”), if any. No cash dividends have been declared or paid to date.

In February 2024, the Company completed an underwritten public offering in which the Company issued and sold 19,736,842 shares of its common stock at a public offering price of $8.74 per share. The Company received net proceeds of approximately $161.8 million after deducting underwriting discounts, commissions and other offering expenses.

ATM Agreement

In November 2022, the Company entered into a Sales Agreement (the "2022 ATM Agreement") with a Guggenheim Securities, LLC as a sales agent in connection with the establishment of an “at-the-market” offering program under which the Company could sell up to an aggregate of $50.0 million of shares of common stock (the “2022 ATM Shares”) from time to time. In February 2024, in connection with the underwritten public offering described above, the Company terminated the 2022 ATM Agreement. No ATM Shares were ever sold pursuant to the 2022 ATM Agreement.

In May 2024, the Company entered into a sales agreement (the "ATM Agreement") with a Guggenheim Securities, LLC in connection with the establishment of an “at-the-market” offering program under which the Company could sell up to an aggregate of $100.0 million of shares of common stock (the “ATM Shares”) from time to time.

14


 

2020 Equity Incentive Plan

The Board adopted the 2020 Equity Incentive Plan (the "2020 Plan") on July 16, 2020 and the stockholders of the Company approved the 2020 Plan on September 29, 2020. The 2020 Plan replaced the predecessor plans (the "Prior Plans") that the Company assumed following its merger with Zafgen in May 2020. Options outstanding under the Prior Plans will remain outstanding, unchanged, and subject to the terms of the Prior Plans and the respective award agreements, and no further awards will be made under the Prior Plans. However, if any award previously granted under the Prior Plans, expires, terminates, is canceled, or is forfeited for any reason after the approval of the 2020 Plan, the shares subject to that award will be added to the 2020 Plan share pool so that they can be utilized for new grants under the 2020 Plan.

The 2020 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, and cash or other stock-based awards. ISOs may be granted only to the Company’s employees, including the Company’s officers, and the employees of the Company’s affiliates. All other awards may be granted to the Company’s employees, including the Company’s officers, the Company’s non-employee directors and consultants, and the employees and consultants of the Company’s affiliates.

The maximum number of shares that may be issued in respect of any awards under the 2020 Plan is the sum of: (i) 1,700,000 shares plus (ii) an annual increase on January 1, 2021 and each anniversary of such date thereafter through January 1, 2030, equal to the lesser of (A) 4% of the shares issued and outstanding on the last day of the immediately preceding fiscal year, or (B) such smaller number of shares as determined by the Board (collectively, the “Plan Limit”). The maximum aggregate number of shares that may be issued under the 2020 Plan is 8,000,000 over the ten-year term of the 2020 Plan.

As permitted by the 2020 Plan, the Company added 1,756,363 and 1,730,768 shares available for grant to the 2020 Plan on January 1, 2024 and January 1, 2023, respectively. As of March 31, 2024, 1,222,219 shares of common stock were available for grant under the 2020 Plan.

During the twelve months ended December 31, 2023, options to purchase 224,437 shares issued under the Prior Plans were cancelled and became available for grant under the 2020 Plan. No such options were cancelled in the three months ended March 31, 2024.

Stock Option Valuation

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees:

 

 

 

March 31,

 

 

2024

Risk-free interest rate

 

4.06%

Expected term (in years)

 

6.25

Expected volatility

 

96%

Dividend yield

 

0.00%

 

15


 

Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2024 (amounts in millions, except for share, contractual term, and per share data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Weighted Average

 

 

Aggregate

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Intrinsic

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Value (a)

 

 

 

Shares

 

 

Price

 

 

Term (in years)

 

 

(in millions)

 

Outstanding as of December 31, 2023

 

 

4,273,502

 

 

$

9.06

 

 

 

7.8

 

 

 

 

Options granted

 

 

1,580,377

 

 

 

4.42

 

 

 

 

 

 

 

Options exercised

 

 

(356

)

 

 

2.95

 

 

 

 

 

 

 

Options forfeited/expired

 

 

(5,000

)

 

 

11.38

 

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

5,848,523

 

 

$

7.81

 

 

 

8.1

 

 

$

11.0

 

Exercisable as of March 31, 2024

 

 

2,419,698

 

 

$

11.39

 

 

 

6.7

 

 

$

1.5

 

Vested and expected to vest as of March 31, 2024

 

 

5,848,523

 

 

$

7.81

 

 

 

8.1

 

 

$

11.0

 

(a)
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were "in the money" at March 31, 2024.

Option Grants

During the three months ended March 31, 2024, the Company granted options to purchase 1,580,377 shares of common stock to employees under the 2020 Plan. The options have an exercise price equal to the closing stock price as of the grant date, and vest over four years, with 25% vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter. The weighted-average grant date fair value of options granted under the 2020 Plan during the three months ended March 31, 2024 was $3.52.

As of March 31, 2024, total unrecognized compensation expense related to unvested stock options granted under the 2020 Plan was $12.5 million, which is expected to be recognized over a weighted average period of 2.57 years.

Inducement Stock Option Grant

There were no inducement awards granted in the three months ended March 31, 2024.

As of March 31, 2024, total unrecognized compensation expense related to unvested inducement options granted was $1.0 million, which is expected to be recognized over a weighted average period of 3.03 years.

Restricted Stock Units

In January 2024, RSUs were granted under the 2020 Plan to certain of the Company's employees in order to maintain retention of key employees. The value of an RSU award is based on the Company's stock price on the date of grant. The shares underlying the RSUs are not issued until the RSUs vest.

16


 

Activity with respect to the Company's RSUs during the three months ended March 31, 2024 was as follows (in millions, except share, contractual term, and per share data):

 

 

 

 

 

 

Weighted

 

 

Weighted Average

 

 

Aggregate

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Intrinsic

 

 

 

Number of

 

 

Grant Date

 

 

Contractual

 

 

Value (a)

 

 

 

Shares

 

 

Fair Value

 

 

Term (in years)

 

 

(in millions)

 

Outstanding as of December 31, 2023

 

 

615,000

 

 

$

4.94

 

 

 

1.6

 

 

 

 

Restricted stock units granted

 

 

245,372

 

 

 

4.21

 

 

 

 

 

 

 

Restricted stock units vested

 

 

(153,750

)

 

 

4.94

 

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

706,622

 

 

$

4.69

 

 

 

2.0

 

 

$

5.4

 

Unvested and expected to vest as of March 31, 2024

 

 

706,622

 

 

$

4.69

 

 

 

2.0

 

 

$

5.4

 

Restricted Stock Unit Grants

During the three months ended March 31, 2024, the Company granted 245,372 shares of RSUs to employees under the 2020 Plan. The RSUs vest annually over four years and have a weighted-average grant date fair value of $4.21 per unit.

As of March 31, 2024, total unrecognized compensation expense for RSUs was $3.1 million, which is expected to be recognized over a weighted-average period of 3.14 years.

Stock-Based Compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows: