# Cue Biopharma, Inc.: Form 10-Q for the period ended Sep 30, 2023 - Company: [Cue Biopharma, Inc.](/companies/cue.md) (CIK 1645460) - Form: 10-Q - Filed: 2023-11-03 - Accepted by EDGAR: Nov 3, 2023, 20:15 ET - Period: 2023-09-30 - Accession: 0000950170-23-058838 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1645460/000095017023058838/cue-20230930.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1645460/000095017023058838/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-09-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2023-07-01 to 2023-09-30 | $2.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Research and development | 3 months, 2023-07-01 to 2023-09-30 | $9.9m | us-gaap:ResearchAndDevelopmentExpense | | Research and development | 9 months, 2023-01-01 to 2023-09-30 | $29.9m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$11.4m | us-gaap:OperatingIncomeLoss | | Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$38.3m | us-gaap:OperatingIncomeLoss | | Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $254.0k | us-gaap:InterestExpense | | Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $848.0k | us-gaap:InterestExpense | | Net income | 3 months, 2023-07-01 to 2023-09-30 | −$11.0m | us-gaap:NetIncomeLoss | | Net income | 9 months, 2023-01-01 to 2023-09-30 | −$37.3m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.24 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.82 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.24 | us-gaap:EarningsPerShareBasic | | Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.82 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 46,358,555 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 45,274,124 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$29.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock | | Cash and equivalents | at 2023-09-30 | $54.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2023-09-30 | $57.5m | us-gaap:AssetsCurrent | | Total assets | at 2023-09-30 | $68.9m | us-gaap:Assets | | Current liabilities | at 2023-09-30 | $17.2m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-09-30 | $26.2m | us-gaap:Liabilities | | Long-term debt | at 2023-09-30 | $5.2m | us-gaap:LongTermDebtNoncurrent | | Current portion of debt | at 2023-09-30 | $4.0m | us-gaap:LongTermDebtCurrent | | Shareholders' equity | at 2023-09-30 | $42.7m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 69,097 characters. *The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Cue Biopharma, Inc. and its subsidiary (“Cue Biopharma”, “we”, “us”, “our” or the “Company”) should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and accompanying notes thereto for the fiscal year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 21, 2023, or the 2022 Annual Report.* ### Overview We are a clinical-stage biopharmaceutical company developing a novel series of T cell engagers, termed Immuno-STAT™ (*Selective Targeting and Alteration of T Cells*), that are engineered to selectively engage and modulate disease-relevant T cells while avoiding the deleterious side effects of non-selective, systemic immune activation. This unique property of selectivity provides Immuno-STATs with the potential for providing superior clinical efficacy along with favorable tolerability. We believe that Immuno-STATs, as described below, build upon our core expertise in rational protein engineering to emulate nature's signals, or "cues", for selective T cell modulation. We believe our proprietary Immuno-STAT platform, as described below, will enable us to enhance the potential of the patient’s own immune system to restore health while avoiding the negative side effects of broad indiscriminate immune activation, in the case of cancer, and broad immune suppression in the case of autoimmune disease. Our selective immune modulation approach may be deployed for treating cancer, autoimmune diseases and chronic infections. In addition to the selective modulation of T cell activity, we believe core features of Immuno-STATs offer differentiated competitive advantages, including modularity, manufacturability, and convenient administration enabling the versatility to treat a broad range of disease. The unique property of Immuno-STATs to be T cell receptor, or TCR, -selective engagers provides core strategic advantages and differentiation from other classes of non-specific T cell engagers, as highlighted below. The core framework of an Immuno-STAT molecule has a stabilized peptide human leukocyte antigen, or pHLA, component that selectively engages T cells harboring TCRs for binding to the tumor-specific peptide-HLA complex (representing Signal 1 in the orange box of the image below). In addition, Immuno-STATs contain activating signals (representing Signal 2 in the orange box of the image below), including modified interleukin 2, or IL-2, in the case of the CUE-100 series, the first series from our biologics platform, that can be selectively delivered to tumor-specific T cells. We believe Immuno-STATs provide an attractive solution for generation of a therapeutic index for immune activation signals, such as IL-2. The unique property of Immuno-STATs as TCR-selective engagers provides core strategic advantages and differentiation from other classes of non-specific T cell engagers, due to the targeting of specific TCRs via Signal 1, as highlighted below. #### The Immuno-STAT Framework: CUE-100 Series We believe the data generated from our ongoing clinical trials with CUE-101, our lead clinical drug product candidate from our IL-2 based CUE-100 series, has demonstrated the potential of the Immuno-STAT platform to improve cancer patient outcomes beyond that of the current standard of care. As described below, CUE-101 has demonstrated evidence of anti-tumor activity in our ongoing clinical trials through selective activation of the anti-cancer T-cells repertoires. Furthermore, CUE-101 has demonstrated a favorable tolerability profile in approximately 80 patients treated to date with doses of up to 8mg/kg. Importantly, the CUE-101 neoadjuvant trial that is currently being conducted by Washington University School of Medicine in patients with newly diagnosed, locally advanced oropharyngeal squamous-cell carcinoma will allow for the evaluation of the tumor tissue microenvironment, or TME, pre and post treatment to shed mechanistic insights into the anti-tumor cellular response. In addition to our encouraging CUE-101 clinical data generated to date, we also have emerging data from our ongoing Phase 1 dose escalation trial of CUE-102, which further enhances our confidence in the platform's versatility and potential for addressing a broad range of cancer types. Through these ongoing trials, we continue to develop datasets differentiating the CUE-100 series Immuno-STATs from competing approaches. We have also recently observed promising preclinical data pertaining to the potential application of our platform for the treatment of a broad range of autoimmune diseases. In February 2023 we announced the establishment of a strategic collaboration with Ono Pharmaceuticals Co., Ltd., or Ono, focused on the development of CUE-401 for the potential treatment of autoimmune and inflammatory diseases through the induction and expansion of regulatory T cells, or Tregs. Our drug product candidates are in various stages of clinical and preclinical development. The emerging preliminary clinical data for CUE-101 and CUE-102 bolsters our belief that we have developed a potential breakthrough approach for modulating cancer-specific T cells directly in the patient’s body. However, our activities are also subject to significant risks and uncertainties. We have not yet commenced any commercial revenue-generating operations, have limited cash flows from operations, and will need to access substantial additional capital to fund our growth and ongoing business operations. ### Our Pipeline The pipeline chart below details our current portfolio of oncology and autoimmune assets and their stages of development. In oncology, we have prioritized and strategically focused resources on our CUE-101 and CUE-102 programs in our IL-2 based CUE-100 series, and we are actively assessing strategic options for third party support through partnerships and collaborations, or alternative funding structures, to further develop CUE-103 and our Neo-STAT™ and RDI-STAT™ programs. We continue to progress forward in our strategic collaboration with Ono to develop CUE-401, a preclinical IL-2/transforming growth factor beta (TGF-beta) based drug product candidate for autoimmune disease. Based on its unique mechanism of action, we believe CUE-401 has the potential to be a highly differentiated molecule for the induction and expansion of Tregs, and is distinct from the vast majority of other IL-2 muteins that are being pursued in this space. We are also assessing strategic alternatives for furthering the development of our CUE-300 series for the treatment of specific autoimmune diseases, such as type 1 diabetes and celiac disease. ### CUE-101 CUE-101 is our most advanced clinical stage asset in oncology and is being investigated for the treatment of human papillomavirus positive, or HPV+, head and neck cancer. We completed enrollment of the patient expansion phase of our monotherapy Phase 1 clinical trial of CUE-101 at the 4 mg/kg recommended Phase 2 dose, or RP2D, for the treatment of third line, or 3L, and beyond recurrent/metastatic head and neck squamous cell cancer, or R/M HNSCC patients. These patients had received and failed several prior lines of systemic therapy, including chemotherapy and checkpoint inhibitors, or CPIs, such as KEYTRUDA®. Patients at this stage of disease progression have a high unmet medical need for alternative therapies that can extend life without the often severe side effects of traditional cancer therapies. In this non-comparator monotherapy trial, CUE-101 has demonstrated evidence of anti-tumor clinical activity as a single agent, a favorable tolerability profile and an extension of median overall survival, or mOS. Of the 19 evaluable patients treated at the RP2D of 4 mg/kg, we observed a confirmed partial response, or PR, lasting for more than 36 weeks as well as six patients with durable stable disease, defined as stable disease on at least two consecutive post-treatment scans lasting at least 12 weeks. We have also observed promising preliminary data with respect to CUE-101’s pharmacokinetic, or PK, and pharmacodynamic, or PD, profile, as well as biomarker data with respect to HPV circulating free DNA, or cfDNA, as a potential proxy of anti-tumor response. Of note, one of the patients demonstrated stable disease for 24 months with no detectable evidence of HPV cfDNA in their blood after commencing treatment with CUE-101 and demonstrated an unconfirmed PR at the end of therapy. Importantly, a long overall survival has been observed in patients treated with CUE-101 as a monotherapy in 3L and beyond. For the patients treated at the RP2D in the monotherapy expansion cohort, the current Kaplan-Meier, or KM, estimate of mOS is 20.8 months, which compares favorably to the historical mOS of approximately eight months that was observed with pembrolizumab as a monotherapy in second line patients in Merck Sharp & Dohme Corp.'s, or Merck’s, KEYNOTE-040 trial and the historical mOS of approximately seven months that was observed with nivolumab as a monotherapy in the CHECKMATE 141 trial sponsored by Bristol-Myers Squibb. We continue to follow the patients treated in the monotherapy trial and anticipate this overall survival data to continue to mature through 2023. #### CUE-101 Monotherapy in 3L+ R/M HNSCC: Kaplan-Meier mOS Estimate 20.8 Months We have completed enrollment in our Phase 1 trial of CUE-101 in combination with Merck’s anti-PD-1 therapy KEYTRUDA (pembrolizumab), the current standard of care for first line, or 1L, R/M HNSCC. We completed the dose escalation portion of this trial without observing any dose-limiting-toxicity and enrolled patients in the patient expansion phase at the RP2D dose of 4 mg/kg of CUE-101 in combination with the approved dose of KEYTRUDA. The waterfall plot below was presented at the Society for Immunotherapy of Cancer, or SITC, meeting in November 2023. As shown below, as of the September 27, 2023 data cut-off date, the overall response rate, or ORR, based on the best change from baseline, or CFB, in the sum of diameters of target lesions with best overall response as measured by RECIST 1.1 in the trial is 47% in the 17 evaluable patients treated with combination therapy at the RP2D of 4 mg/kg of CUE-101 and 200 mg of KEYTRUDA, including one patient with a confirmed complete response, or CR, and seven additional patients with confirmed PRs with a disease control rate, or DCR, of 65%, calculated by adding patient overall responses, partial responses and stable disease . The ORR of 47% in all patients with a combined positive score, or CPS, of ≥ 1, which reflects the levels of PD-L1 expression in the tumor, compares favorably to the historical ORR of 19% observed in all patients with CPS of ≥ 1 treated with pembrolizumab monotherapy in Merck's KEYNOTE-048 trial. Notably, five out of the eight objective responses in the CUE-101 Phase 1 combination trial with pembrolizumab were observed in patients with tumors with low PD-L1 expression, as evidenced by CPS of less than 20, i.e. an ORR of 56% versus 14% historical ORR observed in patients with CPS\>1 and \<20 treated with pembrolizumab monotherapy in Merck's KEYNOTE-048 trial. #### CUE-101 in Combination with Pembrolizumab in 1L R/M HNSCC (data cut-off date September 27, 2023) As shown below, patients with low CPS (1-19) treated with pembrolizumab alone in the KEYNOTE-48 trial had a lower ORR than all treated patients with CPS ≥1. Patients with low CPS (1-19), treated with CUE-101 and pembrolizumab in our ongoing Phase 1 combination trial demonstrated an ORR of 56%, compared to approximately 15% observed with pembrolizumab monotherapy in the KEYNOTE-048 trial. We believe that this supports the premise that CUE-101 and pembrolizumab given in combination could expand patient reach in HPV16+ R/M HNSCC patients with low PD-L1 expression. This is particularly important since patients with low CPS scores (CPS 1-19) represent approximately 50% of all patients that are CPS positive. #### First-line (1L) R/M HNSCC Treated with CUE-101 4mg/kg in Combination with Pembrolizumab #### vs. Pembrolizumab Monotherapy We believe the evidence of combination activity of CUE-101 with KEYTRUDA is likely due to their complementary mechanisms of action, enabling anti-tumor T cells to effectively recognize and kill target tumor cells. We believe that CUE-101 has the potential to enhance the clinical activity of KEYTRUDA as well as other CPIs since the presence of expanded tumor-specific T cells is an obligatory pre-requisite for anti-PD-1 therapy. As such, we believe that CUE-101 has the potential to expand patient reach and enhance the therapeutic benefit of CPIs. On October 3, 2022, we received Fast Track Designation of CUE-101 for the treatment of R/M HPV+ HNSCC as a monotherapy and in combination with KEYTRUDA. As the data from the CUE-101 monotherapy trial and CUE-101 in combination with pembrolizumab trial matures, we are working to define potential registration paths for CUE-101, including a planned meeting with the FDA regarding CUE-101 as a monotherapy. Importantly, it is our position that the CUE-101 clinical data generated to date has reduced the risk profile of the entire IL-2 based CUE-100 series due to the core framework of the CUE-100 series being conserved for each drug product candidate, with the only substantive modification being the targeting peptide epitope within the human leukocyte antigen, or HLA, pocket. Therefore, the core IL-2 scaffold is a shared molecular feature of all molecules generated within this series, including CUE-102 as described below which shares 99% sequence identity with CUE-101. ### CUE-102 The second drug product candidate in our CUE-100 series, CUE-102, targets Wilms’ Tumor 1 protein, or WT1, an oncofetal antigen known to be over-expressed in more than 20 different cancers, including both solid tumors (such as colorectal, ovarian, pancreatic, gastric and lung tumors) and hematologic malignancies (such as acute myeloid leukemia, multiple myeloma and myelodysplastic syndromes). Based on the premise that CUE-102 shares the same core molecular framework as CUE-101, except for the T cell epitope pertaining to HPV-E7 versus WT1, its IND was supported by clinical and safety data from the ongoing CUE-101 monotherapy trial and did not require additional IND-enabling toxicology studies. This supports our premise that each CUE-100 series Immuno-STAT molecule provides further de-risking and acceleration of subsequent drug product candidates. With CUE-102 we believe there is a potential to reach an even larger patient population than for CUE-101 as WT1 can potentially treat a broad range of cancer types with significant unmet medical need. We are enrolling patients in a Phase 1 monotherapy dose-escalation trial with CUE-102 focused on WT1-positive recurrent/metastatic gastric, pancreatic, ovarian and colorectal cancers. As of October 1, 2023, 18 patients have received CUE-102 in doses ranging from 1 mg/kg to 8 mg/kg given every three weeks, 14 of the patients have at least one post dose scan and were evaluable for disease response and nine remain on treatment. CUE-102 has been well tolerated with no dose limiting toxicities observed. As shown below, a DCR of 75-80% has been observed in patients treated with 2 mg/kg and 4 mg/kg of CUE-102. Monotherapy anti-tumor activity observed as of the data cut-off date of October 1, 2023 includes decreases in target tumor lesions, decreases in tumor biomarkers and durable stable disease in several patients. #### CUE-102 Monotherapy Patient Status by Cohort (as of data cut-off date) Two patients in dose escalation cohort 2 (treated with 2 mg/kg of CUE-102) demonstrated reductions in target tumor lesions as shown in the figures below. Both of these patients remain on treatment at the time of data cut-off. Both patients have advanced disease and were heavily pre-treated prior to enrollment in the CUE-102 monotherapy trial. We anticipate opening the patient expansion cohort, or the Phase 1b portion of the trial, in patients with colorectal cancers as well as other indications in early 2024. We believe that the modularity of our CUE-100 series platform enables the generation of new drug product candidates for tumor antigens that have already been clinically validated in adoptive cellular therapy approaches, resulting in further potential de-risking and accelerated development of future molecules to address a broad range of cancer types. For example, we have generated preclinical proof of concept data supporting the manufacturability and selective biologic activity of Immuno-STATs targeting mutated driver antigens (such as KRAS) and broadly expressed cancer antigens (such as MAGE-A4 and PRAME). These Immuno-STAT molecules contain peptide antigens presented on different HLA alleles, including HLA-A02, -A03, and -A11. Generating Immuno-STATs across these additional HLA alleles will enhance potential patient coverage and market reach globally. Based on the successful validation of the modularity of the core Immuno-STAT scaffold, multiple potential Immuno-STAT candidate molecules may be considered for nomination as subsequent clinical development programs. We are also exploring the application of our Immuno-STAT platform to CAR-T and TCR-T therapies to further expand and maintain T-cell levels in the patient's body to potentially increase efficacy of these therapies. Furthermore, we have expanded the potential reach of the Immuno-STAT platform to address the heterogeneity and diversity present in many cancers by developing a derivative scaffold of the CUE-100 series containing stable “peptide-less” or “empty” HLA molecules, to which defined peptides of interest may be covalently attached. We refer to this derivative scaffold as Neo-STAT™. Neo-STAT is designed to provide greater flexibility for targeting multiple tumor epitopes, enhancing production efficiencies, and decreasing time and cost associated with manufacturing. We have also generated a derivative biologic designed to address a primary resistance mechanism found in a subset of solid tumors. This escape mechanism is based upon evading immune surveillance through down-regulation of HLA, thereby making the tumor “invisible” to T cells. This derivative of the CUE-100 series, referred to as RDI-STAT™, takes advantage of the clinical validation of the Immuno-STAT platform via the CUE-100 series by deploying an antibody-like targeting moiety binding to tumor specific antigens found on the surface of tumor cells. Through this approach, we believe we may be able to “paint” the tumor with a viral epitope placed within the HLA pocket of the CUE-100 series Immuno-STAT with the objective of "redirecting" high frequency anti-viral T cells to attack the targeted tumor cells. As noted above, we are seeking partnerships to further develop our Neo-STAT and RDI-STAT assets. In addition to these novel potential approaches to cancer immunotherapy, we have leveraged the modularity of the Immuno-STAT platform to develop additional biologic series outside of oncology. For example, CUE-300 and CUE-400 have been specifically designed through rational protein engineering to address distinct therapeutic approaches for treating autoimmune disease. The CUE-300 series incorporates the inhibitory PD-L1 co-modulator for selective inhibition of an autoreactive T cell repertoire. For example, CUE-301 has been engineered with an epitope known to be expressed in Type 1 diabetes. The CUE-400 series represents a novel class of bispecific molecules designed to selectively induce and expand Tregs. In February 2023, we announced a partnership with Ono supporting the development of CUE-401 for the potential treatment of autoimmune and inflammatory diseases. ### Plan of Operation Our technology is in the development phase. We believe that our platforms have the potential for creating a diverse pipeline of promising drug product candidates addressing multiple medical indications. We intend to maximize the value and probability of commercialization of our Immuno-STAT drug product candidates by focusing on researching, testing, optimizing, conducting pilot studies, performing early-stage clinical development and potentially partnering, where appropriate, for more extensive, later stages of clinical development, as well as seeking extensive patent protection and intellectual property development. Since we are a development-stage company, the majority of our business activities to date have been, and our planned future activities will be, devoted to furthering research and development. A fundamental part of our corporate development strategy is to establish strategic partnerships with leading pharmaceutical or biotechnology organizations that will allow us to more fully exploit the potential of our technology platform in the areas of oncology and autoimmune disease and accelerate and expand our CUE-100 series pipeline, such as our collaborations described below under the heading “Collaboration Agreement with LG Chem" and "Collaboration and Option Agreement with Ono”. ### Critical Accounting Estimates and Significant Judgments Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, and the reported revenue and expenses during the reported periods. We evaluate these estimates and judgments, including those described below, on an ongoing basis. We base our estimates on historical experience, known trends and events, contractual milestones and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the estimates, assumptions and judgments involved in the accounting policies described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our 2022 Annual Report have the greatest potential impact on our financial statements, so we consider those estimates, assumptions and judgments to be our critical accounting policies and estimates. There were no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2023. ### Recent Accounting Pronouncements and Adopted Standards A discussion of recent accounting pronouncements is included in Note 2 to our consolidated financial statements in this Quarterly Report on Form 10-Q. ### Significant Contracts and Agreements Related to Research and Development Activities ### Einstein License Agreement On January 14, 2015, we entered into a license agreement, as amended and restated on July 31, 2017, and as amended on October 30, 2018, or the Einstein License, with Albert Einstein College of Medicine, or Einstein, for certain patent rights, or the Patents, relating to our core technology platform for the engineering of biologics to control T cell activity, precision, immune-modulatory drug product candidates, and two supporting technologies that enable the discovery of costimulatory signaling molecules (ligands) and T cell targeting peptides. We hold an exclusive worldwide license, with the right to sublicense, import, make, have made, use, provide, offer to sell, and sell all products, processes and services that use the Patents, including certain technology received from Einstein related thereto, which we refer to as the Licensed Products. Under the Einstein License, we are required to: - Pay royalties and amounts based on a certain percentage of proceeds, as defined in the Einstein License, from sales of Licensed Products and sublicense agreements. - Pay escalating annual maintenance fees, which are non-refundable, but are creditable against the amount due to Einstein for royalties. - Make significant payments based upon the achievement of certain milestones, as defined in the Einstein License. As of September 30, 2023, two of these milestones had been achieved, as we had filed an IND in 2019, and initiated the investigator sponsored Phase 1b neoadjuvant clinical trial for CUE-101 in 2021. - Incur minimum product development costs per year and meet certain diligence obligations until the first commercial sale of the first Licensed Product. As of September 30, 2023, we were in compliance with our obligations under the Einstein License. The Einstein License expires upon the expiration of the last obligation to make royalty payments to Einstein which may be due with respect to certain Licensed Products, unless terminated earlier under the provisions thereof. The Einstein License includes certain termination provisions that will be triggered if we fail to meet our obligations thereunder. We account for the costs incurred in connection with the Einstein License in accordance with Accounting Standards Codification, or ASC, 730, *Research and Development*. For each of the three months ended September 30, 2023 and 2022, costs incurred with respect to the Einstein License were $0. For each of the nine months ended September 30, 2023 and 2022, costs incurred with respect to the Einstein License were $0. Such costs, if any, are included in research and development costs in our consolidated statements of operations and other comprehensive loss. Pursuant to the Einstein License, we issued to Einstein 671,572 shares of our common stock in connection with the consummation of the initial public offering of our common stock on December 27, 2017. ### Collaboration Agreement with LG Chem Effective November 6, 2018, we entered into a Collaboration, License and Option Agreement, or the LG Chem Collaboration Agreement, with LG Chem Ltd., or LG Chem, related to the development of Immuno-STATs focused in the field of oncology. Pursuant to the LG Chem Collaboration Agreement, we granted LG Chem an exclusive license to develop, manufacture and commercialize our lead product, CUE-101, as well as Immuno-STATs that target T cells against two additional cancer antigens, or the Drug Product Candidates, in Australia, Japan, Republic of Korea, Singapore, Malaysia, Vietnam, Thailand, Philippines, Indonesia, China (including Macau and Hong Kong) and Taiwan, which we refer to collectively as the LG Chem Territory. We retain rights to develop and commercialize all assets included in the LG Chem Collaboration Agreement in the United States and in global markets outside of the LG Chem Territory. Under the LG Chem Collaboration Agreement, we will engineer the selected Immuno-STATs for up to three alleles, which are expected to include the predominant alleles in the LG Chem Territory, thereby enhancing our market reach by providing for greater patient coverage of populations in global markets, while LG Chem will establish a chemistry, manufacturing and controls, or CMC, process for the development and commercialization of selected Drug Product Candidates. In addition, LG Chem has the option to select one additional Immuno-STAT for an oncology target, or an Additional Immuno-STAT, for an exclusive worldwide development and commercialization license. On December 18, 2019, we and LG Chem entered into a global license and collaboration agreement, which was amended on November 5, 2020. We refer to such agreement, as amended, as the Global License and Collaboration Agreement. The Global License and Collaboration Agreement supersedes the provisions of the LG Chem Collaboration Agreement related to LG Chem’s option for an Additional Immuno-STAT, which agreement provided for effectiveness if and when LG Chem exercised its option, other than certain select provisions including the length of the option period and representations, warranties and covenants of the parties. On April 30, 2021, LG Chem’s option pursuant to the Global License and Collaboration Agreement expired. Under the terms of the LG Chem Collaboration Agreement, LG Chem paid us a $5.0 million non-refundable, non-creditable upfront payment and purchased approximately $5.0 million of shares of our common stock at a price per share equal to a 20% premium to the volume weighted-average closing price per share over the 30 trading day period immediately prior to the effective date of the LG Chem Collaboration Agreement. We are also eligible to receive additional aggregate payments of up to approximately $400.0 million if certain research, development, regulatory and commercial milestones are successfully achieved. On May 16, 2019, we earned a $2.5 million milestone payment for the FDA’s acceptance of the IND for our lead drug product candidate, CUE-101, pursuant to the LG Chem Collaboration Agreement. On December 7, 2020, we earned a $1.25 million milestone payment on the selection of a preclinical candidate pursuant to the LG Chem Collaboration Agreement. On November 23, 2021, we earned a $3.0 million milestone payment for the selection of a Drug Product Candidate. In addition, the LG Chem Collaboration Agreement also provides that LG Chem will pay us tiered single-digit royalties on net sales of commercialized Drug Product Candidates, or Collaboration Products, in the LG Chem Territory on a product-by-product and country-by-country basis, until the later of expiration of patent rights in a country, the expiration of regulatory exclusivity in such country, or ten years after the first commercial sale of a Collaboration Product in such country, subject to certain royalty step-down provisions set forth in the LG Chem Collaboration Agreement. Pursuant to the LG Chem Collaboration Agreement, the parties will share research costs related to Collaboration Products, and LG Chem will provide CMC process development for selected Drug Product Candidates and potentially additional downstream manufacturing capabilities, including clinical and commercial supply for Collaboration Products. In return for performing CMC process development, LG Chem is eligible to receive low-single digit percentage royalty payments on the sales of Collaboration Products sold in all countries outside the LG Chem Territory. For the three months ended September 30, 2023 and 2022, we recognized revenue of approximately $178,000 and approximately $68,000, respectively, related to the LG Chem Collaboration Agreement. For the nine months ended September 30, 2023 and 2022, we recognized revenue of approximately $243,000 and approximately $1,094,000, respectively, related to the LG Chem Collaboration Agreement. As of September 30, 2023, we had recorded approximately $19.8 million in collaboration revenue related to this agreement since the agreement was entered into. The majority of the research phase of the collaboration agreement was substantially complete on March 31, 2022. The LG Chem Collaboration Agreement includes various representations, warranties, covenants, indemnities and other customary provisions. LG Chem may terminate the LG Chem Collaboration Agreement for convenience or change of control of us on a program-by-program, product-by-product or country-by-country basis, or in its entirety, at any time following the notice period set forth in the LG Chem Collaboration Agreement. Either party may terminate the LG Chem Collaboration Agreement, in its entirety or on a program-by-program, product-by-product or country-by-country basis, in the event of an uncured material breach. The LG Chem Collaboration Agreement is also terminable by either party (i) upon the bankruptcy, insolvency or liquidation of the other party or (ii) for certain activities involving the challenge of certain patents controlled by the other party. Unless earlier terminated, the LG Chem Collaboration Agreement will expire on a product-by-product and country-by-country basis upon the expiration of the applicable royalty term. To date, LG Chem has selected one additional cancer antigen, WT1, which is the focus of the CUE-102 research program. We are currently developing two Collaboration Products with LG Chem pursuant to this agreement. ### Collaboration and Option Agreement with Ono On February 22, 2023, we entered into a strategic collaboration agreement, or the Ono Collaboration and Option Agreement, with Ono Pharmaceutical Co., Ltd., or Ono, to further develop CUE-401 and provide dedicated resources and capabilities to help advance CUE-401 toward the clinic. Under the terms of the Ono Collaboration and Option Agreement, Ono paid us an upfront payment and agreed to fully fund all research activities related to CUE-401 through a specified option period. During this option period, we will be responsible for the research and development of CUE-401. Upon Ono’s exercise of its option to license CUE-401, we will receive an option exercise payment and be eligible for development and commercial milestone payments up to an aggregate of approximately $220 million, as well as tiered royalties on sales. Upon any such exercise, Ono will receive worldwide rights to develop and commercialize CUE-401, with us retaining a 50% co-development and co-commercialization right in the United States. Under the terms of the Ono Collaboration and Option Agreement, we will perform research activities related to CUE-401 through a specified option period of 24 months, or the Research Term. During this Research Term, we will be responsible for the execution of scientific investigation, nonclinical, preclinical, and clinical drug research and development activities designed to progress CUE-401 toward a potential IND and regulatory approval, collectively referred to as R&D. Ono is responsible for the funding of R&D activities performed by us. Per the Ono Collaboration and Option Agreement, as consideration for the R&D activities performed by us, Ono (i) made a one-time, non-refundable, non-creditable upfront payment of $3.0 million to us and (ii) will reimburse us for all costs incurred in conducting research, including (a) pass through costs from third party contractors and (b) full time employee salaries capped at $2.1 million in the first 18 months of the Research Term. The term of the Ono Collaboration and Option Agreement extends until the expiration of the Research Term which cannot exceed a 24-month period. We have forecasted that we will be able to complete the R&D activities in 18 months based on the initial research and development plans we have established. We received the $3.0 million upfront payment in March 2023. Aside from the $3.0 million upfront payment and funding related to pass through costs, we do not believe that any variable consideration should be included in the transaction price as of September 30, 2023. Such assessment considered the application of the constraint to ensure that estimates of variable consideration would be included in the transaction price only to the extent we have had a high degree of confidence that revenue would not be reversed in a subsequent reporting period. We will re-evaluate the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as other changes in circumstances occur. For the three months ended September 30, 2023 and 2022, we recognized revenue of approximately $1,922,000 and $0, respectively, related to the Ono Collaboration and Option Agreement. For the nine months ended September 30, 2023 and 2022, we recognized revenue of approximately $3,426,000 and $0, respectively, related to the Ono Collaboration and Option Agreement. We recorded short-term research and development liabilities on our balance sheet dated September 30, 2023, of approximately $2,238,000. We did not recognize short- or long-term research and development liabilities on our balance sheet as of December 31, 2022, as the agreement was executed in February 2023. ### Results of Operations ### Collaboration Revenue We have not generated commercial revenue from product sales. To date, we have generated collaboration revenue from our former collaboration agreement with Merck, the LG Chem Collaboration Agreement and the Ono Collaboration and Option Agreement. Collaboration revenue may vary from period to period depending on the progress of our work in connection with either or both of our collaboration agreements. ### Operating Expenses We generally recognize operating expenses as they are incurred in two general categories, general and administrative expenses and research and development expenses. Our operating expenses also include non-cash components related to depreciation and amortization of property and equipment and stock-based compensation, which are allocated, as appropriate, to general and administrative expenses and research and development expenses. General and administrative expenses consist of salaries and related expenses for executive, legal, finance, human resources, information technology and administrative personnel, as well as professional fees, insurance costs, and other general corporate expenses. We expect general and administrative expenses to increase in future periods as we incur additional expenses related to our operation as a public company which requires our compliance with certain regulatory and legal procedures. We expect activities supporting our operations including legal, accounting, insurance, employee compensation and other expenses to increase. Research and development expenses consist primarily of compensation expenses, fees paid to consultants, outside service providers and organizations (including research institutes at universities), facility expenses, and development and clinical trial expenses with respect to our drug product candidates. We charge research and development expenses to operations as they are incurred. We expect research and development expenses to increase in the future as we continue to advance the clinical development of CUE-101 and CUE-102, including our ongoing and planned clinical trials, and develop potential future drug product candidates based on our technology and research. We also believe that rising inflation, supply chain disruptions and labor shortages may also contribute to increased research and development costs. ### Three and Nine Months Ended September 30, 2023 and 2022 Our consolidated statements of operations and other comprehensive loss for the three and nine months ended September 30, 2023 and 2022, as discussed herein, are presented below. *(in thousands)* *(in thousands)* | | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 | | --- | ---: | ---: | ---: | ---: | | **Collaboration revenue** | $2,100 | $68 | $3,669 | $1,094 | | **Operating expenses:** | | | | | | General and administrative | 3,645 | 3,528 | 12,071 | 12,465 | | Research and development | 9,874 | 7,571 | 29,915 | 27,246 | | Gain on right-of-use asset termination | — | — | — | (258) | | Total operating expenses | 13,519 | 11,099 | 41,986 | 39,453 | | **Loss from operations** | (11,419) | (11,031) | (38,317) | (38,359) | | **Other (expense) income:** | | | | | | Interest income, net | 700 | 200 | 1,756 | 296 | | Interest expense, net | (286) | (124) | (738) | (355) | | Total other (expense) income | 414 | 76 | 1,018 | (59) | | **Net loss** | $(11,005) | $(10,955) | $(37,299) | $(38,418) | | Unrealized gain (loss) from available-for-sale securities | 5 | (92) | 96 | (92) | | **Comprehensive loss** | $(11,000) | $(11,047) | $(37,203) | $(38,510) | | Net loss per common share – basic and diluted | $(0.24) | $(0.31) | $(0.82) | $(1.11) | | Weighted average common shares outstanding –basic and diluted | 46,358,555 | 35,383,430 | 45,274,124 | 34,471,499 | ### Collaboration Revenue Collaboration revenue was approximately $2,100,000 and $68,000 for the three months ended September 30, 2023 and 2022, respectively. We recognized collaboration revenue of $3,669,000 and $1,094,000 for the nine months ended September 30, 2023 and 2022, respectively. The increase of approximately $2,032,000 and $2,575,000 during the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022, respectively, was due to the Ono Collaboration and Option Agreement executed in February 2023. All collaboration revenue recognized in the three and nine months ended September 30, 2023 was related to the performance of services under our collaboration agreements with Ono and LG Chem, including a $3.0 million upfront payment received pursuant to the Ono Collaboration and Option Agreement and pass through costs related to research activities. All collaboration revenue recognized in the three and nine months ended September 30, 2022 was related to the performance of services under our collaboration agreement with LG Chem. ### General and Administrative General and administrative expenses totaled approximately $3,645,000 and $3,528,000 for the three months ended September 30, 2023 and 2022, respectively. This increase of approximately $117,000 during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was due primarily to higher professional and consulting fees, offset by a decrease in rent expense. General and administrative expenses for the three months ended September 30, 2023 consisted of expenses related to employee and board compensation of $1,209,000, professional and consulting fees of $1,071,000, stock-based compensation of $858,000, rent of $173,000, insurance expense of $71,000 and other expenses of $263,000. General and administrative expenses for the three months ended September 30, 2022 consisted of expenses related to employee and board compensation of $1,140,000, stock-based compensation of $1,003,000, professional and consulting fees of $906,000, rent of $182,000, insurance expense of $95,000 and other expenses of $202,000. General and administrative expenses totaled approximately $12,071,000 and $12,465,000 for the nine months ended September 30, 2023 and 2022, respectively. This decrease of approximately $394,000 during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was due primarily to lower stock-based compensation related to executive management. General and administrative expenses for the nine months ended September 30, 2023 consisted of expenses related to employee and board compensation of $4,100,000, professional and consulting fees of $3,833,000, stock-based compensation of $2,708,000, rent of $544,000, insurance expense of $227,000, and other expenses of $659,000. General and administrative expenses for the nine months ended September 30, 2022 consisted of expenses related to employee and board compensation of $3,682,000, stock-based compensation of $3,650,000, professional and consulting fees of $3,555,000, rent of $716,000, insurance expense of $267,000, and other expenses of $595,000. ### Research and Development Research and development expenses totaled approximately $9,874,000 and $7,571,000 for the three months ended September 30, 2023 and 2022, respectively. This increase of approximately $2,303,000 during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was due primarily to higher clinical expenses, stock-based compensation and research and laboratory expenses. Research and development expenses for the three months ended September 30, 2023 included expenses related to clinical expenses of $3,429,000, employee and board compensation of $2,272,000, research and laboratory expenses of $1,560,000, stock-based compensation expense of $1,215,000, rent expense of $679,000, insurance expense of $203,000, depreciation and amortization of $126,000, and other expenses of $390,000. Research and development expenses for the three months ended September 30, 2022 included expenses related to employee compensation of $2,368,000, clinical expenses of $1,495,000, research and laboratory expenses of $1,286,000, stock-based compensation expense of $1,061,000, rent of $677,000, insurance expense of $252,000, depreciation and amortization of $196,000, and other expenses of $236,000. Research and development expenses totaled approximately $29,915,000 and $27,246,000 for the nine months ended September 30, 2023 and 2022, respectively. This increase of approximately $2,669,000 was due primarily to clinical expenses related to the CUE-101 clinical trial and expenses related to the initiation of the Phase 1 monotherapy clinical trial of CUE-102. Rising inflation, supply chain disruptions, and labor shortages may also contribute to future increases in research and development expense. Research and development expenses for the nine months ended September 30, 2023 included expenses related to research and laboratory expenses of $7,736,000, employee and board compensation of $7,404,000, clinical expenses of $7,029,000, stock-based compensation of $3,399,000, rent expense of $2,022,000, insurance expense of $615,000, other professional fees of $539,000, depreciation and amortization of $426,000, and other expenses of $745,000. Research and development expenses for the nine months ended September 30, 2022, included expenses related to employee compensation of $7,920,000, research and laboratory expenses of $5,619,000, clinical expenses of $4,570,000, stock-based compensation of $3,734,000, rent of $2,592,000, insurance expense of $756,000, depreciation and amortization of $687,000, and other expenses of $1,368,000. ### Gain on Right-of-use Asset Termination Gain on right-of-use asset termination was $0 and $258,000 for the three and nine months ended September 30, 2023 and 2022, respectively. This decrease of $258,000 was due to the gain on right-of-use asset related to the termination of our operating lease agreement for our laboratory and office space in Cambridge, Massachusetts at 21 Erie Street, effective on April 30, 2022. ### Interest Income Interest income was approximately $700,000 for the three months ended September 30, 2023 as compared to approximately $200,000 for the three months ended September 30, 2022. Interest income for the three months ended September 30, 2023 included approximately $576,000 in income resulting from amortization of discounts received on certain of our marketable securities and approximately $124,000 of interest income from our operating sweep account, compared to approximately $200,000 of interest income for the three months ended September 30, 2022. Interest income was approximately $1,756,000 for the nine months ended September 30, 2023 as compared to approximately $296,000 for the nine months ended September 30, 2022. Interest income for the nine months ended September 30, 2023 included approximately $1,490,000 in income resulting from amortization of discounts received on certain of our marketable securities and approximately $266,000 of interest income from our operating sweep account, compared to approximately $296,000 of interest income for the nine months ended September 30, 2022. ### Interest Expense Interest expense was approximately $286,000 and $124,000 for the three months ended September 30, 2023 and 2022, respectively. This increase of $162,000 was primarily due to cash paid for interest expense related to the proceeds from borrowings under our Loan and Security Agreement, as amended, or the Loan Agreement, with Silicon Valley Bridge Bank, N.A., or SVBB, of $288,000, and amortization of deferred issuance costs of $9,000, offset by approximately $11,000 from amortization/accretion on investments. Interest expense was approximately $738,000 and $355,000 for the nine months ended September 30, 2023 and 2022, respectively. This increase of $383,000 was primarily due to cash paid for interest expense related to the proceeds from borrowings under the Loan Agreement with SVBB of $946,000, and amortization of deferred issuance costs of $28,000, offset by cash received on the sale of property and equipment of $2,000 and approximately $234,000 from amortization/accretion on investments. ### Liquidity and Capital Resources We have financed our working capital requirements primarily through private and public offerings of equity securities, cash received from Merck, LG Chem, and Ono under the respective collaboration agreements and borrowings under the Loan Agreement. At September 30, 2023, we had cash and cash equivalents totaling $54,691,000 available to fund our ongoing business activities. Additional information concerning our financial condition and results of operations is provided in the financial statements included in this Quarterly Report on Form 10-Q. The amounts that we actually spend for any specific purpose may vary significantly and will depend on a number of factors, including, but not limited to, our research and development activities and programs, clinical testing, regulatory approval, market conditions, and changes in or revisions to our business strategy and technology development plans. On May 9, 2023, we filed a registration statement on Form S-3, which was declared effective on May 26, 2023 (File No. 333-271786), to register for sale from time to time up to $300.0 million of our common stock, preferred stock, debt securities, warrants, subscription rights and/or units in one or more offerings. In October 2021, we entered into an open market sale agreement, or the October 2021 ATM Agreement, with Jefferies LLC, or Jefferies, to sell shares of our common stock for aggregate gross proceeds of up to $80.0 million, from time to time, through an "at-the-market" equity offering program under which Jefferies acts as sales agent. The October 2021 ATM Agreement will terminate upon the earliest of (a) the sale of $80.0 million of shares of our common stock pursuant to the October 2021 ATM Agreement or (b) the termination of the October 2021 ATM Agreement by us or Jefferies. During the three months ended September 30, 2023,we sold 1,378,867 shares of common stock under the October 2021 ATM Agreement for proceeds of approximately $5,589,000 net of commission paid, but excluding transaction expenses. During the nine months ended September 30, 2023, we sold 1,915,131 shares of common stock under the October 2021 ATM Agreement for proceeds of approximately $7,605,000, net of commission paid, but excluding transaction expenses. As of September 30, 2023, we had sold an aggregate of 5,508,538 shares of common stock under the October 2021 ATM Agreement for proceeds of approximately $31.2 million, net of commission paid, but excluding transaction expenses, since its inception. On February 15, 2022, we entered into the Loan Agreement, pursuant to which we have borrowed $10.0 million. The Loan Agreement was amended in April 2023. The term loans under the Loan Agreement, or the Term Loans, bear interest at a floating rate per annum equal to the greater of (A) the prime rate (as published in the money rates section of The Wall Street Journal) plus 2.25% and (B) 5.50%. On the first calendar day of each month, we will be required to make monthly interest payments and commencing on June 30, 2023, we are required to repay the Term Loans in (i) 30 consecutive installments of principal plus monthly payments of accrued interest if the additional term loans are not advanced and (ii) 24 months if the additional term loans are advanced. All outstanding principal and accrued and unpaid interest under the Term Loans and all other outstanding obligations with respect to the Term Loans are due and payable in full on December 1, 2025. The Loan Agreement permits voluntary prepayment of all, but not less than all, of the Term Loans, subject to a prepayment premium except if the facility is refinanced with another SVBB facility. Such prepayment premium would be 2.00% of the principal amount of the Term Loans if prepaid on or after the first anniversary of the date on which we entered the Loan Agreement but prior to the second anniversary of the date on which we entered the Loan Agreement, and 1.00% of the principal amount of the Term Loans if prepaid on or after the second anniversary of the date on which we entered the Loan Agreement. Upon prepayment or repayment in full of the Term Loans, we will be required to pay a one-time final payment fee equal to 5.00% of the original principal amount of any funded Term Loans being repaid. The Loan Agreement also requires us to maintain in our accounts at the Lender unrestricted and unencumbered cash equal to the lesser of all of our cash or $20,000,000. On March 10, 2023, Silicon Valley Bank, or SVB, was closed and the Federal Deposit Insurance Company, or FDIC, was appointed receiver for the bank. The FDIC created a successor bridge bank, SVBB, and all deposits of SVB were transferred to SVBB under a systemic risk exception approved by the U.S. Department of the Treasury, the Federal Reserve and the FDIC. SVBB continues to hold our Term Loans under the same existing terms and covenants which were in place with SVB. The vast majority of our cash and cash equivalents reside in custodial accounts at US Bank for which SVB Asset Management is the advisor. On November 14, 2022, we entered into securities purchase agreements with accredited investors pursuant to which, on November 16, 2022, we issued and sold to such investors in a private placement an aggregate of 7,656,966 shares of common stock and, in lieu of shares of common stock to certain investors, pre-funded warrants, or Pre-Funded Warrants, to purchase an aggregate of 1,531,440 shares of common stock, and, in each case, accompanying warrants, or Warrants, to purchase an aggregate of up to 9,188,406 additional shares of common stock (or Pre-Funded Warrants in lieu thereof) at a price of $3.265 per share and accompanying Warrant (or $3.2649 per Pre-Funded Warrant and accompanying Warrant), or the PIPE Financing. The exercise price of the Warrants is $3.93 per share, or if exercised for a Pre-Funded Warrant in lieu thereof, $3.9299 per Pre-Funded Warrant. The Warrants are exercisable at any time after they are issued and ending on the fifth anniversary of the closing. The Pre-Funded Warrants are exercisable at any time after they are issued and will not expire. We received aggregate gross proceeds from the PIPE Financing of approximately $30 million, before deducting placement agent fees and offering expenses of $2.6 million. Piper Sandler & Co. acted as lead placement agent and Public Ventures LLC acted as co-placement agent for the PIPE Financing. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. If we issue debt securities, we may be required to grant security interests in our assets, could have substantial debt service obligations, and lenders may have a senior position (compared to stockholders) in any potential future bankruptcy or liquidation. Additionally, corporate collaboration and licensing arrangements may require us to incur non-recurring and other charges, give up certain rights relating to our intellectual property and research and development activities, increase our near and long-term expenditures, issue securities that dilute our existing stockholders, issue debt which may require liens on our assets and which will increase our monthly expense obligations, or disrupt our management and business. ### Cash Flows The following table summarizes our changes in cash, cash equivalents, and restricted cash for the nine months ended September 30, 2023 and 2022: *(in thousands)* | Net cash provided by (used in): | Nine Months Ended September 30, 2023 | 2022 | | --- | ---: | ---: | | Operating activities | $(29,003) | $(31,292) | | Investing activities | 25,002 | (29,609) | | Financing activities | 7,078 | 26,256 | | Net increase in cash, cash equivalents, and restricted cash | $3,077 | $(34,645) | ### Operating Activities During the nine months ended September 30, 2023 and 2022, we used cash of $29,003,000 and $31,292,000, respectively, to fund our operating activities. Cash used in operating activities during the nine months ended September 30, 2023 consisted primarily of our net loss of $37,299,000 and decreases of $2,064,000 in operating lease liability, $1,603,000 in accounts receivable, $324,000 in prepaid expenses and other current assets, $251,000 in accounts payable, $234,000 in amortization of discount on purchased securities and $2,000 in gain on sale of property and equipment. Cash used in operating activities was offset by increases of $6,108,000 in stock-based compensation, $2,238,000 in research and development contract liability, $2,142,000 in amortization of operating lease right-of-use asset, $1,573,000 in accrued expenses, $443,000 in depreciation and amortization, $139,000 in deposits, $98,000 in accretion on final payment of Term Loans, $28,000 in amortization of debt issuance costs and $5,000 in accrued interest. Cash used in operating activities during the nine months ended September 30, 2022 consisted primarily of our net loss of $38,418,000 and decreases of $741,000 in accrued expenses, $645,000 in research and development contract liability, $258,000 in gain on right-of-use asset termination, $546,000 in accounts payable, $395,000 in deposits, $397,000 in operating lease liability, $101,000 in amortization of discount on purchased securities, $3,000 in accrued interest on purchased securities, and $846,000 in prepaid expenses and other current assets. Cash used in operating activities was partially offset by increases of $7,384,000 in stock-based compensation, $507,000 in amortization of operating lease right-of-use asset, $21,000 in amortization of debt issuance costs, $76,000 in accretion on final payment of Term Loans, $719,000 in depreciation and amortization, $2,347,000 in accounts receivable, and $4,000 in loss on disposal of fixed assets. ### Investing Activities During the nine months ended September 30, 2023, our investing activities provided $25,002,000 in cash, compared to cash used in investing activities of $29,609,000 during the nine months ended September 30, 2022. Cash provided in investing activities during the nine months ended September 30, 2023 consisted of the net redemption of short-term investments in marketable securities of $25,000,000 and the cash received from the sale of property and equipment of $2,000. Cash used in investing activities during the nine months ended September 30, 2022 consisted of the purchase of property and equipment of $170,000, and the purchase of short-term investments in marketable securities of $29,500,000, offset by cash received from the sale of fixed assets of $6,000. ### Financing Activities During the nine months ended September 30, 2023 and 2022, we generated cash from financing activities of $7,078,000 and $26,256,000, respectively, a decrease of $19,178,000. Cash from financing activities during the nine months ended September 30, 2023 consisted of cash proceeds from the sale of common stock pursuant to the October 2021 ATM Agreement of $7,605,000 net of sales agent commissions and fees, and cash proceeds from the exercise of stock options of $473,000. Cash from financing activities during the nine months ended September 30, 2022 consisted of cash proceeds from the sale of common stock pursuant to the October 2021 ATM Agreement of $16,598,000 net of sales agent commissions and fees, and proceeds from borrowings under the Loan Agreement of $10,000,000, partially offset by cash used for restricted stock buy-back at vesting of $200,000 and payment of debt issuance costs of $142,000. ### Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of our Immuno-STAT platform, continue ongoing and initiate new clinical trials of and seek marketing approval for our drug product candidates. In addition, we expect to incur additional costs associated with operating as a public company. Our expenses will also increase if, and as, we: - continue the clinical development of our CUE-100 series, including CUE-101 and CUE-102; - leverage our programs to advance our other drug product candidates into preclinical and clinical development; - seek regulatory approvals for any drug product candidates for which we successfully complete clinical trials; - seek to discover and develop additional drug product candidates in the CUE-100 series, including Neo-STATs; - establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any drug product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly; - hire additional clinical, quality control and scientific personnel; - expand our manufacturing, quality, operational, financial and management systems; - increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; - maintain, expand and protect our intellectual property portfolio; - acquire or in-license other drug product candidates and technologies; and - incur additional legal, accounting and other expenses in operating as a public company. In the first quarter of 2022, we prioritized our strategic focus on our CUE-101 and CUE-102 oncology programs in our CUE-100 series. The data generated from our ongoing clinical trials provides a sound basis for establishing strategic partnerships to enhance our capacity by subsidizing development of these highly promising programs. We are actively seeking third party support through partnerships and collaborations, or alternative funding structures, to more fully exploit the potential of our technology platform in the areas of oncology and autoimmune disease, accelerate and expand our CUE-100 series pipeline including the further development of CUE-103 and our Neo-STAT and RDI-STAT programs as well as our CUE-300 and CUE-400 series. In 2022, we also took proactive steps to decrease our office and lab footprint and to restructure our research and development functions in support of prioritized corporate objectives and strategies. These steps have realized cost savings to date that have been allocated to our key programs. We believe that our existing cash and cash equivalents as of September 30, 2023 will enable us to fund our operating requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We will need to raise additional capital or incur additional indebtedness to continue to fund our operations in the future. Our ability to raise additional funds will depend on financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market drug product candidates that we would otherwise prefer to develop and market ourselves, which could adversely affect our business prospects, and we may be unable to continue our operations. Because of numerous risks and uncertainties associated with the research, development and commercialization of our drug product candidates, we are unable to estimate the exact amount of our working capital requirements. Factors that may affect our planned future capital requirements and accelerate our need for additional working capital include the following: - the progress, timing, scope and costs of our clinical trials, including the ability to timely enroll patients in our ongoing, planned and potential future clinical trials; - the outcome, timing and cost of regulatory approvals by the FDA and other comparable regulatory authorities, including the potential that the FDA or other comparable regulatory authorities may require that we perform more studies than those that we currently expect; - the number and characteristics of drug product candidates that we may in-license and develop; - our ability to successfully commercialize our drug product candidates, if approved; - the amount of sales and other revenues from drug product candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party reimbursement; - selling and marketing costs associated with our potential products, including the cost and timing of expanding our marketing and sales capabilities; - the terms and timing of any potential future collaborations, licensing or other arrangements that we may establish; - cash requirements of any future acquisitions and/or the development of other drug product candidates; - the costs of operating as a public company; - the cost and timing of completion of commercial-scale, outsourced manufacturing activities; - the time and cost necessary to respond to technological and market developments; - any disputes which may occur between us and Einstein, employees, collaborators or other prospective business partners; and - the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights. A change in the outcome of any of these or other variables with respect to the development of any of our drug product candidates could significantly change the costs and timing associated with the development of that drug product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties and grants from organizations and foundations. If we raise additional funds by selling shares of our common stock or other equity-linked securities, the ownership interest of our current stockholders will be diluted. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or drug product candidates or to grant licenses on terms that may not be acceptable to us. If we raise additional funds through debt financing, we may have to grant a security interest on our assets to the future lenders, our debt service costs may be substantial, and the lenders may have a preferential position in connection with any future bankruptcy or liquidation. If we are unable to raise additional capital when needed, we may be required to curtail the development of our technology or materially curtail or reduce our operations. We could be forced to sell or dispose of our rights or assets. Any inability to raise adequate funds on commercially reasonable terms could have a material adverse effect on our business, results of operation and financial condition, including the possibility that a lack of funds could cause our business to fail, dissolve and liquidate with little or no return to investors. ### Principal Commitments During the three and nine months ended September 30, 2023, there were no material changes to our contractual obligations and commitments as of December 31, 2022 described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report. ## Controls and procedures As filed, 3,374 characters. ### Disclosure Controls and Procedures We are responsible for maintaining disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on our management’s evaluation (with the participation of our principal executive officer and our principal financial officer) of our disclosure controls and procedures as required by Rule 13a-15 under the Exchange Act, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2023, the end of the period covered by this report. ### Inherent Limitations on Effectiveness of Controls Our management, including our principal executive officer and our principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of control effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. ### Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ## Risk factors As filed, 770 characters. We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In evaluating us and our business, you should carefully consider the information included in this Quarterly Report on Form 10-Q and in other documents we file with the SEC and the risk factors previously disclosed in “Part I, Item 1A. Risk Factors” of our 2022 Annual Report. Filed Nov 3, 2023. Source: SEC EDGAR, the filing index for accession 0000950170-23-058838. Last ingested by Listed: Oct 24, 2026, 15:14 ET. No prices; not investment advice.