Verastem, Inc.: Form 10-Q for the period ended Sep 30, 2023

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for our fiscal year ended December 31, 2022 as filed with the. Please also refer to the sections under headings “Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for our fiscal year ended December 31, 2022.

OVERVIEW

We are a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to advancing new medicines for patients battling cancer. Our pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/ MEK inhibition and FAK inhibition.

Our most advanced product candidates, avutometinib and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, but not limited to low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), colorectal cancer (“CRC”), pancreatic cancer, and melanoma. We believe that avutometinib may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other pathway inhibitors, or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies.

Avutometinib is an orally available first-in-class unique small molecule RAF/MEK clamp. In contrast to other MEK inhibitors that are commercially available and in development, avutometinib is a dual RAF/MEK clamp that blocks MEK kinase activity and induces the formation of dominant negative RAF-MEK complexes preventing phosphorylation of MEK by A-Raf proto-oncogene, serine/threonine kinase (“ARAF”), B-Raf proto-oncogene serine/threonine kinase (“BRAF”) and C-raf proto-oncogene serine/threonine kinase (“CRAF”). MEK-only inhibitors (e.g. trametinib) may have limited efficacy because they induce MEK phosphorylation (“pMEK”) by relieving extracellular-signal-regulated-kinase (“ERK”)-dependent feedback inhibition of RAF. By inhibiting RAF-mediated phosphorylation of MEK, avutometinib has the advantage of not inducing pMEK. This unique mechanism of avutometinib enables it to inhibit ERK signaling more effectively and may confer enhanced therapeutic activity against mitogen-activated pathway kinase (“MAPK”) pathway-driven cancers.

Avutometinib has been shown to inhibit signaling and proliferation of tumor cell lines with a variety of MAPK pathway alterations including Kirsten rat sarcoma viral oncogene homolog (“KRAS”), neuroblastoma rat sarcoma viral oncogene homolog (“NRAS”), and BRAF mutations, among others. Avutometinib has demonstrated strong antitumor activity in combination with (i) agents targeting parallel pathways (e.g. inhibitors of FAK, CDK4/6 and mTOR), (ii) agents targeting other nodes in the MAPK pathway (e.g. anti-EGFR, SOS1, KRAS G12C, and KRAS G12D inhibitors), (iii) chemotherapy, and (iv) anti-PD-1.

Defactinib is an oral small molecule inhibitor of FAK and proline-rich tyrosine kinase (“PYK2”) that is currently being evaluated as a potential combination therapy for various solid tumors. FAK is a non-receptor tyrosine kinase encoded by the protein tyrosine kinase-2 (“PTK-2”) gene that is involved in cellular adhesion and, in cancer, metastatic capability. Defactinib targets malignant cells both directly and through modulation of the tumor microenvironment. Defactinib has received orphan drug designation in ovarian cancer in the United States, the European Union, and Australia. Preclinical research by our scientists and collaborators at world-renowned research institutions has described the effect of FAK inhibition as enhancing immune response by decreasing immuno-suppressive cells, increasing cytotoxic T cells and reducing stromal density, which allows tumor-killing immune cells to enter the tumor. Furthermore, it has been shown that FAK activation in response to MAPK inhibitor therapy may bypass MAPK pathway blockade by driving tumor growth through activation of downstream pathways such as RhoA and YAP, supporting the clinical evaluation of avutometinib in combination with defactinib for treatment of cancers harboring MAPK alterations.

The combination of avutometinib and defactinib has been found to be clinically active in some patients with KRAS mutant and KRAS wild-type LGSOC and has received breakthrough designation from the U.S. Food & Drug Administration (the “FDA”) for the treatment of all patients with recurrent LGSOC, regardless of KRAS status, after one or more prior lines of therapy including platinum-based chemotherapy.

In the fourth quarter of 2020, we commenced two registration-directed trials investigating avutometinib as a monotherapy and in combination with defactinib. The registration-directed trials are entitled RAMP (RAF and MEK Program) 201 and RAMP 202. RAMP 201 is an adaptive two-part multicenter, parallel cohort, randomized, open label trial to evaluate the efficacy and safety of avutometinib alone and in combination with defactinib in patients with recurrent LGSOC. RAMP 202 is a Phase 2, adaptive two-part multicenter, parallel cohort, randomized, open-label trial to evaluate the efficacy and safety of avutometinib alone and in combination with defactinib in patients with KRAS G12V NSCLC, following treatment with a platinum-based regimen and immune checkpoint inhibitor. Additionally, and based on preclinical rationale, additional cohorts were added to the RAMP 202 study including KRAS non-G12V NSCLC and BRAF mutant (V600E and non-V600E) NSCLC.

In the fourth quarter of 2022, a type B meeting with the FDA was held to discuss the results to date of the ongoing RAMP 201 trial, confirm the go-forward treatment regimen selection and discuss the regulatory path forward. The combination of avutometinib with defactinib has been selected versus monotherapy as the go-forward treatment in all recurrent LGSOC regardless of KRAS status, acknowledging the demonstrated contribution of defactinib.

Updated Results of Avutometinib and Defactinib Combination in RAMP 201 Part A

An abstract highlighting updated interim results from Part A of RAMP 201 was presented in a Poster Discussion Session at the American Society of Clinical Oncology (ASCO) annual meeting that took place June 2-6, 2023 in Chicago, Illinois.

In this data cut from Part A of the RAMP 201 study, 31 patients with recurrent LGSOC were treated with the combination of avutometinib and defactinib, of which 29 were evaluable for efficacy with a minimum follow-up of 12 months and 13 patients remained on study treatment.

Overall, patients were heavily pretreated with a median of 4 prior systemic regimens (up to 11), including prior platinum-based chemotherapy, endocrine therapy and bevacizumab in most patients and prior MEK inhibitor therapy in about 13% of patients. Confirmed objective response rates (“ORR”) by blinded independent central review of 45% (13/29; 95% CI: 26%-64%) were observed.​ Tumor shrinkage was observed in the majority of patients, 86% (25/29). Further, 3 out of 4 patients who received prior MEK inhibitors responded to the combination.

Among the patients with KRAS mutant LGSOC, the ORR was 60% (9/15) in the combination arm. Among the patients with KRAS wild type LGSOC, the ORR was 29% (4/14). The median time to response was 5.5 months (range 1.6-14.7 months). The median duration of response and median progression free survival have not been reached.

Updated Phase 1/2 FRAME Study Results in Patients with LGSOC

In September 2023 we presented updated FRAME study efficacy data at the 5th Annual RAS-Target Development Summit in Boston Massachusetts showing an ORR of 42% (11 of 26) in evaluable patients with LGSOC. Among patients with KRAS mutant LGSOC (n=12), the ORR was 58% (7 of 12), compared to patients with KRAS wild-type LGSOC (n=12), the ORR was 33% (4 of 12). Across all LGSOC patients, the median duration of response was 26.9 months (95% CI: 8.5-47.3) while median progression free survival (PFS) was 20.0 months (95% CI: 11.1-31.2). As of the July 2023 data cutoff date, 19% of patients (5 of 26) were still on study treatment with a minimum follow-up of 17 months.

We intend to include mature data from the RAMP 201 study and the FRAME study, an investigator-sponsored Phase 1/2 study, to potentially support filing for accelerated approval in patients with recurrent LGSOC. Both studies are evaluating avutometinib and defactinib in patients with recurrent LGSOC. In July 2023, we announced that we have finalized the design of our confirmatory Phase 3 trial with the FDA to evaluate the efficacy and safety of avutometinib and defactinib versus statement of care chemotherapy and hormonal therapy in patients with recurrent LGSOC. The trial is entitled RAMP 301 and is expected to begin enrollment in the second half of 2023.

In September 2021, we entered into a clinical collaboration agreement with Amgen, Inc. (“Amgen”) to evaluate the combination of avutometinib with Amgen’s KRAS G12C inhibitor LUMAKRAS® (sotorasib) in a Phase 1/2 trial entitled RAMP 203. The Phase 1/2 trial will evaluate the safety, tolerability and efficacy of avutometinib in combination with LUMAKRAS in patients with KRAS G12C NSCLC who have not been previously treated with a KRAS G12C inhibitor, as well as in patients who have progressed on a KRAS-G12C inhibitor. The study will investigate the potential benefits of a more complete vertical blockade of the MAPK pathway with the combination of avutometinib (RAF/MEK inhibition) with LUMAKRAS (KRAS G12C inhibition) in KRAS G12C locally advanced or metastatic NSCLC. The RAMP 203 trial has progressed to the recommended Phase 2 dose of 4 mg avutometinib in combination with 960 mg of LUMAKRAS and initiation of Part B dose expansion in patients who are G12C inhibitor treatment naïve and in patients who experienced disease progression on prior G12C monotherapy. In October 2023, we announced initial safety and pharmacokinetics results, as well as preliminary efficacy results from RAMP 203 which were presented at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics on October 11-15, 2023 in Boston, Massachusetts. The confirmed ORR was 25% (3/12) across efficacy-evaluable patients and seen in both KRAS G12C inhibitor resistant (14.3%; 1/7) and naïve (40%; 2/5) patients.

In November 2021, we entered into a clinical collaboration agreement with Mirati Therapeutics, Inc. (“Mirati”) to evaluate the combination of avutometinib with Mirati’s KRAS G12C inhibitor KRAZATI® (adagrasib) in a Phase 1/2 trial entitled RAMP 204. The Phase 1/2 trial will evaluate the safety, tolerability and efficacy of avutometinib in combination with KRAZATI in patients with KRAS G12C NSCLC who have progressed on a KRAS G12C inhibitor. The trial will build on preclinical data showing a deeper blockade of MAPK pathway signaling resulting in enhanced anti-tumor efficacy with the combination of KRAZATI (KRAS G12C inhibition) and avutometinib (RAF/MEK inhibition) relative to either agent alone. The RAMP 204 trial is open and enrolling. Dose escalation is ongoing.

In May 2022, we received the first “Therapeutic Accelerator Award” from the Pancreatic Cancer Network (“PanCAN”) for up to $3.8 million. The grant is expected to support a Phase 1b/2 clinical trial of avutometinib in combination with defactinib entitled RAMP 205. This Phase 1b/2 trial will evaluate the safety, tolerability and efficacy of GEMZAR® (gemcitabine) and ABRAXANE® (Nab-paclitaxel) in combination with avutometinib and defactinib in patients with previously untreated metastatic adenocarcinoma of the pancreas. The RAMP 205 trial will evaluate whether combining avutometinib (to target mutant KRAS which is mutated in more than 90% of pancreatic adenocarcinomas) and defactinib (to reduce stromal density and adaptive resistance to avutometinib) to the standard GEMZAR/ABRAXANE regimen improves outcomes for patients with this type of pancreatic cancer. In August 2022, PanCAN agreed to provide us with an additional $0.5 million for the collection and analysis of patient samples. We opened and began enrollment in the RAMP 205 study.

Our operations to date have been organizing and staffing our company, business planning, raising capital, identifying and acquiring potential product candidates, undertaking preclinical studies and clinical trials for our product candidates and initiating U.S. commercial operations following the approval of COPIKTRA through our ownership period ending in September 2020. We have financed our operations to date primarily through public offerings of our common stock and pre-funded warrants, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules Capital, Inc. (“Hercules”) in March 2017, as amended, the upfront payments and milestone payments under our license and collaboration agreements with Sanofi, CSPC Pharmaceutical Group Limited (“CSPC”), and Yakult Honsha Co., Ltd. (“Yakult”), the upfront payment and milestone payments received under the Secura APA, the issuance of the 2018 Notes (defined herein) in October 2018, the proceeds in connection with the private investment in public equity (the “PIPE”), our loan and security agreement executed with Oxford Finance LLC (“Oxford”) in March 2022, and sales of Series B Convertible Preferred Stock (as defined below). Additionally, from our U.S. commercial launch of COPIKTRA on September 24, 2018 through our ownership period ending in September 2020, we financed a portion of our operations through product revenue.

As of September 30, 2023, we had an accumulated deficit of $797.5 million. Our net loss was $20.0 million, $60.0 million, $18.1 million and $57.0 million for the three and nine months ended September 30, 2023, and 2022, respectively. We expect to incur significant expenses and may continue to incur operating losses for the foreseeable future as a result of the continued research and development of avutometinib and defactinib. As of September 30, 2023, we had cash, cash equivalents and investments of $165.7 million. We expect our existing cash resources will be sufficient to fund our planned operations through at least 12 months from the date of issuance of these condensed consolidated financial statements.

We expect to finance the future development costs of our clinical product portfolio with our existing cash, cash equivalents and investments, through future milestones and royalties received pursuant to the Secura APA, through our loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to, collaboration agreements, future offerings of our equity, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If we fail to obtain additional future capital, we may be unable to complete our planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements, and the amounts of revenues and expenses during the reported periods.

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.

The critical accounting policies we identified in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2022, related to revenue recognition, collaborative agreements, accrued and prepaid research and development expenses, stock-based compensation, and leases. During the nine months ended September 30, 2023, there were no material changes to our critical accounting policies.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2023 and 2022

(dollar amounts in thousands)

Research and development expense. Research and development expense for the three months ended September 30, 2023 (the “2023 Quarter”) was $13.9 million compared to $11.3 million for the three months ended September 30, 2022 (the “2022 Quarter”). The $2.6 million increase from the 2022 Quarter to the 2023 Quarter was primarily driven by the $2.0 million upfront payment made in September 2023 pursuant to the GenFleet Agreement (defined herein), an increase of $0.7 million in contract research organization (“CRO”) costs, an increase of $0.4 million in personnel costs, including non-cash stock compensation, an increase of $0.2 million in investigator sponsored trial (“IST”) costs, and an increase of $0.2 million in investigator fee costs, partially offset by a decrease of $0.9 million in drug substance and drug product costs.

Research and development expenses consist of costs associated with our research activities, including the development of our product candidates. Research and development expenses include product/ product candidate and/or project-specific costs, as well as unallocated costs. We allocate the expenses related to external research and development services, such as CROs, clinical sites, manufacturing organizations and consultants, by project and/or product candidate. We use our employee and infrastructure resources in a cross-functional manner across multiple research and development projects. Our project costing methodology does not allocate personnel, infrastructure and other indirect costs to specific clinical programs or projects.

Product/ product candidate/ project specific costs include:

• direct third-party costs, which include expenses incurred under agreements with CROs, the cost of consultants who assist with the development of our product candidates on a program-specific basis, clinical site costs, and any other third-party expenses directly attributable to the development of the product candidates;
• costs related to contract manufacturing operations including manufacturing costs in connection with producing product candidates for use in conducting preclinical and clinical studies. Costs associated with manufacturing avutometinib are included in “Avutometinib manufacturing and non-clinical trial specific” category below as these costs relate to both the “Avutometinib + defactinib” and “Avutometinib + other combinations” categories and are not specifically allocated to any particular project. Costs to produce defactinib are included in “Avutometinib + defactinib” below; and
• license fees.

Unallocated costs include:

• research and development employee-related expenses, including salaries, benefits, travel, and stock-based compensation expense;
• cost of consultants, including our scientific advisory board, who assist with our research and development but are not allocated to a specific program; and
• facilities, depreciation, and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, and laboratory supplies.

The table below summarizes our direct research and development expenses for our product/ product candidates/ projects and our unallocated research and development costs for the 2023 Quarter and the 2022 Quarter.

(in thousands)

The $0.5 million increase in avutometinib + defactinib costs from the 2022 Quarter to the 2023 Quarter is primarily driven by an increase in RAMP 301 trial costs, an increase in RAMP 201 trial costs, and an increase in pre-clinical collaboration costs partially offset by a decrease in defactinib drug substance and drug product costs. The $0.4 million increase of avutometinib + other combinations costs from the 2022 Quarter to the 2023 Quarter is primarily driven by an increase in RAMP 203 trial costs and IST costs. The $0.6 million decrease in avutometinib manufacturing and non-clinical trial specific costs from the 2022 Quarter to the 2023 Quarter is primarily driven a decrease in pre-clinical collaboration costs for avutometinib. The $2.1 million increase in GenFleet (defined herein) costs is primarily driven by the $2.0 million upfront payment made in September 2023 pursuant to the GenFleet Agreement.

Selling, general and administrative expense. Selling, general and administrative expense for the 2023 Quarter was $7.4 million compared to $6.4 million for the 2022 Quarter. The increase of $1.0 million from the 2022 Quarter to the 2023 Quarter primarily resulted from an increase of $0.5 million in personnel costs, including non-cash stock compensation, an increase of $0.2 million of costs in anticipation of potential launch of avutometinib and defactinib in LGSOC, and an increase of $0.3 million in travel and other costs.

Other Income (expense). Other expense for the 2023 Quarter was less than $0.1 million compared to other income of less than $0.1 million in the 2022 Quarter. Other expense for the 2023 Quarter and other income for the 2022 Quarter was comprised of changes in foreign currency exchange rates.

Interest income. Interest income for the 2023 Quarter was $2.2 million compared to $0.3 million for the 2022 Quarter. The increase of $1.9 million from the 2022 Quarter to the 2023 Quarter in interest income is primarily driven by an increase in interest rates and investment balances on short term investments and cash equivalents.

Interest expense. Interest expense for the 2023 Quarter was $1.1 million compared to $0.7 million for the 2022 Quarter. The increase of $0.4 million from the 2022 Quarter to the 2023 Quarter was primarily driven by the interest expense pursuant to the loan and security agreement entered into with Oxford on March 25, 2022 including an additional $15.0 million debt drawdown on March 22, 2023.

Change in fair value of preferred stock tranche liability. The change in fair value of the preferred stock tranche liability of $0.2 million for the 2023 Quarter was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement (defined herein). There was no preferred stock tranche liability outstanding during the 2022 Quarter.

Comparison of the nine months ended September 30, 2023 and 2022

(dollar amounts in thousands)

Sale of COPIKTRA license and related assets revenue. Sale of COPIKTRA license and related assets revenue for the nine months ended September 30, 2023 (the “2023 Period”) was $0.0 million compared to $2.6 million for the nine months ended September 30, 2022 (the “2022 Period”). Sale of COPIKTRA license and related assets revenue for the 2022 Period was comprised of one regulatory milestone for $2.5 million achieved by Secura’s sublicensee, CSPC, and $0.1 million related to royalties on COPIKTRA sales in the 2022 Period and future royalties expected to be received pursuant to the Secura APA that were not constrained.

Research and development expense. Research and development expense for the 2023 Period was $38.9 million compared to $39.8 million for the 2022 Period. The $0.9 million decrease from the 2022 Period to the 2023 Period was primarily driven by a decrease of $3.6 million in drug substance and drug product costs, a decrease of $1.1 million in CRO costs, partially offset by the $2.0 million upfront payment pursuant to the GenFleet Agreement, an increase of $0.9 million in personnel costs, including non-cash stock compensation, and increase of $0.9 million in IST costs.

The table below summarizes our direct research and development expenses for our product/ product candidates/ projects and our unallocated research and development costs for the 2023 Period and the 2022 Period.

(in thousands)

The $3.3 million decrease in avutometinib + defactinib costs from the 2022 Period to the 2023 Period is primarily driven by a decrease in RAMP 202 trial costs, decrease in defactinib drug product and drug substance costs, and RAMP 201 trial costs, partially offset by an increase in RAMP 301 trial costs. The $2.0 million increase of avutometinib + other combinations costs from the 2022 Period to the 2023 Period is primarily driven by an increase in

RAMP 203 trial costs, RAMP 204 trial costs and IST Costs. The $2.7 million decrease in avutometinib manufacturing and non-clinical trial specific costs from the 2022 Period to the 2023 Period is primarily driven a decrease in drug substance and drug product costs for avutometinib, CRO costs, and pre-clinical collaborations. The $2.1 million increase in GenFleet costs is primarily driven by the $2.0 million upfront payment made in September 2023 pursuant to the GenFleet Agreement.

Selling, general and administrative expense. Selling, general and administrative expense for the 2023 Period was $22.1 million compared to $18.9 million for the 2022 Period. The increase of $3.2 million from the 2022 Period to the 2023 Period primarily resulted from an increase of $0.9 million in additional costs in anticipation of potential launch of avutometinib and defactinib in LGSOC, an increase of $0.7 million in consulting and professional fees, an increase of $0.6 million in costs associated with financing activities, an increase of $0.4 million in personnel costs, including non-cash stock compensation, and an increase $0.6 million in travel and other costs.

Other Income (expense). Other expense for the 2023 Period was $0.1 million compared to other income of $0.1 million in the 2022 Period. Other expense for the 2023 Period was comprised of changes in foreign currency exchange rates. Other income for the 2022 Period was comprised of a gain on the sale of fixed assets and changes in foreign currency exchange rates.

Interest income. Interest income for the 2023 Period was $4.3 million compared to $0.4 million for the 2022 Period. The increase of $3.9 million from the 2022 Period to the 2023 Period in interest income is primarily driven by an increase in interest rates and investment balances on short term investments and cash equivalents.

Interest expense. Interest expense for the 2023 Period was $3.0 million compared to $1.4 million for the 2022 Period. The increase of $1.6 million from the 2022 Period to the 2023 Period was primarily driven by the interest expense pursuant to the loan and security agreement entered into with Oxford on March 25, 2022 including an additional $15.0 million debt drawdown on March 22, 2023.

Change in fair value of preferred stock tranche liability. The change in fair value of the preferred stock tranche liability of $0.3 million for the 2023 Period was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement (defined herein). There was no preferred stock tranche liability outstanding during the 2022 Period.

LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity

We have financed our operations to date primarily through public and private offerings of our common stock and pre-funded warrants, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments and under our license and collaboration agreements with Sanofi, Yakult, and CSPC, the upfront payment under the Secura APA, the issuance of 2018 Notes in October 2018, the proceeds in connection with the PIPE, the Loan Agreement with Oxford, and the issuance of Series B Convertible Preferred Stock. With the commercial launch of COPIKTRA in the United States in September 2018 through our ownership period ending in September 2020, we financed a portion of our operations through product revenue. As of September 30, 2020, we have sold our COPIKTRA license and no longer sell COPIKTRA in the United States. We expect to finance a portion of our business through future potential milestones and royalties received pursuant to the Secura APA.

As of September 30, 2023, we had $165.7 million of cash, cash equivalents, and investments. We primarily invest our cash, cash equivalents and investments in U.S. Government money market funds, agency bonds, corporate bonds and commercial paper of publicly traded companies.

Risks and uncertainties include those identified under Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 14, 2023.

Cash flows

The following table sets forth the primary sources and uses of cash for the 2023 Period and the 2022 Period (in thousands):

Operating activities. The use of cash in both periods resulted primarily from our net losses adjusted for non-cash charges and changes in the components of working capital. Our cash outflow from net losses adjusted for non-cash charges and adjustments was $55.8 million and $52.0 million for the 2023 Period and the 2022 Period, respectively. Non-cash charges and adjustments were primarily related to change in fair value of the preferred stock tranche liability and stock-based compensation expense in the 2023 Period and stock-based compensation expense in the 2022 Period. Our cash outflow from operating activities due to changes in operating assets and liabilities was $1.0 million for the 2023 Period. Our cash inflow from operating activities due to changes in operating assets and liabilities was $5.0 million for the 2022 Period. Cash outflow due to changes in operating assets and liabilities for the 2023 Period was primarily driven by an increase of $3.0 million in prepaid expenses, other current assets and other assets partially offset by an increase of $1.3 million in accrued expenses and other liabilities, an increase of $0.3 million in deferred liabilities and an increase of $0.2 million in accounts payable. Cash inflow due to changes in operating assets and liabilities for the 2022 Period was primarily driven by an increase of $3.1 million in accounts payable, a decrease of $1.3 million in prepaid expenses, other current assets, and other assets, an increase of $1.0 million in deferred liabilities, a decrease of $0.4 million in accounts receivable partially offset by a decrease of $0.8 million in accrued expenses and other liabilities. The changes in prepaid expenses, other current assets, and other assets in both periods are exclusive of cash received from PanCAN and used on the RAMP 205 study. Cash used in operating activities was $56.8 million and $47.1 million for the 2023 Period and the 2022 Period, respectively.

Investing activities. The cash provided by investing activities for the 2023 Period relates to the net purchases of investments of $56.9 million. The cash provided by investing activities for the 2022 Period relates to the net maturities of investments of $53.2 million.

Financing activities. The cash provided by financing activities for the 2023 Period primarily represents $91.4 million of proceeds from our previously disclosed public offering in June 2023 of common stock and pre-funded warrants to purchase shares of our common stock, net of issuance costs, $28.1 million of proceeds received from issuance of Series B Convertible Preferred Stock, net of issuance costs, $14.9 million of proceeds received pursuant to the loan and security agreement with Oxford, $1.4 million of proceeds received from insurance premium financing and $0.1 million of proceeds received related to our employee stock purchase plan, partially offset by $1.3 million of payments on insurance premium financing. The cash provided by financing activities for the 2022 Period primarily represents $27.4 million of net proceeds received under our at-the market equity offering program, $24.1 million of net proceeds received from the loan and security agreement with Oxford, and $0.3 million of proceeds received related to exercise of stock options and our employee stock purchase plan. Refer to Note 11. Capital Stock to our unaudited condensed consolidated financial statements included in this quarterly report for additional details on the January 2023 offering of our Series B Convertible Preferred Stock, the June 2023 offering of our common stock and pre-funded warrants to purchase shares of our common stock, and our at-the-market equity offering program; Note 7. Debt to our unaudited condensed consolidated financial statements included in this quarterly report for additional details on the loan and security agreement with Oxford; Note 9. Notes Payable to our unaudited condensed consolidated financial statements included in this quarterly report for additional details on the finance agreement with AFCO Premium Credit LLC related to insurance premium financing and the monthly payments of principal and interest related thereto; and Note 10. Convertible Senior Notes to our unaudited condensed consolidated financial statements included in this quarterly report for details on our 5.00% Convertible Senior Notes due 2048.

License and Collaboration Agreements

GenFleet Therapeutics (Shanghai), Inc.

On August 24, 2023, we entered into a collaboration and option agreement (“Genfleet Agreement”) with GenFleet Therapeutics (Shanghai), Inc. (“GenFleet”), pursuant to which GenFleet granted us the option to obtain the exclusive development and commercialization rights worldwide outside of mainland China, Hong Kong, Macau, and Taiwan for up to three oncology programs targeting RAS pathway driven cancers (the “Genfleet Options”). We may exercise its GenFleet Options on a program-by-program basis.

We made an upfront payment of $2.0 million in September 2023 to GenFleet and will provide $1.5 million of research support over the first three years of the GenFleet Agreement. In addition, pursuant to the GenFleet Agreement, upon achievement of certain development and commercial milestones, and upon us exercising our GenFleet Options, GenFleet will be entitled to receive payments of up to $622.0 million. We have also agreed to pay GenFleet royalties on net sales of licensed products in the Territory ranging from the mid to high single digits.

We may terminate the GenFleet Agreement in its entirety or on a program-by-program basis by providing 90 days written notice to GenFleet. Either party may terminate the GenFleet Agreement in its entirety or on a program-by-program and country-by-country basis, with 60 days’ written notice for the other party’s material breach if such party fails to cure the breach. Either party may also terminate the GenFleet Agreement in its entirety upon certain insolvency events involving the other party.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The disclosure of our contractual obligations and commitments was reported in our Annual Report on Form 10-K for the year ended December 31, 2022. Except as previously disclosed in the Company’s subsequent filings with the SEC, including this Quarterly Report on Form 10-Q, there have not been any material changes from the contractual obligations and commitments previously disclosed in such report.

We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents and investments of $165.7 million as of September 30, 2023, consisting of cash, U.S. Government money market funds, agency bonds, corporate bonds and commercial paper of publicly traded companies. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because most of our investments are interest bearing. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration most of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

We contract with CROs and contract manufacturers globally which may be denominated in foreign currencies. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of September 30, 2023, an immaterial amount of our total liabilities were denominated in currencies other than the functional currency.

On March 25, 2022, we entered into the Loan Agreement, under which we borrowed $25.0 million in March 2022 and $15.0 million in March 2023, for a total of $40.0 million. The Term Loans under the Loan Agreement bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap. Changes in interest rates will cause interest charges to fluctuate under the Loan Agreement. A 10% increase in current interest rates would have resulted in an immaterial increase in the amount of cash interest expense for the three and nine months ended September 30, 2023 due to the overall interest rate floor and cap.

Evaluation of disclosure controls and procedures

Our management, with the participation of our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting

There have been 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.

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on March 14, 2023.