Verastem, Inc.: Form 10-Q for the period ended Sep 30, 2024

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, 2023. 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, 2023.

OVERVIEW

We are a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to the development and commercialization of new medicines to improve the lives of patients diagnosed with cancer. Our pipeline is focused on RAS/ MAPK driven cancers, specifically novel drug candidates that inhibit signaling pathways critical to 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 LGSOC, NSCLC, pancreatic cancer, CRC, and thyroid cancer. 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, small molecule RAF/MEK clamp that inhibits RAS/RAF/MEK, extracellular-signal-regulated-kinase (“ERK”) MAPK pathway which is involved in proliferation, migration, transformation, and survival of tumor cells. In contrast to other MEK-only inhibitors, 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 dependent feedback inhibition of RAF. By inhibiting RAF-mediated phosphorylation of MEK, avutometinib has the potential 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 MAPK pathway-driven cancers. We use the term “RAMP” to refer to our RAF and MEK Program.

Avutometinib inhibits MAPK pathway signaling and proliferation of tumor cell lines harboring MAPK pathway alterations including KRAS, neuroblastoma rat sarcoma viral oncogene homolog (“NRAS”), and BRAF mutations, among others. Avutometinib has demonstrated strong antitumor activity as monotherapy and 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 and PYK2 are members of the same family of nonreceptor protein tyrosine kinases that integrate signals from integrin and growth factor receptors to regulate cell proliferation, survival, migration, and invasion. Defactinib disrupts malignant cells both directly and through modulation of the tumor microenvironment. Preclinical research by our scientists and collaborators indicates that FAK inhibition delays tumor progression in cancer models, which was associated with reduced stromal density and immunosuppressive cell populations. Furthermore, activation of FAK is a putative adaptive resistance mechanism to MAPK pathway inhibition, supporting the clinical evaluation of avutometinib in combination with defactinib for treatment of cancers harboring MAPK pathway alterations.

The combination of avutometinib and defactinib is clinically active in patients with KRAS mutant (“KRAS mt”) and KRAS wild-type (“KRAS wt”) recurrent LGSOC and has received breakthrough designation from 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. Avutometinib, alone or in combination with defactinib, has received orphan drug designation for the treatment of all patients with LGSOC in the United States. Defactinib has received orphan drug designation in ovarian cancer in the United States, the European Union, and Australia. In addition, the FDA granted orphan drug designation to avutometinib, in combination with defactinib, for the treatment of pancreatic cancer.

In the fourth quarter of 2020, we commenced a registration-directed trial, known as the RAMP 201 study, investigating avutometinib as a monotherapy and in combination with defactinib for the treatment of patients with recurrent LGSOC. The RAMP 201 study 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. The combination of avutometinib and defactinib has been declared the go-forward treatment regimen based on a higher rate of confirmed objective responses in a planned interim analysis with prespecified criteria, acknowledging the demonstrated contribution of defactinib.

In October 2024, we announced updated results from the RAMP 201 study with a data cutoff of June 30, 2024. The primary analysis of RAMP 201 study showed a confirmed overall response rate (“ORR”) by blinded independent central review of 31% (34/109; 95% CI: 23-41) in all evaluable patients with measurable disease with approximately 12 months of follow up. Among patients with KRAS mt LGSOC, the confirmed ORR was 44% (25/57; 95% CI: 31-58) and for patients with KRAS wt LGSOC the confirmed ORR was 17% (9/52; 95% CI: 8-30). The median duration of response was 31.1 months (95% CI: 14.8-31.1) in all evaluable patients, with 31.1 months (95% CI: 14.8-31.1) in the KRAS mt population and 9.2 months (95% CI: 5.5-NEi) in the KRAS wt population. The median progression-free survival was 12.9 months (95% CI: 10.9-20.2) in all evaluable patients, with 22 months (95% CI: 11.1-36.6) in the KRAS mt population and 12.8 months (95% CI: 7.4-18.4) in the KRAS wt population. The disease control rate at six or more months was 61% in the total evaluable population, 70% in KRAS mt population and 50% in KRAS wt population. The updated data continues to demonstrate avutometinib in combination with defactinib is generally well-tolerated, with a 10% discontinuation rate due to adverse events and no new safety signals were identified. The most common treatment-related adverse events (all grades, grade ≥3) for the combination were nausea (67.0%, 2.6%), diarrhea (58.3%, 7.8%), and increased blood creatine phosphokinase levels (60.0%, 24.3%).

In October 2024, we announced that a Type A meeting was held with the FDA during which we aligned with the FDA on our plans to complete our NDA submission for the combination of avutometinib and defactinib in October 2024 for adult patients with recurrent KRAS mt LGSOC, who received at least one prior systemic therapy, based on mature data from the RAMP 201 study. Subsequently in October 2024, we completed our NDA submission with the FDA for the investigational combination of avutometinib and defactinib for adults with recurrent KRAS mt LGSOC, who received at least one prior systemic therapy. We submitted the NDA under the FDA’s Accelerated Approval pathway and requested a Priority Review based on the combination’s potential to address significant unmet medical need among patients with recurrent LGSOC. If granted, the FDA review will be completed within six months following the 60-day filing period. If approved, we expect that avutometinib plus defactinib will be the first-ever FDA-approved treatment specifically for adult patients in the United States with recurrent KRAS mutant LGSOC. At this time, the FDA did not recommend pursuing accelerated approval of a KRAS wt indication. This strategic approach allows us to potentially reach the market more efficiently while mapping out a path forward with the FDA for the KRAS wt indication, including leveraging data from the ongoing RAMP 301 Phase 3 study. RAMP 301, which is currently enrolling patients with recurrent LGSOC regardless of KRAS mutation status, will serve as a confirmatory study for the initial indication and has potential to expand the indication regardless of KRAS mutation status. Obtaining approval of an NDA can be a lengthy, expensive, and uncertain process and the FDA has substantial discretion in the approval process and may refuse to accept any application, including requests such as ours for accelerated approval and priority review, or may decide that our data is insufficient for approval and require additional preclinical, clinical, or other studies. While we have engaged in discussions with the FDA with respect to the scope and nature of our NDA submission, the FDA may, for example, require additional data under the RAMP 301 study before approving the NDA for the scope we request, or at all. There can be no assurance regarding the timing and outcome of the FDA review and approval of our NDA submission.

We estimate the total annual incident addressable market opportunity for the combination of avutometinib and defactinib to be approximately $300 million for KRAS mt and approximately $374 million for KRAS wt populations. We estimate the total prevalent addressable market opportunity to be approximately $1.7 billion for KRAS mt and approximately $1.6 billion for KRAS wt populations, respectively. Our estimates of the patient population, pricing and revenue opportunities for its product candidates, including for KRAS mt and KRAS wt patients with LGSOC, are based on several internal and third-party estimates and assumptions, including, without limitation, internal forecasts, the median duration of treatment from initial interim clinical data and the assumed prices at which we can commercialize our product candidates. Specifically, our estimates of total addressable market opportunities are based on: (a) estimated annual incidence of KRAS mt and KRAS wt populations of approximately 500 and 1,000 patients, respectively, (b) estimated prevalence of KRAS mt and KRAS wt populations of approximately 2,800 and 4,200 patients, respectively, (c) the average duration of therapy as observed in Verastem clinical trials of 18 months and 11 months for KRAS mt and KRAS wt populations, respectively, and (d) an estimated cost of therapy of $34,000 per month consistent with other recent oncology drug launches.

The average duration of therapy included in this calculation is based, in part, on the estimated duration of therapy for patients dosed with the combination of avutometinib and defactinib for the combined Parts A, B, and C in RAMP 201 as of the data cutoff as of June 30, 2024. Amongst 115 patients, 58 enrolled with KRAS mutated LGSOC and 57 had wild-type, or non-mutated, KRAS. The estimated mean duration of therapy for all patients is 14.5 months. For KRAS mt, the estimated mean duration of therapy is 18.3 months and for KRAS wt, the estimated mean duration of therapy is 10.7 months.

Estimated mean duration of therapy was calculated by projecting complete time on treatment for patients still on treatment by sampling from an exponential distribution conditional on the observed duration through the cutoff date.

In December 2023, we announced initiation of a Phase 3 trial, known as the RAMP 301 study, to evaluate the combination of avutometinib and defactinib for the treatment of patients with recurrent LGSOC. The RAMP 301 study is a randomized global trial, evaluating the efficacy and safety of avutometinib and defactinib versus standard chemotherapy or hormonal therapy in patients with recurrent LGSOC. RAMP 301 is intended to serve as the confirmatory study required by the FDA to potentially convert an accelerated approval for the combination of avutometinib and defactinib for the treatment of LGSOC to full approval. We also intend to initiate discussions with global regulatory authorities, including those in Europe and Japan, to determine the regulatory path with the objective of ultimately seeking approval for the combination in additional regions. For RAMP 301, we are currently enrolling patients with LGSOC regardless of KRAS mutation status across the United States, United Kingdom, European Union, Canada, and Australia, and we plan to complete enrollment by the end of 2025.

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 study entitled RAMP 203. The Phase 1/2 trial began evaluating 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 trial built upon initial preclinical data showing enhanced anti-tumor efficacy with the combination of LUMAKRAS (KRAS G12C inhibition) and avutometinib (RAF/MEK inhibition) relative to either agent alone. In October 2023, we announced initial safety and pharmacokinetics results, as well as preliminary efficacy results, from the RAMP 203 study which were presented at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics in October 2023. These preliminary results showed a confirmed ORR of 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 January 2024, the FDA granted fast track designation for combination of avutometinib and LUMAKRAS for the treatment of patients with KRAS G12C-mutant metastatic NSCLC who have received at least one prior systemic therapy and have not been previously treated with a KRAS G12C inhibitor. The RAMP 203 study has progressed to the recommended Phase 2 dose of 4 mg avutometinib in combination with 960 mg of LUMAKRAS for the doublet of avutometinib and LUMAKRAS. RAMP 203 is currently enrolling patients who have experienced disease progression on a KRAS G12C inhibitor in the dose expansion phase (Part B) and completed enrollment of patients without prior G12C treatment to the initial doublet dose expansion phase. Based on emerging data demonstrating improved tumor regressions in KRAS G12C-mutant NSCLC preclinical models when a FAK inhibitor is combined with a G12C inhibitor and avutometinib, defactinib was added to the RAMP 203 study in new triplet cohorts in 2024. We expect to report updated interim data from the doublet combination of avutometinib plus LUMAKRAS and provide initial safety data and a status of enrollment for the triplet combination of avutometinib, LUMAKRAS and defactinib by the end of 2024.

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. In the fourth quarter of 2024, after discussion with Bristol Myers Squibb Company, who completed an acquisition of Mirati in the first quarter of 2024, and the RAMP 204 steering committee, we decided to close the RAMP 204 study to further enrollment in order to prioritize the RAMP 203 study. No new safety signals were identified in the RAMP 204 study and closure to further enrollment is not related to safety findings. The RAMP 203 study will be prioritized primarily because it covers both patients who are G12Ci treatment naïve and progressed and importantly includes the triplet treatment approach.

In May 2022, we received the first “Therapeutic Accelerator Award” from PanCAN for up to $3.8 million. The grant is supporting a Phase 1b/2 clinical trial of avutometinib in combination with defactinib entitled RAMP 205. RAMP 205 is evaluating the safety, tolerability and efficacy of avutometinib and defactinib in combination with GEMZAR® (gemcitabine) and ABRAXANE® (Nab-paclitaxel) in patients with previously untreated metastatic adenocarcinoma of the pancreas. The RAMP 205 trial is evaluating 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 pancreatic adenocarcinoma. In August 2022, PanCAN agreed to provide us with an additional $0.5 million for the collection and translational analysis of patient samples. The RAMP 205 trial is open and enrolling. Combination dose evaluation is ongoing. As of a data cut of May 14, 2024, we reported patients receiving the combination of avutometinib and defactinib with gemcitabine and Nab-paclitaxel in dose level 1 cohort achieved a confirmed ORR of 83% (5/6), one dose-limiting toxicity was observed in the dose level 1 cohort, and the dose level was subsequently cleared after additional patients were enrolled. The initial interim results were presented at the American Society of Clinical Oncology Annual Meeting in June 2024. We expect to report updated data from RAMP 205 study in the first quarter of 2025.

Furthermore, avutometinib and defactinib are currently being investigated in combination with immunotherapeutic and other agents through investigator sponsored trials (“ISTs”) for the treatment of various solid tumors, including, but not limited to, CRC, gynecological cancer with MAPK pathway alterations, breast cancer, thyroid cancer and melanoma.

In August 2023, we entered into a collaboration and option agreement (the “GenFleet Agreement”) with GenFleet pursuant to which GenFleet granted us options to obtain exclusive development and commercialization rights worldwide outside of mainland China, Hong Kong, Macau, and Taiwan (the “GenFleet Territory”) for up to three oncology programs targeting RAS pathway driven cancers (the “GenFleet Options”). We may exercise our GenFleet Options on a program-by-program basis. The collaboration builds on the strengths of both companies in oncology small molecule drug development, enabling us to partner our clinical development and regulatory expertise with GenFleet’s accomplished discovery capabilities. This synergistic collaboration includes our experience and established network of collaborators, including scientific and clinical experts in RAS biology and RAS pathway-driven cancers and GenFleet’s accomplishments with its KRAS G12C inhibitor program. In December 2023, we announced the selection of an orally bioavailable, potent and selective small molecule KRAS G12D (ON/OFF) inhibitor entitled VS-7375/GFH375 with a potential best-in-class profile as the lead program from our collaboration with GenFleet. An investigational new drug (“IND”) application by GenFleet in China for VS-7375/GFH375, was cleared in June 2024, following which GenFleet initiated a Phase 1/2 study in solid tumors with KRAS G12D mutation for VS-7375/GFH375 in China in June 2024. GenFleet has dosed several patients in the Phase/12 study in China evaluating VS-7375/GFH375 in patients with KRAS G12D-mutated advanced solid tumors which started in July 2024. The Phase 1 study is being conducted in approximately 20 hospitals in China and will evaluate the safety and efficacy of VS-7375/GFH375 in patients with advanced KRAS G12D mutant solid tumors. The Phase 1 study will determine the recommended Phase 2 dose and then further evaluate in Phase 2 the efficacy and safety of VS-7375/GFH375 in patients with advanced solid tumors, such as pancreatic ductal adenocarcinoma, colorectal cancer and non-small cell lung cancer. After evaluating initial dose escalation data from the Phase 1 study in China, we anticipate filing an IND in the United States by first quarter of 2025.

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, pre-funded warrants, and warrants, offerings of convertible notes, 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 milestone payments under our license and collaboration agreements with Sanofi, CSPC, and Yakult, the upfront payment and milestone payments received under the Secura APA, the proceeds in connection with the private investment in public equity (the “PIPE”), and our Loan Agreement with Oxford, sales of Series B Convertible Preferred Stock. 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, 2024, we had an accumulated deficit of $891.0 million. Our net loss was $24.0 million, $66.1 million, $20.0 million and $60.0 million for the three and nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, we had cash, cash equivalents, and investments of $113.2 million. In accordance with applicable accounting standards, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within 12 months after the date of the issuance of the consolidated financial statements. We anticipate operating losses may continue for the foreseeable future since we do not yet have regulatory approval to sell any of our product candidates, and we continue to incur operating costs to execute our strategic plan, including costs related to research and development of our product candidates and commercial readiness activities. As a result of the assessment in accordance with the applicable accounting standards, these conditions raise substantial doubt about our ability to continue as a going concern for 12 months after the date the condensed consolidated financial statements are issued.

We expect to finance our operations with our existing cash, cash equivalents and investments, through potential future milestones and royalties received pursuant to the Secura APA, through the Loan 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, given the risk associated with these potential strategic or financing opportunities, they are not deemed probable for purposes of the going concern assessment. 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. Therefore, there is substantial doubt about our ability to continue as a going concern.

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, 2023, related to revenue recognition, collaborative agreements, accrued and prepaid research and development expenses, and stock-based compensation. During the nine months ended September 30, 2024, there were no material changes to our critical accounting policies.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2024 and 2023

(dollar amounts in thousands)

Research and development expense. Research and development expense for the three months ended September 30, 2024 (the “2024 Quarter”) was $24.8 million compared to $13.9 million for the three months ended September 30, 2023 (the “2023 Quarter”). The $10.9 million increase from the 2023 Quarter to the 2024 Quarter was primarily driven by an increase of $4.8 million in contract research organization (“CRO”) costs, an increase of $1.8 million in consulting costs, an increase of $1.7 million in investigator fees, an increase of $1.0 million in milestone and upfront payments pursuant to the GenFleet Agreement, an increase of $0.6 million in clinical supply, an increase of $0.5 million in personnel costs, including non-cash stock compensation and an increase of $0.5 million in drug substance and drug product manufacturing 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 record expenses related to external research and development services, such as CROs, clinical sites, pass-through fees such as investigator fees, 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, pass-through fees, 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 2024 Quarter and the 2023 Quarter.

(in thousands)

As a result of adding defactinib to the RAMP 203 study, we have classified RAMP 203 study costs incurred during the 2024 Quarter within “avutometinib + defactinib” in the table above. RAMP 203 study costs incurred prior to 2024 Quarter remain classified within “avutometinib + other combinations” in the table above. The $8.5 million increase in avutometinib + defactinib costs from the 2023 Quarter to the 2024 Quarter was primarily driven by an increase in RAMP 301 study costs, an increase in drug metabolism and pharmacokinetics costs, an increase in RAMP 201 study costs, an increase in RAMP 205 study costs, and inclusion of RAMP 203 study costs within avutometinib + defactinib classification starting in the 2024 Quarter, partially offset by a decrease in RAMP 202 study costs. The $0.7 million decrease in avutometinib + other combinations costs is primarily driven by starting in the 2024 Quarter classifying RAMP 203 study costs within the “avutometinib + defactinib classification. The $1.2 million increase in GenFleet costs was primarily driven by a $3.0 million development milestone payment made in 2024 Quarter compared to the $2.0 million upfront payment made in the 2023 Quarter pursuant to the GenFleet Agreement.

Selling, general and administrative expense. Selling, general and administrative expense for the 2024 Quarter was $12.3 million compared to $7.4 million for the 2023 Quarter. The increase of $4.9 million from the 2023 Quarter to the 2024 Quarter primarily resulted from $3.0 million in July 2024 Offering financing fees in the 2024 Period, an increase of $1.2 million in personnel costs, including non-cash stock compensation, and an increase of $0.7 million in cost in anticipation of potential launch of avutometinib and defactinib in LGSOC.

Other expense. Other expense for the 2024 Quarter was $0.1 million compared to less than $0.1 million for the 2023 Quarter. Other expense for the 2024 Quarter and 2023 Quarter was comprised of transaction losses due to changes in foreign currency exchange rates.

Interest income. Interest income for the 2024 Quarter was $0.8 million compared to $2.2 million for the 2023 Quarter. The decrease of $1.4 million from the 2023 Quarter to the 2024 Quarter in interest income was primarily due to the decrease in investment balances on short term investments and cash equivalents during each respective quarter.

Interest expense. Interest expense for the 2024 Quarter and 2023 Quarter was $1.1 million. Interest expense for the 2024 Quarter and 2023 Quarter was primarily comprised of interest expense pursuant to the loan and security agreement entered into with Oxford on March 25, 2022.

Change in fair value of preferred stock tranche liability. The change in fair value of the preferred stock tranche liability was $0.0 million for the 2024 Quarter compared to $0.2 million income for the 2023 Quarter. The change in fair value of preferred stock tranche liability was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement. The fair value of the preferred stock tranche liability was $0.0 million at the beginning of the 2024 Quarter and expired in July 2024 resulting in no adjustment in the 2024 Quarter. The fair value of the preferred stock tranche liability decreased from $7.5 million at the beginning of the 2023 Quarter to $7.3 million at the end of the 2023 Quarter resulting in $0.2 million income in the 2023 Quarter.

Change in fair value of warrant liability. The change in fair value of warrant liability of $13.5 million for the 2024 Quarter was comprised of the mark-to-market adjustment for the warrants issued as part of the July 2024 Offering which decreased primarily due to the decrease in our stock price from July 23, 2024 to end of 2024 Quarter. There was no warrant liability outstanding during the 2023 Quarter.

Comparison of the nine months ended September 30, 2024 and 2023

(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, 2024 (the “2024 Period”) was $10.0 million compared to $0.0 million for the nine months ended September 30, 2023 (the “2023 Period”). Sale of COPIKTRA license and related assets revenue for the 2024 Period was comprised of one sales milestone of $10.0 million due upon Secura achieving cumulative worldwide net sales of COPIKTRA exceeding $100.0 million during the 2024 Period. The $10.0 million milestone payment was received by us in July 2024.

Research and development expense. Research and development expense for the 2024 Period was $60.5 million compared to $38.9 million for the 2023 Period. The $21.6 million increase from the 2023 Period to the 2024 Period was primarily driven by an increase of $8.9 million in CRO costs, an increase of $3.6 million in investigator fees, an increase of $3.6 million in consulting costs, an increase of $1.8 million in personnel costs, including non-cash stock compensation, an increase of $1.6 million in clinical supply costs, an increase of $1.0 million in milestone and upfront payments pursuant to the GenFleet Agreement, an increase of $0.5 million in IST expenses, and an increase of $0.6 million in other research and development 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 2024 Period and the 2023 Period.

(in thousands)

As a result of adding defactinib to the RAMP 203 study, we have classified RAMP 203 study costs incurred during the 2024 Quarter within “avutometinib + defactinib” in the table above. RAMP 203 study costs incurred prior to

2024 Quarter remain classified within “avutometinib + other combinations” in the table above. The $17.2 million increase in avutometinib + defactinib costs from the 2023 Period to the 2024 Period was primarily driven by an increase in RAMP 301 study costs, an increase in drug metabolism and pharmacokinetics costs, an increase in RAMP 201 study costs, an increase in consulting costs, an increase in RAMP 205 study costs, and inclusion of RAMP 203 study costs incurred within the 2024 Quarter within avutometinib + defactinib, partially offset by a decrease in RAMP 202 study costs. The $1.5 million decrease in avutometinib manufacturing and non-clinical trial specific costs from the 2023 Period to the 2024 Period was primarily driven by a decrease in avutometinib drug substance costs. The $1.7 million increase in GenFleet costs from the 2023 Period to the 2024 Period was primarily driven $3.0 million development milestone payment made in 2024 Period compared to the $2.0 million upfront payment made in the 2023 Period pursuant to the GenFleet Agreement.

Selling, general and administrative expense. Selling, general and administrative expense for the 2024 Period was $32.8 million compared to $22.1 million for the 2023 Period. The increase of $10.7 million from the 2023 Period to the 2024 Period primarily resulted from an increase of $4.7 million in costs in anticipation of potential launch of avutometinib and defactinib in LGSOC, an increase of $3.6 million in personnel costs, including non-cash stock compensation, $3.0 million in July 2024 Offering financing fees in the 2024 Period, and partially offset by $0.6 million in financing fees for the Securities Purchase Agreement in the 2023 Period.

Other expense. Other expense for the 2024 Period and 2023 Period was $0.1 million. Other expense for the 2024 Period was comprised of transaction losses due to changes in foreign currency exchange rates. Other expense for the 2023 Period was comprised of transaction losses due to changes in foreign currency exchange rates partially offset by a gain on sale of fixed assets.

Interest income. Interest income for the 2024 Period was $3.2 million compared to $4.3 million for the 2023 Period. The decrease of $1.1 million from the 2023 Period to the 2024 Period was primarily driven by an decrease in investment balances on short term investments and cash equivalents during each respective period.

Interest expense. Interest expense for the 2024 Period was $3.4 million compared to $3.0 million for the 2023 Period. The increase of $0.4 million from the 2023 Period to the 2024 Period was primarily driven additional interest expense in the 2024 Period pursuant to the Loan Agreement as a result of the 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 was $4.2 million income for the 2024 Period compared to $0.3 million expense for the 2023 Period. The change in fair value of preferred stock tranche liability was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement. The fair value of the preferred stock tranche liability decreased from $4.2 million at the beginning of the 2024 Period and expired in July 2024 resulting in $4.2 million income in the 2024 Period. The fair value of the preferred stock tranche liability increased from $6.9 million upon issuance on January 24, 2023, to $7.3 million at the end of the 2023 Period resulting in $0.3 million expense in the 2023 Period.

Change in fair value of warrant liability. The change in fair value of warrant liability of $13.5 million for the 2024 Period was comprised of the mark-to-market adjustment for the warrants issued as part of the July 2024 Offering which decreased primarily due to the decrease in our stock price from July 23, 2024 to end of 2024 Period There was no warrant liability outstanding during the 2023 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, common warrants, pre-funded warrants, and warrants, offerings of convertible notes, 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 under our license and collaboration agreements with Sanofi, Yakult, and CSPC, the upfront payment under the Secura APA, 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, 2024, we had $113.2 million of cash, cash equivalents, and investments. We primarily invest our cash, cash equivalents and investments in U.S. Government money market funds, U.S. government 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, 2023 as filed with the SEC on March 14, 2024, and under “Risk Factors” in this Quarterly Report on Form 10-Q.

Cash flows

The following table sets forth the primary sources and uses of cash for the 2024 Quarter and the 2023 Quarter (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 $78.7 million and $55.8 million for the 2024 Period and the 2023 Period, respectively. Non-cash charges and adjustments for the 2024 Period were primarily related to the changes in fair value of the preferred stock tranche liability, the change in fair value of warrant liability and stock-based compensation expense. Non-cash charges and adjustments for the 2023 Period were primarily related to stock-based compensation expenses. Our cash outflow from operating activities due to changes in operating assets and liabilities was $0.9 million and $1.0 million for the 2024 Period and the 2023 Period, respectively. Cash outflow due to changes in operating assets and liabilities for the 2024 Period was primarily driven by a decrease of $2.7 million of account payable, an increase of $1.9 million of prepaid expenses, other current assets and other assets, a decrease of $0.3 million of deferred liabilities, and an increase of $0.2 million of grant receivable partially offset by an increase of $4.2 million of accrued expenses and other liabilities. 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. The increases in both periods in prepaid expenses, other current assets, and other asserts is exclusive of cash received from PanCAN and used on the RAMP 205 study. Cash used in operating activities was $79.7 million and $56.8 million for the 2024 Period and the 2023 Period, respectively.

Investing activities. The cash provided by investing activities for the 2024 Period relates to maturities of investments of $60.0 million, partially offset by a purchase of property and equipment of less than $0.1 million. The cash provided by investing activities for the 2023 Period relates to the net purchases of investments of $56.9 million.

Financing activities. The cash provided by financing activities for the 2024 Period represents $53.8 million of net proceeds received from the issuance of shares of common stock, pre-funded warrants, and warrants as part of the July 2024 Offering, $1.3 million of proceeds received from insurance premium financing and $0.2 million of proceeds received from exercise of stock options and our employee stock purchase plan, partially offset by $1.2 million of payments on insurance premium financing, and $0.2 million of fees paid to the Lenders to amend our Loan Agreement with Oxford. The cash provided by financing activities for the 2023 Period primarily represents $91.4 million of proceeds from our 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 Agreement, $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. Refer to 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 related to insurance premium financing and the monthly payments of principal and interest related thereto; Note 7. Debt to our unaudited condensed consolidated financial statements included in this quarterly report for additional details on the Loan Agreement; and Note 10. Capital Stock to our unaudited condensed consolidated financial statements included in this quarterly report for additional details on the July 2024 Offering of common stock, pre-funded warrants, and warrants, June 2023 Offering of common stock and pre-funded warrants, and the January 2023 offering of our Series B Convertible Preferred Stock.

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, 2023. 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 $113.2 million as of September 30, 2024, consisting of cash, U.S. Government money market funds, U.S. government 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 of 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 June 30, an immaterial amount of our total liabilities were denominated in currencies other than the functional currency.

As of September 30, 2024, we have borrowed $40.0 million under the Loan Agreement. 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 can 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 June 30, 2024 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, 2024. 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, 2024, 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, 2024, 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, 2023 as filed with the SEC on March 14, 2024 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, as filed with the SEC on August 8, 2024.