UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, ~~2021~~2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39971

Landos Biopharma, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	81-5085535
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
~~1800 Kraft Drive~~, ~~Suite 216~~P.O. Box 11239 Blacksburg, Virginia	~~24060~~24062
(Address of principal executive offices)	(Zip Code)

~~Registrant’s telephone number, including area code:~~ (540) 218-2232

Registrant’s telephone number, including area code

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

LABP

The Nasdaq Stock Market LLC

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

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

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

As of ~~May 17, 2021,~~August 5, 2022, the registrant had ~~40,117,598~~40,254,890 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~(Loss) Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1315
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2322
Item 4.	Controls and Procedures	2322

PART II.	OTHER INFORMATION	2423

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2423
Item 6.	Exhibits	24
Signatures		2625

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements. (Unaudited)

Landos Biopharma, Inc.

Condensed Consolidated Balance Sheets

~~(Unaudited)~~

(in thousands, except share and per share amounts)

March 31,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$
8,572

$
2,416

Marketable securities, available for sale

97,786

25,718

Incentive and tax receivables

1

154

Prepaid expenses and other current assets

3,386

202

Deferred offering costs

0

1,398

Total current assets

109,745

29,888

Property, plant and equipment-net

465

444

Total assets

$
110,210

$
30,332

Liabilities, convertible preferred stock and stockholders’ equity (deficit)

Current liabilities:

Accounts payable

$
8,200

$
8,606

Accrued liabilities

364

1,939

Other current liabilities

255

489

Total current liabilities

8,819

11,034

Other liabilities

212

276

Total liabilities

9,031

11,310

Commitments and Contingencies

—

—

Convertible preferred stock, $0.01 par value; 0 shares authorized, issued or outstanding as of March 31, 2021; 11,260,608 shares authorized, issued and
outstanding as of December 31, 2020: aggregate liquidation preference of $70,254 as of December 31, 2020

0

73,037

Stockholders’ equity (deficit):

Preferred stock, $0.01 par value; 10,000,000 shares authorized, 0 shares issued or outstanding as of March 31, 2021; 0 shares authorized, issued or outstanding as of December 31, 2020 Common stock, $0.01 par value; 200,000,000 shares authorized, 39,866,669 shares issued and outstanding as of March 31, 2021; 37,410,450 shares authorized, 12,767,909 shares issued and outstanding as of December 31, 2020

399

71

Additional paid-in-capital

166,429

1,633

Accumulated other comprehensive (loss) gain

(102
)

10

Accumulated deficit

(65,547
)

(55,729
)
Total stockholders' equity (deficit)

101,179

(54,015
)
Total liabilities, convertible preferred stock and stockholders’ equity

$
110,210

$
30,332


	June 30,			December 31,
	2022			2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	19,241		$	8,305
Marketable securities, available-for-sale		36,510			82,575
Prepaid expenses and other current assets		2,287			1,266
Total current assets		58,038			92,146
Property and equipment, net		0			707
Other assets		0			26
Total assets	$	58,038		$	92,879

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	4,711		$	12,908
Accrued liabilities		1,799			3,703
Total current liabilities		6,510			16,611
Total liabilities		6,510			16,611
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021		0			0
Common stock, $0.01 par value; 200,000,000 shares authorized, 40,254,890 shares issued and outstanding as of June 30, 2022 and December 31, 2021		403			403
Additional paid-in capital		171,816			170,241
Accumulated other comprehensive loss		(392	)		(225	)
Accumulated deficit		(120,299	)		(94,151	)
Total stockholders’ equity		51,528			76,268
Total liabilities and stockholders’ equity	$	58,038		$	92,879

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

Landos Biopharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~

~~(Unaudited)~~(Loss) Income

(in thousands, except share and per share amounts)

(Unaudited)

Three Months Ended

March 31,

2021

2020

Operating expenses:

Research and development

$
7,254

$
4,690

General and administrative

2,646

1,080

Total operating expenses

9,900

5,770

Loss from operations

(9,900
)

(5,770
)
Other income (expenses):

Interest expense

—

(1
)
Gain/(loss) from foreign exchange

18

(222
)
Other income, net

64

197

Other income (expense), net

82

(26
)
Net loss

(9,818
)

(5,796
)
Net loss per share, basic and diluted

(0.38
)

(0.49
)
Weighted-average shares used to compute net loss per share, basic and diluted

26,070,455

11,874,723

Net loss

(9,818
)

(5,796
)
Unrealized gain/(loss) on available-for-sale securities

(112
)

(686
)
Comprehensive loss

(9,930
)

(6,482
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue - license fee:	$	0		$	18,000		$	0		$	18,000
Operating expenses:
Research and development	$	6,604		$	11,522		$	17,404		$	18,776
General and administrative		4,662			2,596			8,815			5,241
Total operating expenses		11,266			14,118			26,219			24,017
(Loss) income from operations		(11,266	)		3,882			(26,219	)		(6,017	)
Other income:
Gain (loss) from foreign exchange		25			(5	)		26			13
Other (expense) income, net		(43	)		220			45			283
Other (loss) income, net		(18	)		215			71			296
Net (loss) income	$	(11,284	)	$	4,097		$	(26,148	)	$	(5,721	)
Net (loss) income per share, basic and diluted	$	(0.28	)	$	0.12		$	(0.65	)	$	(0.19	)
Weighted-average shares used to compute net (loss) income per share, basic		40,254,890			33,639,481			40,254,890			29,875,877
Weighted-average shares used to compute net (loss) income per share, diluted		40,254,890			34,384,784			40,254,890			29,875,877
Comprehensive (loss) income:
Net (loss) income	$	(11,284	)	$	4,097		$	(26,148	)	$	(5,721	)
Unrealized gain (loss) on available-for-sale securities		75			(40	)		(167	)		(152	)
Comprehensive (loss) income	$	(11,209	)	$	4,057		$	(26,315	)	$	(5,873	)

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

Landos Biopharma, Inc.

Condensed Consolidated Statements of Cash Flows

~~(Unaudited)~~

(in thousands)

(Unaudited)

Three Months Ended

March 31,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$
9,818

$
5,796

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

Compensation expense related to vesting of common stock issued to Xontogeny

0

13

Depreciation of property and equipment

43

29

Accrued interest on marketable securities

426

12

Stock-based compensation expense

1,023

0

Net realized gain/(loss) on sale of marketable securities

0

28

Net (accretion of discount) amortization of premium on marketable securities

(196
)

36

Gain/(loss) from foreign exchange

18

(223
)
Changes in operating assets and liabilities:

Incentive and tax receivables

153

0

Prepaid expenses and other assets

(2,212
)

56

Accounts payable

(422
)

2,792

Other liabilities

(1,575
)

(315
)
Net cash (used in) operating activities

(12,560
)

(3,368
)
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(64
)

(20
)
Purchase of available-for-sale marketable securities

(81,379
)

(1,251
)
Proceeds from sales and maturities of marketable securities

9,395

2,978

Net cash provided by (used in) investing activities

(72,048
)

1,707

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from initial public offering

90,506

Proceeds from exercise of stock options

258

—

Net cash provided by (used in) financing activities

90,764

—

Net change in cash and cash equivalents

6,156

(1,661
)
Cash and cash equivalents at beginning of period

2,416

9,808

Cash and cash equivalents at end of period

$
8,572

$
8,147

Supplemental non-cash disclosure:
NONCASH INVESTING AND FINANCING ACTIVITY:

Deferred offering costs included in accounts payable and accrued liabilities

$
0

$
59

Purchases of fixed assets in accounts payable

0

23

Reclassification of par to additional paid-in-capital

2

0

Reclassification of series A and B convertible preferred stock to common stock

72,925

0

Unrealized loss on available-for-sale marketable securities

112

686


	Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(26,148	)	$	(5,721	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		577			93
Accrued interest on marketable securities		0			415
Stock-based compensation expense		1,575			1,335
Net realized gain on sale of marketable securities		0			2
Amortization of premium (discount) on marketable securities		549			245
Non-cash loss on termination of lease		137			0
Gain on sale of equipment		(23	)		0
Gain from foreign exchange		0			13
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(1,007	)		(1,260	)
Accounts payable		(8,255	)		2,067
Other liabilities		(1,904	)		(349	)
Net cash used in operating activities		(34,499	)		(3,160	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(7	)		(213	)
Proceeds from sale of property and equipment		35			0
Purchase of available-for-sale marketable securities		(3,672	)		(85,409	)
Proceeds from sales and maturities of marketable securities		49,021			14,289
Net cash provided by (used in) investing activities		45,377			(71,333	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net of issuance costs		0			90,506
Proceeds from exercise of stock options		0			258
Net cash provided by financing activities		0			90,764
Net change in cash and cash equivalents		10,878			16,271
Cash and cash equivalents at beginning of period		8,305			2,416
Effect of exchange rates on cash		58			0
Cash and cash equivalents at end of period	$	19,241		$	18,687

Supplemental non-cash disclosure: NONCASH INVESTING AND FINANCING ACTIVITY:
Non-cash gain on sale of fixed assets	$	14		$	0
Reclassification of par to additional paid-in-capital	$	0		$	2
Conversion of Series A and B convertible preferred stock to common stock	$	0		$	72,925
Operating right-of-use asset obtained in exchange for operating lease liability	$	824		$	0
Derecognition of operating right-of-use asset and operating lease liability upon termination of lease	$	714		$	0
Unrealized (loss) gain on available-for-sale marketable securities	$	(167	)	$	152

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

Landos Biopharma, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

~~(Unaudited)~~

(in thousands, except share amounts)

(Unaudited)


	Convertible preferred stock						Convertible preferred stock				Common stock																	Convertible Preferred Stock						Common Stock
	Shares			Amounts			Shares		Amounts		Shares		Amounts		Additional paid-in capital		Tranche right		Accumulated deficit			Accumulated other comprehensive loss			Total stockholders’ deficit			Shares			Amounts			Shares		Amounts		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2019		11,260,608			73,037			—		—		11,784,148	$	63	$	16		—	$	(25,585	)	$	(77	)	$	(25,583	)
Compensation expense related to vesting of common stock issued to Xontogeny		—			—			—		—		193,182		2		12		—		—			—			14
Unrealized gain / (loss) on available-for-sale securities		—			—			—		—		—		—		—		—		—			(686	)		(686	)
Balance at December 31, 2021																													—		$	—			40,254,890	$	403	$	170,241	$	(225	)	$	(94,151	)	$	76,268
Stock-based compensation expense																													—			—			—		—		941		—			—			941
Unrealized loss on available-for-sale securities																													—			—			—		—		—		(242	)		—			(242	)
Net loss		—			—			—		—		—		—		—		—		(5,796	)		—			(5,796	)		—			—			—		—		—		—			(14,864	)		(14,864	)
Balance at March 31, 2020		11,260,608			73,037							11,977,330		65		28		—		(31,381	)		(763	)		(32,051	)
Balance at March 31, 2022																													—		$	-			40,254,890	$	403	$	171,182	$	(467	)	$	(109,015	)	$	62,103
Stock compensation expense																													—			—			—		—		634		—			—			634
Unrealized gain on available-for-sale securities																													—			—			—		—		—		75			—			75
Net income																													—			—			—		—		—		—			(11,284	)		(11,284	)
Balance at June 30, 2022																													0		$	0			40,254,890	$	403	$	171,816	$	(392	)	$	(120,299	)	$	51,528

��	Convertible preferred stock						Convertible preferred stock				Common stock
																												Convertible Preferred Stock						Common Stock
	Shares			Amounts			Shares		Amounts		Shares		Amounts		Additional paid-in capital		Tranche right		Accumulated deficit			Accumulated other comprehensive loss			Total stockholders’ deficit			Shares			Amounts			Shares		Amounts		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2020		11,260,608		$	73,037			—	$	—		12,767,909	$	71	$	1,633		—	$	(55,729	)	$	10		$	(54,015	)		11,260,608		$	73,037			12,767,909	$	71	$	1,633	$	10		$	(55,729	)	$	(54,015	)
Conversion of preferred stock to common stock upon closing of the initial public offering		(11,260,608	)		(73,037	)		—		—		20,549,478		262		72,775		—		—			—			73,037			(11,260,608	)		(73,037	)		20,549,478		262		72,775		—			—			73,037
Issuance of common stock, net of issuance costs		—			—			—		—		6,250,000		63		90,443		—		—			—			90,506			—			—			6,250,000		63		90,443		—			—			90,506
Stock compensation expense		—			—			—		—		—		—		1,023		—		—			—			1,023
Exercise of Stock Options		—			—			—		—		299,282		3		555		—		—			—			558
Unrealized gain / (loss) on available-for-sale securities																							(112	)		(112	)
Stock-based compensation expense																													—			—			—		—		1,023		—			—			1,023
Exercise of stock options																													—			—			299,282		3		555		—			—			558
Unrealized loss on available-for-sale securities																													—			—			—		—		—		(112	)		—			(112	)
Net loss		—			—			—		—		—		—		—		—		(9,818	)		—			(9,818	)		—			—			—		—		—		—			(9,818	)		(9,818	)
Balance at March 31, 2021		—		$	—							39,866,669	$	399	$	166,429			$	(65,547	)	$	(102	)	$	101,179			0		$	-			39,866,669	$	399	$	166,429	$	(102	)	$	(65,547	)	$	101,179
Stock compensation expense																													—			—			—		—		312		—			—			312
Exercise of stock options																													—			—			34,217		—		64		—			—			64
Unrealized loss on available-for-sale securities																													—			—			—		—		—		(40	)					(40	)
Net income																													—			—			—		—		—					4,097			4,097
Balance at June 30, 2021																													0		$	-			39,900,886	$	399	$	166,805	$	(142	)	$	(61,450	)	$	105,612

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

Landos Biopharma, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~(Unaudited)~~

1. Organization and ~~description~~Description of the ~~business~~Business

~~Description of business~~

Landos Biopharma, Inc. ~~(the~~(“Landos” or the “Company”) was incorporated in the state of Delaware in January 2017 and is a clinical-stage biopharmaceutical company ~~discovering~~focused on the discovery and ~~developing novel treatments~~development of oral therapeutics for patients with autoimmune diseases. The Company has ~~identified Lanthionine Synthetase C-Like 2 (“LANCL2”) as a~~several active development programs, each discovered internally, targeting novel ~~therapeutic target for autoimmune diseases, including inflammatory bowel disease (“IBD”); Crohn’s disease (“CD”),~~pathways at the interface of immunity and ulcerative colitis (“UC”). Landos’ wholly-owned lead clinical asset, BT-11, is the first therapeutic that targets LANCL2 and acts locally in the gastrointestinal tract for treatment of inflammatory bowel disease (IBD). The Company completed global Phase 2 clinical testing of BT-11 for UC in 2020. Landos is a platform company that continues to discover innovative therapeutic targets (one to two new therapeutic targets per year and their associated drug development programs). Landos also has a robust pipeline of seven product candidates for other autoimmune diseases (lupus, rheumatoid arthritis, multiple sclerosis, type 1 diabetes), several of which Landos anticipates will advance to Phase 1 clinical testing in 2021. Since inception, the Company has devoted substantially all of its resources to performing research and development activities in support of its product development efforts. The Company does not have any products or partnered products approved for sale and has not generated any revenue from commercial product sales. The Company was incorporated in Delaware in ~~January 2017~~.metabolism.

OnInitial Public Offering

In February 3, 2021, the Company completed its initial public offering ~~(“IPO”~~("IPO") in which it ~~issued and~~ sold 6,250,000 shares of ~~its~~ common stock ~~and the Company received net proceeds~~at an initial public offering price of ~~$90.5 million~~$16.00 per share. Proceeds from the IPO, ~~after deducting underwriters’~~net of underwriting discounts, commissions and ~~commissions. Offering~~offering costs paid by the Company, were ~~initially capitalized and consisted of fees and expenses incurred~~approximately $90.5 million.

In addition, in connection with the ~~sale~~completion of the Company’s IPO, all outstanding shares of the Company's convertible preferred stock were converted into 20,549,478 shares of the Company’s common stock.

Stock Split

In January 2021, the Company’s Board of Directors approved a 1.8249-for-1 stock split of the Company’s outstanding common shares. Also in January 2021, the Company amended its Amended and Restated Certificate of Incorporation to affect the stock split. The stock split resulted in an adjustment to the preferred share conversion price to reflect a proportional increase in the number of common shares to be issued upon conversion. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the stock insplit for all periods presented.

Liquidity and Capital Resources

As of June 30, 2022, the ~~IPO, including legal, accounting, printing~~Company had cash, cash equivalents and ~~other IPO-related costs.~~marketable securities of $55.8 million, which it believes will be sufficient to fund its planned operations for at least the next 12 months. Upon completion of its portfolio prioritization review later this year, the ~~IPO, these offering costs were reclassified to stockholders’ equity~~Company will provide further details into its operating plans and offset against the proceeds from the offering on the balance sheet. Immediately prior to the completion of the IPO, all shares of convertible preferred stock then outstanding were converted into 20,549,478 shares of common stock on a capital resources.

~~one-to-one basis, $72.9 million of convertible preferred stock was reclassified to additional paid-in-capital and $0.2 of convertible preferred stock was reclassified to common stock on~~Since the Company’s ~~balance sheet.~~

~~Liquidity and capital resources~~

~~The Company has incurred net losses and negative cash flows from operations since~~ inception ~~and had an accumulated deficit of $65.5 million as of March 31, 2021. Since inception through March 31, 2021, the Company~~in 2017, it has funded operations ~~primarily~~ through the issuance of convertible preferred stock and convertible promissory notes, ~~and through~~the proceeds from its IPO, and the ~~Company's initial public offering. The~~upfront payment from the license and collaboration agreement (Note 7). As of June 30, 2022, the Company had an accumulated deficit of $120.3 million and expects to incur substantial operating losses for at least the next several ~~years and~~years. As such, the Company will need to ~~obtain~~raise additional ~~financing in order~~capital to initiate and complete its planned clinical trials, ~~discover, develop, seek~~to continue and expand its research and development operations that support its planned discovery, development and clinical and regulatory ~~approvals for~~activities, and to adequately prepare for ~~potential~~ commercialization of its product ~~candidates. There can be no assurance~~candidates that ~~such financing will be available or will be at terms acceptable to~~may achieve regulatory approval in the ~~Company.~~

As of March 31, 2021, the Company had cash, cash equivalents and marketable securities of $106.4 million, which it believes will be sufficient to fund its planned operations through 2023 from the date of the issuance of its consolidated financial statements.future.

2. Summary of ~~significant accounting policies~~Significant Accounting Policies

Basis of ~~presentation~~Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Landos Biopharma Australia Pty Ltd. (“Landos Australia”). All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ~~(GAAP)~~("GAAP") for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. In the opinion of the Company’s management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented have been included. Operating results for the three and six months ended ~~March 31, 2021~~June 30, 2022 are not necessarily indicative of the results that may be expected for the full year, for any other interim period or for any future year.

Use of ~~estimates~~Estimates

The preparation of consolidated financial statements in conformity with ~~U.S.~~ GAAP requires management to make certain estimates and assumptions that affect the reported amounts ~~of assets and liabilities and disclosure of contingent assets and liabilities at~~in the ~~date of the~~Company's consolidated financial statements and the ~~reported amounts of expenses during~~disclosures made in the ~~reporting period.~~accompanying notes. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to, accrued liabilities, fair value

of equity instruments, and uncertain tax positions. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. ~~Actual~~Despite management’s intention to establish accurate estimates and use reasonable assumptions, actual results ~~could~~may differ from ~~those~~the Company's estimates.

~~COVID-19~~

~~In March 2020,~~Significant Accounting Policies

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements for the ~~World Health Organization declared the outbreak~~three and six months ended June 30, 2022 are consistent with, and should be read in conjunction with, those discussed in Note 1 of the ~~novel coronavirus disease (“COVID-19”) as a pandemic, and~~consolidated financial statements in the ~~Company expects its operations in all locations to be affected as~~Company's Annual Report on Form 10-K for the virus continues to proliferate. The Company has adjusted certain aspects of its operations to protect employees and customers while still meeting customers’ needs for vital technology. The Company will continue to monitor the situation closely and it is possible that further measures will be implemented. In light of the uncertainty as to the severity and duration of the pandemic, the impact on the financial position is uncertain at this time.year ended December 31, 2021.

Cash and ~~cash equivalents~~Cash Equivalents

~~The Company considers all~~

Cash and cash equivalents consist of cash and highly liquid investments ~~purchased~~ with original maturities of three months or less ~~from~~at the ~~purchase~~ date of purchase. The carrying amounts approximate fair value due to ~~be cash equivalents.~~the short maturities of these investments. Cash equivalents consist primarily of amounts invested in money market funds and commercial paper and are stated at fair value.

Marketable ~~securities~~Securities

The Company’s investments in marketable securities are maintained by investment managers and consist of corporate debt securities with original maturities of over ninety (90 ~~days~~,) days, all of which are considered available-for-sale debt securities. The Company classifies its available-for-sale securities as short-term marketable securities on the ~~consolidated balance sheets,~~Condensed Consolidated Balance Sheets, even though the stated maturity date may be one year or more beyond the current ~~consolidated balance sheet~~Condensed Consolidated Balance Sheets date, as the Company views those securities as available for use in current operations, if needed.

Available-for-sale securities are carried at fair value with their unrealized gains and losses included in accumulated other comprehensive loss within stockholders’ ~~(deficit)~~ equity, until such gains and losses are realized in other income (expense), net, within the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive loss~~Comprehensive Income (Loss) or until an unrealized loss is considered other-than-temporary. Realized gains and losses are determined using the specific identification method.

The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary ~~declines~~impairments in value, the Company considers such factors as, among other things, how significant the ~~decline~~impairment in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions. If the Company determines from this analysis that it does not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, the impairment is considered other-than-temporary and is recognized in the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive loss.~~Comprehensive Income (Loss).

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, cash equivalents, and marketable securities. Bank deposits are held by accredited financial institutions and these deposits may at times be in excess of insured limits. The Company limits its credit risk associated with cash and cash equivalents by placing them with financial institutions it believes are of high quality. The Company has not experienced any losses on its deposits of cash or cash equivalents. The Company’s available-for-sale investments primarily consist of high-grade corporate debt, and potentially subject the Company to concentrations of credit risk. The Company has adopted investment guidelines that limit the amounts the Company may invest in any one type of investment and requires all investments held by the Company to be highly rated, thereby reducing credit risk exposure.

Research and ~~development expenses~~Development Expenses

~~Research and development expenses consist primarily of costs incurred for the development of the Company’s lead clinical product candidates BT-11, NX-13 and other pipeline therapeutic assets.~~

Research and development costs consist primarily of external costs related to clinical development, contract manufacturing and discovery as well as personnel costs. ~~Personnel costs consist of salaries and employee benefits.~~ The Company estimates preclinical and clinical study and research expenses based on the services performed, pursuant to contracts with research institutions that conduct and manage ~~preclinical~~nonclinical and clinical studies and research services on its behalf. The Company records the costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued liabilities in the ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets. These costs are a component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. ~~The Company has not experienced any material differences between accrued costs and actual costs incurred.~~

~~Basic and diluted net loss~~Net (Loss) Income per ~~share~~Share

Basic ~~loss~~net (loss) income per share is computed by dividing the net ~~loss~~(loss) income by the weighted-average number of shares of common stock outstanding during the period. Diluted ~~loss~~net (loss) income per share is computed by dividing the net ~~loss~~(loss) income by the weighted-average number of shares of common stock together with the number of additional shares of common stock that would have been outstanding if all potentially dilutive shares of common stock had been issued. ~~Since~~The following table sets forth the ~~Company was in a loss position~~computation of basic and diluted net (loss) income per share during the periods presented (in thousands, except share and per share amounts):


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Numerator:
Net (Loss) Income	$	(11,284	)	$	4,097		$	(26,148	)	$	(5,721	)
Denominator:
Weighted-average shares of common stock issued and outstanding		40,254,890			33,867,593			40,254,890			30,121,003
Less: weighted-average unvested common stock subject to repurchase		0			(228,112	)		0			(245,126	)
Weighted-average common stock outstanding used to calculate net (loss) income per common share, basic		40,254,890			33,639,481			40,254,890			29,875,877
Weighted-average effect of potentially dilutive securities:
Stock options to purchase common stock		0			537,832			0			0
Common stock subject to repurchase		0			207,471			0			0
Weighted-average common shares outstanding used to calculate net (loss) income per common share, diluted		40,254,890			34,384,784			40,254,890			29,875,877
Net (loss) income per common stock, basic and diluted	$	(0.28	)	$	0.12		$	(0.65	)	$	(0.19	)

The following outstanding shares of potentially dilutive securities have been excluded from diluted net (loss) income per common share for the periods presented, ~~basic net loss per share is the same as diluted net loss per share since the effects of potentially dilutive securities are antidilutive.~~because their inclusion would be anti-dilutive:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock options to purchase common stock		3,654,179		491,650		3,654,179		1,407,369
Common stock subject to repurchase		0		0		0		216,707
Total		3,654,179		491,650		3,654,179		1,624,076

Comprehensive Loss

The Company’s comprehensive loss is currently comprised of changes in unrealized gain (losses) on available-for-sale securities.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in 1 operating segment.

Emerging ~~growth company status~~Growth Company Status

The Company is an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these ~~combined and~~condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently ~~issued accounting pronouncements not yet adopted~~Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02—Leases (Topic 842), requiring the recognition of lease assets and liabilities on the balance sheet. The standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The standard iswas effective for public entities for fiscal years beginning after December 15, 2018 and ~~was initially~~is effective for nonpublic entities for fiscal years beginning after December 15, ~~2019. In October 2019,~~2021. The Company adopted ASU 2016-02, as amended, by applying the ~~FASB approved a one-year delay in the effective date~~modified retrospective approach for ~~non-public companies~~leases existing at, and ~~in June 2020, approved an additional one-year delay in the effective date for non-public companies.~~entered into after January 1, 2022. As a result, prior periods are presented in accordance with the ~~standard is now effective for fiscal years beginning after December 15, 2021.~~previous guidance in ASC 840, Leases (“ASC 840”). The Company ~~does~~has elected to apply the “practical expedient package,” which permits it to not ~~expect~~reassess previous conclusions around lease identification, lease classification, and initial direct costs. Further, the Company made accounting policy elections to exclude leases with terms of 12 months or less from the recognition requirements and to not separate lease and non-lease components. On January 1, 2022, the Company recognized an initial right-of-use asset and lease liability of $0.8 million. The adoption of ~~this ASU to~~Topic 842 did not have ~~a material~~an impact on ~~its consolidated financial statements.~~the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss and did not require recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company elected to continue applying the guidance under ASC 840 for comparative periods, as allowed in Topic 842.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13—Financial Instruments (Topic 326) Measurement of Credit Losses on Financial Instrument (“CECL”), which requires an allowance for expected credit losses on financial assets be recognized as early as day one of the instrument. This ASU departs from the incurred loss model which means the probability threshold is removed. It considers more forward-looking information and requires the entity to estimate its credit losses as far as it can reasonably estimate. The ASU iswas effective for fiscal years beginning after December 15, 2019 ~~including interim periods within those fiscal years,~~ for public business entities that are U.S. Securities and Exchange Commission (SEC) filers, excluding entities eligible to be smaller reporting companies (SRC). For all other public business entities, including SRC, the ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company ~~elected~~expects to adopt the new standard in the annual reporting period beginning after December 15, 2022 and does not expect the adoption of this ASU to have a material impact on the consolidated financial statements.

3. Fair ~~value measurement~~Value Measurement

Financial assets and liabilities are recorded at fair value on a recurring basis in the ~~consolidated balance sheet.~~Condensed Consolidated Balance Sheets. The carrying values of the Company’s financial assets and liabilities, including cash and cash equivalents, prepaids and other current assets, accounts payable, and accrued expenses approximate their fair value due to the short-term maturity of these instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are directly related to the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable inputs for similar assets or liabilities. These include quoted prices for identical or similar assets or liabilities in active markets and quoted prices for identical or similar assets of liabilities in markets that are not active;

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or ~~liabilities~~liabilities.

~~Financial~~The following table presents information about the Company’s financial assets ~~and liabilities subject to~~measured at fair value ~~measurements~~ on a recurring basis and indicates the level of ~~inputs used in~~the fair value hierarchy utilized to determine such ~~measurements are~~fair values as ~~follows~~of June 30, 2022 (in thousands):


	March 31, 2021								June 30, 2022
	Level 1		Level 2		Level 3		Aggregate fair value		Level 1		Level 2		Level 3		Aggregate fair value
Assets:
Money market funds	$	7,233	$	0	$	0	$	7,233
U.S. government treasury securities										4,499		0		0		4,499
Fixed income securities		0		71,512		0		71,512		0		20,861		0		20,861
Asset backed securities		0		26,274		0		26,274		0		15,649		0		15,649
Total assets	$	7,233	$	97,786	$	0	$	105,019	$	4,499	$	36,510	$	0	$	41,009

December 31, 2020

Level 1

Level 2

Level 3

Aggregate
fair value

Assets:

Money market funds

$
265

$
—

$
—

$
265

Fixed income securities

—

23,343

—

23,343

Asset backed securities

—

2,375

—

2,375

Total assets

$
265

$
25,718

$
—

$
25,983

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of December 31, 2021 (in thousands):


	December 31, 2021
	Level 1		Level 2		Level 3		Aggregate Fair Value
Assets:
Money market funds	$	3,180	$	0	$	0	$	3,180
Fixed income securities		0		54,224		0		54,224
Asset backed securities		0		28,351		0		28,351
Total assets	$	3,180	$	82,575	$	0	$	85,755

The contractual maturities of ~~available for sale~~available-for-sale securities as of ~~March 31, 2021~~June 30, 2022 are as ~~follows:~~follows (in thousands):


	As of March 31,
	2021
	(in thousands)
Within one year	$	44,963	$	20,707
Within one to five years		52,823		15,803
Total contractual maturities	$	97,786	$	36,510

The Company’s financial instruments consist of Level 1 and Level 2 assets. The Company values its Level 1 assets based on quoted prices in active markets for identical instruments. Level 1 assets consist primarily of highly liquid money market funds and U.S. government treasury securities that are included in cash equivalents. The Company values its Level 2 assets consisting of certificates of deposits, fixed income securities, and asset backed securities with the help of a third-party pricing service using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses such pricing data as the primary input, to which no material adjustments have been made during the periods presented, to make its determination and assessments as to the ultimate valuation of these assets. The fair values of these instruments approximate amortized cost.

There were 0 transfers into or out of Level 3 securities during the six months ended June 30, 2022.

4. ~~Share-based compensation~~Balance Sheet Components

Property and Equipment, net

Property and equipment, net consists of the following:


	June 30,			December 31,
	2022			2021
Laboratory equipment	$	744		$	837
Furniture and fixtures		297			307
Construction in process		0			104
Total property and equipment		1,041			1,248
Less: accumulated depreciation		(1,041	)		(541	)
Total property and equipment, net	$	0		$	707

Depreciation expense for property and equipment was $224,000 and $50,000 for the three months ended June 30, 2022 and 2021, respectively, and $577,000 and $93,000 for the six months ended June 30, 2022 and 2021, respectively.

Accrued Liabilities

Accrued liabilities consist of the following:


	June 30,		December 31,
	2022		2021
Accrued research and development	$	729	$	1,575
Accrued general and administrative		353		996
Accrued payroll and employee benefits		717		1,132
Total accrued liabilities	$	1,799	$	3,703

5. Stockholders’ Equity

Convertible Preferred Stock

In connection with the completion of the Company’s IPO in February 2021, all outstanding shares of the Company’s convertible preferred stock automatically converted into 20,549,478 shares of common stock.

Stock-Based Compensation

2019 Equity Incentive Plan

In December 2019, the board of directors of the Company (the “Board”) adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the grant of share-based awards, including stock options and restricted stock units, to employees, directors, and non-employee service providers of the Company. ~~In December 2019, the Board authorized 3,657,019~~The number of shares ~~for future issuance under the 2019 Plan. All such shares authorized~~of common stock reserved for issuance under the 2019 Plan ~~have been reserved.~~automatically increases on January 1 of each calendar year, starting on January 1, 2020 and continuing through January 1, 2029, in an amount equal to the least of (i) 5

~~On January 27, 2021,~~% of the ~~Company’s Board~~total number of ~~Directors approved a 1.8249-for-1 stock split~~shares of the Company’s capital stock issued and outstanding ~~common shares. On~~on the last day of the calendar month before the date of each automatic increase; (ii) 1,000,000 shares; or (iii) a lesser number of shares determined by the Company’s board of directors. Subject to this provision, the Company added 1,824,900 shares available for grant to the 2019 Plan effective January ~~29,~~1, 2022. As of June 30, 2022, there were approximately 6,575,706 shares available for future grants.

2021 Employee Stock Purchase Plan

In January 2021, the ~~Company amended its Amended~~Board adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). The purpose of the 2021 ESPP is to secure the services of new employees, to retain the services of existing employees and ~~Restated Certificate~~to provide incentives for such individuals to exert maximum efforts toward the Company’s success. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of ~~Incorporation to affect~~Section 423 of the Code for U.S. employees. The number of shares of common stock ~~split.~~ ~~The stock split resulted~~reserved for issuance under the 2021 ESPP automatically increases on January 1 of each calendar year, starting on January 1, 2022 and continuing through January 1, 2031, in an ~~adjustment~~amount equal to the ~~preferred share conversion price to reflect a proportional increase in~~lesser of (i) 1% of the total number of ~~common~~ shares ~~to be issued upon conversion. The accompanying financial statements and notes to financial statements give retroactive effect to the stock split for all periods presented.~~

~~A summary~~ of the Company’s capital stock ~~option activity is as follows:~~issued and outstanding on the last day of the calendar month before the date of each automatic increase; or (ii) a lesser number of shares determined by the Board. Subject to this provision, the Company added 402,548 shares available for grant to the 2021 ESPP effective January 1, 2022. As of June 30, 2022, there were approximately 791,251 shares available for future grants under the 2021 ESPP. As of June 30, 2022, no shares of common stock had been purchased under the 2021 ESPP.

Number
of Shares

Number of Options Outstanding

Weighted
Average
Exercise
Price

Weighted
Remaining
Contract
Term
(in years)

Aggregate
Intrinsic
Value
(in thousands)

Balances as of December 31, 2020

2,003,587

1,249,218

$
0

—

$
-

Authorized

0

—

$
—

—

Granted

(349,650
)

349,650

$
16.00

—

Exercised

0

(299,282
)

$
1.86

—

Forfeited

0

—

$
0

—

Balances as of March 31, 2021

1,653,937

1,299,586

$
5.67

9.67

$
5,151

Options exercisable at March 31, 2021

256,478

$
6.68

9.66

$
756

Options vested and expected to vest at March 31, 2021

1,299,586

$
5.67

9.67

$
5,151

2022 Inducement Plan

In March 2022, the Board adopted the 2022 Inducement Plan. The 2022 Inducement Plan is a non-stockholder approved stock plan under which the Company may grant equity awards to induce highly-qualified prospective officers and employees who are not currently employed by the Company to accept employment and provide them with a proprietary interest in the Company. The Company intends that the 2022 Inducement Plan be reserved for persons to whom the Company may issue securities without stockholder approval as an inducement pursuant to Nasdaq Marketplace Rule 5635(c)(4). The number of shares of common stock reserved for issuance under the 2022 Inducement Plan was initially determined to be 1,000,000 shares. As of June 30, 2022, there were 1,000,000 shares available for future grants under the 2022 Inducement Plan.

Stock Option Awards

The total intrinsic value of stock options exercised was ~~$2.3~~$1.5 million for the ~~three-months~~six months ended ~~March 31,~~June 30, 2021.

The weighted average fair value per share of options to purchase common stock granted was ~~$9.38 in~~$0.91 and $7.33 for the ~~three~~six months ended ~~March 31, 2021.~~

~~The fair value of each stock option award is estimated on the grant-date using the Black-Scholes option pricing model. The inputs used below are subjective~~June 30, 2022 and ~~require significant judgment to determine.~~2021, respectively.


	~~Three Months Ended March 31, 2021~~
~~Expected term (in years)~~		~~5.9~~
~~Risk-free interest rate~~		~~0.46~~	%
~~Expected volatility~~		~~66.55~~	%
~~Dividend rate~~		—	%

The following table summarizes stock-based compensation expense for employees, which was included in the condensed consolidated statements of operations and comprehensive ~~loss~~(loss) income as follows (in thousands):


			Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended March 31, 2021		2022		2021		2022		2021
Research and development	$	778	$	120	$	211	$	550	$	989
General and administrative		245		514		101		1,025		346
Total stock-based compensation expense	$	1,023	$	634	$	312	$	1,575	$	1,335

At ~~March 31, 2021,~~June 30, 2022, the total compensation cost related to unvested stock-based awards granted ~~to employees~~ under the 2019 Plan but not yet recognized was approximately ~~$3.1 million. This cost will~~$2.1 million, which is expected to be ~~amortized on~~recognized over a ~~straight-line basis over the remaining vesting period. The~~ weighted-average ~~remaining recognition~~ period isof approximately ~~1.6~~3.6 years.

~~Early Exercise of Employee Options~~

The terms of the 2019 Plan permit certain option holders to exercise options before their options are vested. The shares of common stock granted upon early exercise that have not vested are subject to repurchase by the Company in the event of termination of the purchaser’s employment, at the price paid by the purchaser. While such shares have been issued, they are not considered outstanding for accounting purposes until they vest and are therefore excluded from shares used in determining loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature. The liability is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. Accordingly, the Company has recorded the unvested portion of the early exercise proceeds of $467 thousand as a liability in the accompanying balance sheets as of March 31, 2021. As of March 31, 2021, the Company recorded $255 thousand in other current liabilities and $212 thousand in other long term liabilities related to shares that were subject to repurchase.

5.6. Commitments and ~~contingencies~~Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. The Company believes there is no litigation pending or loss contingencies that could have, either individually or in the aggregate, a material impact on the Company’s financial statements.

~~6. Income taxes~~

The Company ~~estimates an annual effective tax~~enters into contracts in the normal course of business with third-party contract organizations for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice and therefore the Company believes that its non-cancelable obligations under these agreements are not material.

Leases

The Company adopted ASC 842 on January 1, 2022 and accordingly, recognized operating lease right-of-use ("ROU") assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease terms at the adoption date, using the Company’s assumed incremental borrowing rate of 0%8%. The Company amortized the operating lease ROU assets and operating lease liabilities over the applicable lease term.

The Company leased office space for ~~the year ending December 31,~~its corporate headquarters located in Blacksburg, Virginia, under a non-cancelable operating lease, which expired in May 2022. In August 2021, as the Company ~~incurred losses~~entered into a three-year lease for an additional facility in Blacksburg, Virginia that was terminated in March 2022.

In connection with the termination of the lease in March 2022, the Company made a one-time cash payment of $0.2 million and included assets with a net book value of $0.1 million, resulting in a loss on the termination of the lease of $0.3 million, which is included in general and administrative costs in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss. In addition, upon termination of the lease in March 2022, operating lease ROU assets and operating lease liabilities were reduced by approximately $0.7 million.

Rent expense was $27,000 and $57,000 for the three ~~month period~~months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and ~~is forecasting an estimated net loss for both financial statement~~$95,000 and ~~tax purposes~~$113,000 for the ~~year ending December 31, 2021. Therefore, 0 federal or state income taxes are expected~~six months ended June 30, 2022 and ~~none have been recorded at this time. Income taxes have been accounted for using the liability method in accordance with FASB ASC 740.~~

Due to the Company's history of losses since inception, there is not enough evidence at this time to support that the Company will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since the Company cannot currently support that realization of its deferred tax assets is more likely than not. However, the Company feels its deferred tax assets may be used upon the Company becoming profitable.

~~At March 31,~~ 2021, ~~the Company had 0 unrecognized tax benefits that would reduce the Company’s effective tax rate if recognized.~~respectively.

7. ~~Net loss per share common share~~

~~The following table sets forth the computation of basic and diluted net loss per share during the periods presented (in thousands, except share and per share amounts):~~License Agreement

Three Months Ended March 31,

Three Months Ended March 31,

2021

2020

Numerator:

Net loss

$
(9,818
)

$
(5,796
)
Denominator:

Weighted-average shares of common stock issued and outstanding

26,332,784

12,363,695

Less: weighted-average unvested common stock subject to repurchase

(262,329
)

(488,972
)
Weighted-average common stock outstanding used to calculate net loss per
common share, basic and diluted

26,070,455

11,874,723

Net loss per share of common stock, basic and diluted

$
(0.38
)

$
(0.49
)

~~The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per common share for the periods presented, because their inclusion would be anti-dilutive:~~License and Collaboration Agreement

Three Months Ended March 31,

Three Months Ended March 31,

2021

2020

Convertible preferred stock on an as-converted basis

0

20,549,478

Stock options to purchase common stock

1,299,586

0

Common stock subject to repurchase

250,924

386,366

Total

1,550,510

20,935,844

~~8. Subsequent events~~

On May 14, 2021, the Company entered into an exclusive license and collaboration agreement (the "LianBio ~~Agreement"~~Agreement”) with ~~Lian~~LianBio Respiratory Limited (“LianBio”). LianBio is a ~~Hong Kong entity, for~~related party to the ~~development, manufacture and commercialization~~Company as a result of an affiliation of a member of the Company’s ~~proprietary compounds, omilancor and NX-13 (the "Licensed Products"), within The People’s Republic~~board of ~~China, Macau, Hong Kong, Thailand, Taiwan, South Korea, Myanmar, Vietnam, Cambodia, Indonesia, Philippines, and Singapore (the “Territory”). Under~~directors at the ~~terms of~~time the LianBio Agreement was executed. Pursuant to the LianBio Agreement, the Company delivered to LianBio an exclusive license and the know-how (the "License”) to develop, manufacture and commercialize omilancor and NX-13 (the “Products”) in the territory comprising the People’s Republic of China (“PRC”), Hong Kong, Macau, Taiwan, Cambodia, Indonesia, Myanmar, Philippines, Singapore, South Korea, Thailand, and Vietnam (the “Territory”). LianBio will ~~receive an upfront~~bear (i) all costs and expenses for any development or commercialization of the Products in the Territory and (ii) all costs and fees associated with applying for regulatory approval of the Products in the Territory. The Company received a non-refundable payment of ~~$18.0~~$18.0 million ~~in connection with the~~upon execution of the LianBio ~~Agreement,~~Agreement. In addition, the Company ~~will be eligible~~has the ability to receive ~~up to $95.0 million~~additional payments upon the achievement of certain development and sales milestone payments of up to ~~$105.0 million.~~an aggregate of $95.0 million and $105.0 million, respectively. The Company is also ~~eligible~~entitled to receive ~~tiered low-to mid-double-digit~~ double-digitroyalties ~~based~~ on net sales of ~~Licensed~~the Products in the ~~Territory, subject~~Territory.

In accordance with the LianBio Agreement, the Company agreed to ~~reduction~~supply to LianBio all clinical and commercial requirements of Products. The terms of the agreement do not provide for either (i) an option to LianBio to purchase Products from the Company at a discount from the standalone selling price or (ii) minimum purchase quantities. In addition, the Company and LianBio formed a Joint Steering Committee (“JSC”) to provide oversight to the activities performed under the LianBio Agreement; however, the substance of the Company’s participation in ~~specified circumstances.~~the JSC does not represent an additional promised service, but rather, a right of the Company to protect its own interests in the arrangement.

12The Company concluded that LianBio meets the definition of a customer because the Company is delivering intellectual property and other services in which the parties are not jointly sharing the risks and rewards. Therefore, the Company concluded that the promises summarized above represent transactions with a customer within the scope of ASC 606. Given that LianBio is not obligated to purchase any minimum amount or quantities of Products, the supply of Products for clinical and commercial purposes was determined to be an option for LianBio, rather than a performance obligation of the Company at contract inception and will be accounted for if and when exercised. The Company also determined that LianBio’s option to purchase Products does not create a material right as the expected pricing is not at a discount. At contract inception and through June 30, 2022, the Company determined that the contract contains a single performance obligation to deliver the License, which represents functional intellectually property given the functionality of the License is not expected to change substantially as a result of the Company’s ongoing activities.

The Company determined that the upfront fixed payment of $18.0 million is the initial transaction price. The potential development milestone payments that the Company is eligible to receive upon the successful achievement of certain regulatory approvals or activities were excluded from the transaction price, as the milestone amounts were fully constrained based on the probability of achievement. The royalties and sales milestone payments are excluded from the transaction price under the sales- or usage-based royalty exception of ASC 606. The Company will reevaluate the transaction price, including all constrained amounts, at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and the Company will adjust its estimate of the transaction price as necessary. The Company will recognize the royalties and sales milestone payments as revenue when the associated sales occur, and relevant sales-based thresholds are met. The Company assessed the arrangement with LianBio and concluded that a significant financing component does not exist. As of June 30, 2021, the Company had completed the transfer of the License and know-how necessary and, as such, recognized the full $18.0 million upfront payment as revenue.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of December 31, ~~2020~~2021 and ~~2019~~2020 and for each of the two years in the period ended December 31, ~~2020~~2021 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 ~~30, 2021.~~24, 2022. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "the company," “we,” “us,” and “our” refer to Landos Biopharma, Inc. together with its subsidiaries.

~~Forward-Looking Statements~~

~~The information in this discussion~~This report contains forward-looking statements ~~and information~~ within the meaning of Section 27A of the Securities Act of 1933, as amended, ~~or the Securities Act,~~ and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, ~~which are subject to the “safe harbor” created by those sections. These~~that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. Theby the words ~~“anticipates,” “believes,” “estimates,” “expects,” “intends,”~~ “may,” ~~“plans,” “projects,~~“might,” “will,” ~~“would”~~“could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and ~~similar expressions are~~“ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking ~~statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed~~statements. You should refer to “Item 1A. Risk Factors” in our ~~forward-looking statements~~Annual Report on Form 10-K for the year ended December 31, 2021 and ~~you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed~~ in ~~the forward-looking statements~~"Item 1a. Risk Factors" below for a discussion of important factors that ~~we make. These forward-looking statements involve risks and uncertainties that could~~may cause our actual results to differ materially from those ~~in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in~~expressed or implied by our Annual Report on Form 10-K and in our other filings with the SEC. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Company Overview

We are a clinical-stage biopharmaceutical company focused on the discovery and development of oral therapeutics for patients with autoimmune ~~diseases that are~~diseases. We believe we were the first to identify and target ~~novel mechanisms of action, including the~~ LANCL2, NLRX1 and PLXDC2, which are immunometabolic ~~pathways. Our core expertise is in the development of therapeutic candidates~~pathways or targets. We believe that ~~target~~these novel pathways are at the interface of immunity and metabolism. Based on our understanding of the role that cellular metabolic pathways have on modulating inflammatory responses, we aim to inhibit these inflammatory responses by changing the metabolic processes in target cells. We leverage our proprietary AI-based precision medicine platform and growing reference datasets, which we refer to as our LANCE platform, to identify novel therapeutic targets and biomarkers based on predictions of immunometabolic function and create therapeutic candidates for autoimmune disease to engage those targets in areas of unmet medical need. Through our LANCE platform, we have identified seven novel immunometabolic ~~targets and product candidates to date across 14 indications, including ulcerative colitis,~~pathways or UC, Crohn’s disease, or CD, lupus, rheumatoid arthritis, nonalcoholic steatohepatitis, multiple sclerosis, Alzheimer’s disease, asthma, psoriasis, atopic dermatitis, eosinophilic esophagitis, chronic obstructive pulmonary disease, diabetic neuropathy and type 1 diabetes.

~~Our lead product candidates are:~~

·~~Omilancor~~ ~~(BT-11), a small molecule targeting the LANCL2 pathway that is in clinical development for the treatment of ulcerative colitis and Crohn’s disease.~~

We recently completed the Phase 2 clinical trial in mild to moderate ulcerative colitis patients, which demonstrated that once a day oral dosing with omilancor was gut-restricted and well tolerated, with no treatment-related significant adverse events and a similar adverse event profile across placebo and omilancor groups. Once a day oral dosing with omilancor induced clinical remission and histological remission plus statistically significant changes in biomarkers.

We generated positive translational data in the Phase 2 clinical trial in ulcerative colitis patients highlighting that omilancor induced increased levels of regulatory CD4+ T cells and myeloid cells and increased IL-10 expression in remitters (p = 0.036) while decreasing TNF-a expressing myeloid cells (p = 0.037) in the colonic mucosa of patients with ulcerative colitis. These results are consistent with normalization of fecal calprotectin occurring in 43.8% of patients receiving omilancor 1000 mg and 40.6% of patients receiving omilancor 500 mg relative to 21.4% of patients receiving placebo after 2 weeks of treatment (p ~~= 0.048) observed in the trial.~~

~~We expect to hold an end-of-Phase 2 meeting with the U.S. Food and Drug Administration, or the FDA, in the second quarter of 2021.~~

After we receive guidance from the FDA, we will incorporate the agency’s feedback in the clinical trial design and will plan to commence a Phase 3 trial of omilancor in UC patients in the United States, Russia, Asia and Europe.

We have commenced a Phase 2 trial in moderate to severe Crohn’s disease in the second quarter of 2021 (please refer to press release dated May 6 and Form 8-K filed on May 7 for further details). We expect to announce topline data from the induction phase of this trial in the first half of 2022.

We have developed an orodispersable formulation of omilancor that is designed to enable exposure to omilancor in the upper gastrointestinal tract while retaining the local action without systemic exposure. This new omilancor formulation is designed for the oral treatment of eosinophilic esophagitis.

We received clearance from the FDA for an investigational new drug application, or IND, for omilancor for the treatment of eosinophilic esophagitis, an orphan drug indication (please refer to press release dated April 6, 2021 for more details regarding the IND clearance).

~~We expect to commence Phase 1b trials in eosinophilic esophagitis and psoriasis in 2022.~~

We have developed a topical formulation of omilancor for skin indications and demonstrated its preclinical efficacy in mouse models of psoriasis (please refer to press release dated April 26, 2021 for more details on the data).

We expect to submit two INDs for omilancor for the treatment of plaque psoriasis and atopic dermatitis in the third quarter of 2021. Following FDA clearance, we plan to initiate a Phase 1b study in patients.



~~NX-13, a small molecule targeting and activating the NLRX1 pathway that is in clinical development for the treatment of UC and CD.~~

We have completed a Phase 1a trial of NX-13 in normal healthy volunteers in March of 2021. In the trial, NX-13 demonstrated a well-tolerated profile, gut-restricted pharmacokinetics and dose-dependent changes in fecal calprotectin (please refer to press release dated March 4, 2021 for further details on the topline results).

~~We have commenced a Phase 1b trial in ulcerative colitis with the first patient randomized on April 29~~th~~, 2021 (please refer to Form 8-K filing and press release dated April 29, 2021 which more fully describe the design and initiation of the Phase 1b trial in UC patients).~~

~~We expect to have the data readout in the second half of 2021 and we expect to announce topline clinical data from this trial in the first quarter of 2022.~~



~~BT-104~~, a small molecule targeting and activating the LANCL2 pathway that is in IND-enabling studies. BT-104 has a different pharmacokinetic (PK) profile than BT-11 and we have observed in preclinical studies that it is highly systemically distributed.

We have demonstrated in a NZB/W F1 mouse model of lupus that BT-104 reduced serum anti-dsDNA antibodies and prevented worsening of proteinuria grade from baseline. Mice were treated with BT-104 daily for 12 weeks between the ages of 24 and 36 weeks. Ninety percent of mice treated with BT-104 experienced an improvement or no change in proteinuria grade from baseline, in comparison to 90% of vehicle treated controls that experienced a worsening in grade. Grade 2 or lower proteinuria was well correlated with the prevention of ESRD clinically.

We expect to complete RNA sequencing studies with samples from healthy mice and mice with lupus treated with vehicle versus BT-104 orally to identify immunological signatures and biomarkers connected to the mechanism of action of BT-104 and help design inclusion/exclusion criteria in Phase 1b clinical trials.

~~On April 15, we filed a PIND meeting request with the FDA and expect to complete IND-enabling studies and submit two IND to the FDA in the third quarter of 2021.~~

~~We expect to advance BT-104 into a Phase 1a clinical trial in the fourth quarter of 2021 for systemic lupus erythematosus and rheumatoid arthritis.~~

~~We expect to establish a Clinical Advisory Board for lupus in the second half of 2021.~~

~~We have continued to efficiently develop our pipeline, including four additional preclinical product candidates:~~



~~PX-69, a small molecule designed to target and activate the PLXDC2 pathway that is in preclinical testing for diabetic nephropathy and rheumatoid arthritis.~~

We have generated preclinical data demonstrating efficacy of PX-69 in mouse and rat models of rheumatoid arthritis. Please refer to the press release dated April 26, 2021 for further details on preclinical findings demonstrating the ability of PX-69 to provide protection against rheumatoid arthritis in rats and mice through immunometabolic mechanisms.

~~We are currently performing scale up manufacturing for PX-69.~~

~~We expect to commence IND-enabling studies in the second half of 2021~~

~~We expect to file an IND for PX-69 in rheumatoid arthritis in the first half of 2022.~~



~~BT-111,~~ a small molecule designed to target and activate LANCL2 for the treatment of non-alcoholic steatohepatitis and type 1 diabetes. We have generated preclinical data demonstrating efficacy of BT-111 in mouse models of NASH and type 1 diabetes.

~~o We have demonstrated that therapeutic dosing of BT-111 (10 mg/kg) for six weeks between weeks six and 12 of CDAA diet, reduced lipid accumulation and liver fibrosis (n = 10,~~ P ~~≤ 0.05). Liver fibrosis, assessed by percent positive area in liver histology by Masson’s trichrome staining, was approximately normalized to standard diet controls.~~

~~o We have demonstrated that BT-111 maintained ß cell mass in a NOD mouse model and reduced apoptosis of human islet cells in response to oxidative and inflammatory stress~~ ~~in vitro~~.



~~NX-66~~, a small molecule designed to target NLRX1 currently in preclinical testing in mouse models of multiple sclerosis and Alzheimer’s disease. NX-66 is highly systemically distributed and penetrates the blood brain barrier.

o We have demonstrated that therapeutic dosing of oral NX-66 (20 mg/kg), between days 14 and 23 post-challenge, ameliorated disease severity in a MOG-induced model of EAE. NX-66 provided a greater than 50% reduction in disease activity four days after the initiation of treatment (n = 10, P ≤ 0.05). NX-66 treatment decreased Tnf and IL1b expression in the spinal cords of EAE mice.

~~o Testing of the preclinical efficacy of NX-66 in mouse models of Alzheimer’s disease is also underway.~~



~~NX-73, a small molecule designed to target NLRX1 currently in preclinical testing in mouse models of asthma and chronic obstructive pulmonary disease.~~

We have identified and implemented 4 models of allergic asthma using 4 of the most clinically relevant and ubiquitous allergens. These models indicate enhanced eosinophilia, neutrophilia, Th2 and Th17 mediated immune signaling in the absence of Nlrx1.

~~We are using four validated models of allergy and asthma using~~ ~~Aspergillus fumigatus~~, ~~Alternaria alternata, ragweed pollen, and house dust mite extract to assess efficacy of NX-73 in suppressing Th2-mediated responses post-sensitization and providing protection from asthma and allergy in mice.~~

~~LANCE Platform~~

~~We leverage our proprietary AI-based precision medicine platform, our LANCE platform, to identify novel therapeutic~~ targets based on predictions of immunometabolic function using a proprietary advanced artificial intelligence-based integrated computational and ~~create therapeutic candidates to engage those targets in areas of unmet medical need. We expect that recent augmentations in Artificial Intelligence (A.I.) coupled with growth of~~experimental precision medicine platform. Our near-term focus is on our ~~Shadowfax~~ High Performance Computing (HPC) environment at Landos will continue to catalyze the LANCE platform for precision autoimmune disease drug development. We have continued to develop our HPC-driven, A.I.- and modeling-based advanced computational platform for precision autoimmune disease drug development. Several enhancements to the LANCE platform encompassing natural language processing, NLP, and graph-based analytics are designed to allowclinical-stage programs including omilancor for the ~~processing~~treatment of ~~millions~~ulcerative colitis, or UC, NX-13 for the treatment of ~~articles~~UC, and ~~billions~~LABP-104 for the potential treatment of ~~data points.~~systemic lupus erythematosus, or SLE, and rheumatoid arthritis, or RA. We believe ~~these critical enhancements to~~ the ~~LANCE platform will facilitate~~therapeutics we discover and develop, if approved, could have a higher degree of data processing and integration to quickly identify the next generation of therapeutic targets and biomarkers plus scout for new indications. Some of the recent enhancements to the LANCE platform include:



~~Developing a new sensitivity analysis framework to capture many features of our computational models of the immune response.~~



~~Incorporating NLP of primary biomedical literature to augment novel candidate discovery and characterization. This proprietary NLP framework allows Landos researchers to rapidly assess~~significant positive impact on the quality of ~~primary literature~~life of patients suffering from autoimmune diseases.

Our lead product candidate, omilancor, is a gut-restricted oral therapeutic that is the first product candidate designed to engage the novel target lanthionine synthetase C-like protein 2, or LANCL2, a membrane receptor that has been shown to modulate immunological mechanisms that are associated with ~~initial candidates derived~~autoimmune diseases such as UC. We are developing omilancor as a once-daily oral treatment initially for UC. We are working on a reformulation of omilancor, including dose selection and assessment, and expect to announce both the timing and the next steps in the development of omilancor later this year.

NX-13 is a novel, gut-restricted oral therapeutic that targets NOD-like receptor X1, or NLRX1, a mitochondria-associated receptor that has been associated with the modulation of inflammatory cytokines for UC. NX-13 is designed to target NLRX1 and induce anti-inflammatory effects in CD4+ T cells and other immune cells in the gastrointestinal tract. We are developing NX-13 as a once-daily oral treatment for UC. In August 2022, we announced positive top-line results for the Phase 1b trial of NX-13 in moderate UC patients. The data from ~~system-wide analysis~~this trial showed that NX-13 was well tolerated following evaluation of ~~large-scale~~multiple doses over four weeks compared with a placebo. While the study was shorter in duration than standard induction trials and not powered for efficacy, there was an indication of signals of clinical ~~datasets.~~

improvement as soon as two weeks in patients’ symptoms and four weeks by endoscopy in exploratory endpoints. We expect to announce the timing for the initiation of a Phase 2 trial of NX-13 in moderate-to-severe UC patients later this year.

LABP-104 is a novel, systemically bioavailable, oral therapeutic that targets LANCL2. We are developing LABP-104 as a once-daily oral treatment for SLE and/or RA. The pathogenesis of SLE is connected to defective apoptosis leading to stimulation of B cells by dendritic cells and CD4+ T cells to produce auto-antibodies. These antibodies activate the complement system and deposit in organs, leading to inflammation and tissue damage. We believe the activation of LANCL2 can intercept these events upstream through skewing of CD4+ T cells to regulatory phenotypes and maintenance of the metabolic requirements for autophagy. We conducted a Phase 1a trial of LABP-104 in healthy volunteers and expect topline results to be reported later this year. We expect to announce both the timing and the next steps for the development of LABP-104 also later this year.



~~Improved~~In May 2021, we entered into an exclusive collaboration and license agreement, or the ~~multiscale modeling capabilities~~LianBio Agreement, with LianBio Respiratory Limited, or LianBio, pursuant to which we granted LianBio an exclusive license to develop, manufacture and commercialize OMILANCOR and NX-13 in Greater China (mainland China, Hong Kong, Taiwan and Macau), South Korea, Singapore, Thailand, Vietnam, Myanmar, Cambodia, Indonesia, and the Philippines, or the Territory. We received an upfront cash payment of ~~our HPC-based agent-based modeling tool~~ ~~ENISI (Enteric Immunity Simulator) by incorporating cellular metabolic networks at~~$18.0 million in connection with the ~~single-cell level.~~



~~Utilizing a variety~~execution of ~~graph-based techniques centered~~the LianBio Agreement and are eligible to receive development milestone payments of up to $95.0 million and sales milestone payments of up to $105.0 million. We are also eligible to receive tiered low-double-digit royalties based on ~~information propagation via homology modeling to utilize data from well-studied model systems,~~net sales of omilancor and ~~biochemical pathway analysis to identify novel sites of convergence between immune and metabolic pathways.~~



~~Incorporating advanced machine learning strategies to further enhance scalability and efficiency, including extending our library of algorithms and models while supporting increased model complexity~~NX-13 in the ~~intersection of immunity and metabolism.~~

Territory, subject to reductions in specified circumstances.



~~Establishing large-scale parallel computing systems for implementing parallel simulation frameworks for massively and dynamically interacting large-scale models.~~



~~Developing~~We have a ~~user-friendly web-based environment to support and HPC-driven infrastructure for drug development.~~



~~Developing and calibrating unique, detailed immunometabolic models of the immune system.~~



Increasing the number of relevant autoimmune disease genomic, metabolomic and biomarker datasets (ulcerative colitis, Crohn’s disease, rheumatoid arthritis, lupus, multiple sclerosis, type 1 diabetes, psoriasis, atopic dermatitis, asthma, allergy, COPD).



~~Further enhancing integration across A.I., agent-based modeling (ABM), partial differential equations (PDE) and ordinary differential equation (ODE) based modeling within the LANCE platform.~~



~~Identifying and validating novel therapeutic targets and biomarkers of response based on the iterative systems biology approach in LANCE.~~



~~Elucidating novel mechanistic insights for the newly identified therapeutic targets.~~



Establishing robust verification and validation methods for confirming model predictions based on clustering analytics, improved big data management through digital libraries and experimental validation.



Utilizing the clinical, translational and immunological data from our clinical trials to enhance our model calibration databases and increase the predictive power of our computational and mathematical models.



~~Increasing our computational and HPC capabilities by establishing a data room with a new~~ ~~Shadowfax~~ HPC system containing 1,536 cores in 64 compute nodes (12 CPUs and 2 cores per CPU), two high memory nodes with 10 cores each, 2 login nodes, 1 head node, on a private VPN plus 500 TB of storage. This on-premise computing environment can seamlessly scale to cloud compute environments when needed.

limited operating history. Since ~~our~~ inception, ~~in 2017,~~ our operations have focused on developing our clinical and preclinical product candidates, ~~and our LANCE platform,~~ organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and conducting clinical trials and preclinical studies. We do not have any product candidates approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the sale of equity securities.

Since our inception in 2017, we have ~~raised an aggregate~~funded operations through the issuance of ~~$170.0 million of gross~~convertible preferred stock and convertible promissory notes, through proceeds from our initial public offering, or IPO, and through the ~~sale of shares of our preferred stock~~upfront payment from a license and ~~convertible promissory notes.~~

~~Since inception, we have incurred significant operating losses. Our net loss was $9.8 million and $5.8 million for the three months ended March 31, 2021 and 2020, respectively.~~collaboration agreement with a related party. As of ~~March 31, 2021,~~June 30, 2022, we had an accumulated deficit of ~~$65.5 million. We~~$120.3 million and we expect to ~~continue to~~ incur ~~significant expenses and~~substantial operating losses for at least the ~~foreseeable~~next several years. As a result, we will need to raise additional capital to initiate and complete our planned clinical trials, to continue and expand our research and development operations that support our planned discovery, development and clinical and regulatory activities, and to adequately prepare for commercialization of our product candidates that may achieve regulatory approval in the future. As of June 30, 2022, we had cash, cash equivalents and marketable securities of $55.8 million, which we believe will be sufficient to fund our planned operations for at least the next 12 months. Upon completion of our portfolio prioritization review later this year, we will provide further details into our operating plans and capital resources. We anticipate that our expenses ~~will~~may increase significantly in connection with our ongoing activities, as we:

•

conduct our ongoing and planned clinical trials of omilancor, NX-13, and ~~NX-13,~~LABP-104, as well as initiate and complete additional clinical ~~trials, as needed;~~trials;

•

pursue regulatory approval of ~~omilancor and NX-13 for the treatment of UC and CD;~~our product candidates;

•

~~leverage our LANCE platform~~seek to discover and develop additional clinical and preclinical product ~~candidates for the treatment of autoimmune diseases;~~candidates;

•

scale up our clinical and regulatory capabilities;

•

establish a commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory ~~approval, including omilancor and NX-13;~~approval;

•

adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;

•

maintain, expand and protect our intellectual property portfolio;

•

hire additional clinical, manufacturing and scientific personnel;

•

add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and

•

incur additional legal, accounting and other expenses in operating as a public company.

~~Recent Developments: LianBio Agreement~~

On May 14, 2021, the Company entered into an exclusive license and collaboration agreement, or the LianBio Agreement, with Lian Respiratory Limited, a Hong Kong entity, for the development, manufacture and commercialization of the Company’s proprietary compounds, omilancor and NX-13, or the Licensed Products, within The People’s Republic of China, Macau, Hong Kong, Thailand, Taiwan, South Korea, Myanmar, Vietnam, Cambodia, Indonesia, Philippines, and Singapore, or the Territory. Under the terms of the LianBio Agreement, the Company will receive an upfront payment of $18.0 million in connection with the execution of the LianBio Agreement and will be eligible to receive development milestone payments of up to $95.0 million and sales milestone payments of up to $105.0 million. The Company is also eligible to receive tiered low- to mid-double-digit royalties based on net sales of Licensed Products in the Territory, subject to reduction in specified circumstances.

Consistent with our strategy, we intend to continue to pursue territory deals that enable partnering on commercialization of lead therapeutic assets outside of the U.S. and European markets. Moreover, we will consider partnering with strategics to develop some of the follow on therapeutic assets as a means of monetizing some of our pipeline assets.

~~Liquidity and Capital Resources~~

On February 3, 2021, we completed our IPO in which we issued and sold 6,250,000 shares of our common stock at a public offering and received net proceeds of $90.5 million, after deducting underwriters’ discounts and commissions and expenses payable by us.

We have further strengthened our capital position and operating runway through our IPO and business development activities. Based on our current expectation for operations, research, development, and clinical trials plans - we believe that the $106.4 million in cash and marketable securities (not including the 18.0 million upfront payment due to us under the LianBio Agreement) will be sufficient to support our operating costs through 2023.

Components of our ~~results~~Results of ~~operations~~Operations

Research and ~~development expenses~~Development Expenses

Research and development expenses consist primarily of costs incurred in connection with our research activities, including our discovery efforts and the development of our product candidates, and include:

•

salaries, benefits, stock-based compensation and other related costs for personnel engaged in research and development functions;

•

expenses incurred under agreements with third parties, including contract research organizations, or CROs, and other third parties that conduct research, preclinical activities and clinical trials on our behalf, as well as contract manufacturing organizations, or CMOs, that manufacture drug material for use in our clinical trials and preclinical studies;

•

costs of outside consultants, including their fees and related travel expenses;

•

the costs of laboratory supplies and acquiring, developing and manufacturing preclinical and clinical trial ~~supply;~~supplies; and

•

allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development costs as incurred. We track external development costs by product candidate or development program, but we do not allocate personnel costs or certain other ~~internal~~ costs to specific development programs or product candidates.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have a higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. WeWhile we expect our research and development expenses to remain relatively consistent in the near-term as we complete our ongoing clinical trials, and as a result of our strategic review of our clinical programs, we expect that our research and development expenses will ~~continue to~~ increase ~~substantially for~~in the ~~foreseeable future~~long-term and will comprise a larger percentage of our total expenses as we ~~complete our ongoing clinical trials,~~ initiate new clinical trials, hire additional research and development staff, continue to discover and develop additional product candidates and prepare regulatory filings for any product candidates that successfully complete clinical ~~development.~~trials.

The successful development of our product candidates is highly uncertain. At this time, we cannot determine with certainty the duration and costs of our existing and future clinical trials of our product candidates or any other product candidate we may develop or

if, when, or to what extent we will generate revenue from the potential commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our product candidates and any other product candidate we may develop in the future will depend on a variety of factors, including:

•

per patient trial costs;

•

the number of patients who enroll in each trial;

•

the number of trials required for approval;

•

the number of sites included in the trials;

•

the countries in which the trials are conducted;

•

the length of time required to enroll eligible patients;

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the drop-out or discontinuation rates of patients;

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potential additional safety monitoring requested by regulatory agencies;

•

the duration of patient participation in the trials and follow-up;

•

our ability to secure adequate supply of our product candidates for our trials;

•

the phase of development of the product candidate; and

•

the efficacy and safety profile of the product candidate.

Our expenditures are subject to additional uncertainties, ~~including the terms~~ and ~~timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We~~we may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay, or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S. Food and Drug Administration, FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

General and ~~administrative expenses~~Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees for accounting, auditing, tax and consulting ~~services;~~services, insurance costs, travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will ~~increase~~remain relatively consistent for the foreseeable future; however, in the ~~future~~long term we expect that they will increase as we increase our personnel headcount to support our expanded infrastructure, including the development of a commercialization infrastructure for any product candidates for which we may obtain regulatory approval. ~~We also expect~~Our expenditures are subject to ~~incur increased expenses associated with being a public company,~~uncertainties, including ~~costs~~the terms and timing of ~~accounting, audit, legal,~~ regulatory approvals, and ~~tax-related services associated with maintaining compliance with stock exchange~~the expense of filing, prosecuting, defending and SEC requirements, director and officer insurance costs and investor and public relations costs. We anticipate the additional costs for these services will increase our general and administrative expenses by between $1.0 million and $2.0 million on an annual basis.enforcing any patent claims or other intellectual property rights.

~~Interest expense~~

Interest expense consists of interest due on our convertible promissory notes that were outstanding during the period prior to the conversion of the notes into Series B convertible preferred stock in August 2019.

~~Income taxes~~

Since our inception in January 2017, we have generated cumulative federal and state net operating loss for which we have not recorded any net tax benefit due to uncertainty around utilizing these tax attributes within their respective carryforward periods.

As of March 31, 2021, we had federal net operating loss carryforwards, or NOLs, of $43.9 million and state NOLs of $43.9 million that may be available to offset future taxable income. The federal NOLs include $2.1 million available to reduce 100% of future taxable income, which will begin to expire in 2037, if not utilized, and $41.8 million, which can be carried forward indefinitely. The state NOLs will begin to expire in 2037, if not utilized.

1817

Utilization of the net operating losses and credits may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended. The annual limitation may result in the expiration of our net operating losses and credits before we can use them. We have recorded a valuation allowance on our net deferred tax assets, including our deferred tax assets related to our net operating loss and research and development tax credit carryforwards.

Other ~~income,~~Income, net

Other income, net, primarily consists of interest income received from available-for-sale marketable securities.

Results of ~~operations~~Operations

Comparison of the three and six months ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020~~

The following table summarizes our results of operations for the ~~years~~three and six months ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020:~~(in thousands):

Three Months Ended March 31,

2021

2020

(in thousands)

Operating expenses

Research and development

$
7,254

$
4,690

General and administrative

$
2,646

$
1,080

Total operating expenses

$
9,900

$
5,770

Loss from operations

(9,900
)

(5,770
)
Other income (expense);

Interest expense

—

(1
)
Gain (loss) from foreign exchange

18

(222
)
Other income, net

64

197

Other income (expense), net

82

(26
)
Net loss

(9,818
)

(5,796
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue:	$	—		$	18,000		$	—		$	18,000
Operating expenses
Research and development	$	6,604		$	11,522			17,404			18,776
General and administrative		4,662			2,596			8,815			5,241
Total operating expenses		11,266			14,118			26,219			24,017
(Loss) income from operations		(11,266	)		3,882			(26,219	)		(6,017	)
Other income:
Gain (loss) from foreign exchange		25			(5	)		26			13
Other (expense) income, net		(43	)		220			45			283
Other (expense) income, net		(18	)		215			71			296
Net (loss) income	$	(11,284	)	$	4,097		$	(26,148	)	$	(5,721	)

Research and ~~development expenses~~Development Expenses

Research and development expenses were ~~$7.3~~$6.6 million for the three months ended ~~March 31, 2021~~June 30, 2022 compared to ~~$4.7~~$11.5 million for the three months ended ~~March 31, 2020.~~June 30, 2021. The ~~increase~~decrease of ~~$2.6~~$4.9 million was primarily ~~attributable~~attributed to ~~increased~~a decrease in CRO and clinical data management costs ~~associated with ongoing~~due to the strategic review of our clinical ~~trial~~programs that resulted in the termination of further enrollment in two clinical trials of omilancor for the treatment of Crohn's Disease (CD). This was partially offset by an increase in consulting and temporary labor costs for the three months ended June 30, 2022. Research and development expenses were $17.4 million for the six months ended June 30, 2022 compared to $18.8 million for the six months ended June 30, 2021. The decrease of $1.4 million was primarily attributed to a decrease in manufacturing costs and a decrease in clinical activities related to our omilancor program due to the termination of further enrollment in two clinical trials of omilancor for ~~omilancor~~the treatment of CD, partially offset by an increase in clinical activities related to our NX-13 and ~~NX-13.~~LABP-104 programs.

The following table summarizes our research and development expenses by product candidate ~~or development program~~ for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 ~~and 2020:~~(in thousands):


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2022		2021		2022		2021
	(in thousands)
External costs by clinical program:
Omilancor	$	5,005	$	3,630	$	997	$	7,199	$	6,248	$	10,564
NX-13		1,370		780		2,466		2,356		4,347		3,424
BT-104		585		—
Other discovery pipeline, LANCE platform and unallocated costs		294		280
LABP-104						517		282		1,290		867
Total external costs by clinical program:						3,980		9,837		11,885		14,855
Compensation						1,001		1,050		2,537		2,683
Other						1,623		635		2,982		1,238
Total research and development expenses	$	7,254	$	4,690	$	6,604	$	11,522	$	17,404	$	18,776

General and ~~administrative expenses~~Administrative Expenses

General and administrative expenses were $4.7 million for the three months ended June 30, 2022 compared to $2.6 million for the three months ended ~~March 31, 2021 compared to $1.1 million for the three months ended March 31, 2020.~~June 30, 2021. The increase of ~~$1.5~~$2.1 million was primarily attributable to increases in ~~patent~~employee-related expenses, including stock-based compensation, as well as an increase in recruiting and legal fees. General and administrative expenses were $8.8 million for the six months ended June 30, 2022 compared to $5.2 million for the six months ended June 30, 2021. The increase of $3.6 million was primarily attributable to increases in legal costs, ~~related legal~~employee-related expenses, including stock-based compensation, recruiting fees, and ~~other outside professional services.~~a one-time charge incurred in connection with a lease termination.

~~Other Income (expense), net~~

Other income, net was $82 thousand for the three months ended March 31, 2021 compared to other expense, net of $26 thousand for the three months ended March 31, 2020. The decrease was due to amortization of bond premium from investment activity and the gains (losses) from foreign exchange.

Liquidity and ~~capital resources~~Capital Resources

Since our inception, we have incurred significant operating losses and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our research programs and product candidates. We expect that our research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials for our current and future research programs and product candidates, including omilancor and NX-13, discovering and developing new product candidates using the LANCE precision medicine platform, contracting with CMOs to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.

We do not currently have any approved products and have never generated any revenue from product sales. To date, we have financed our operations primarily through ~~equity financings. As~~the issuance of ~~March 31, 2021, we had $106.4 million in cash, cash equivalents~~convertible preferred stock and ~~marketable securities~~convertible promissory notes, proceeds from our IPO, and ~~an accumulated deficit of $65.5 million. We had no indebtedness as of March 31, 2021.~~

the upfront payment from the LianBio Agreement. On February 3, 2021, we completed our IPO in which we issued and sold 6,250,000shares of our common stock and received net proceeds of $90.5 million, after deducting underwriters’ discounts and commissions and expenses payable by us. As of June 30, 2022, we had $55.8 million in cash, cash equivalents and marketable securities and an accumulated deficit of $120.3 million.

The following table summarizes our sources and uses of cash for each of the periods set forth below (in thousands):


	Six Months Ended June 30,
	2022			2021
Net cash used in operating activities	$	(34,499	)	$	(3,160	)
Net cash provided (used in) by investing activities		45,377			(71,333	)
Net cash provided by financing activities		—			90,764
Net increase in cash and cash equivalents	$	10,878		$	16,271

Operating Activities

Three Months Ended March 31,

2021

2020

Net cash used in operating activities

$
(12,560
)

$
(3,368
)
Net cash provided by (used in) investing activities

(72,048
)

1,707

Net cash provided by financing activities

90,764

—

Net increase (decrease) in cash and cash equivalents

$
6,156

$
(1,661
)

~~Operating~~During the six months ended June 30, 2022, we used cash in operating activities of $34.5 million, reflecting a net loss of $26.1 million, partially offset by non-cash charges of $2.8 million and a net change of $11.2 million in our operating assets and liabilities. The non-cash charges consist primarily of $1.6 million of stock-based compensation expense, $0.6 million of depreciation expense and $0.5 million related to the amortization of the premium on investments. The net change in our operating assets and liabilities was primarily due to a decrease in accounts payable and other liabilities and an increase in prepaid expenses and other current assets.

During the six months ended June 30, 2021, we used cash in operating activities of $3.2 million, reflecting a net loss of $5.7 million, partially offset by non-cash charges of $2.1 million and a net change of $0.5 million in our operating assets and liabilities. The non-cash charges consist primarily of $1.3 million of stock-based compensation expense and $0.4 million related to accrued interest on investments. The net change in our operating assets and liabilities was primarily due to a decreases in accounts payable and accrued liabilities and an increase in prepaid expenses and other current assets.

Investing Activities

Net cash ~~used in operating~~provided by investing activities for the ~~three~~six months ended ~~March 31, 2021~~June 30, 2022 was ~~$12.6~~$45.4 million, consisting ~~primarily~~ of ~~our net loss~~proceeds from sales and maturities of $9.8 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses. Net cash used in operating activities for the three months ended March 31, 2020 was $3.4 million, consisting primarilymarketable securities, partially offset by purchases of ~~our net loss of $5.8 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses.~~

~~Investing activities~~

available-for-sale marketable securities. Net cash used in investing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was ~~$72.0~~$71.3 million, consisting primarily of purchases of ~~available-for-sale~~ marketable securities and property and equipment, partially offset by proceeds from sales and maturities of marketable securities. ~~Net provided by investing activities for the three months ended March 31, 2020 was $1.7 million, consisting primarily of maturities of available-for-sale marketable securities.~~

Financing Activities

~~Financing activities~~

Net cash provided by financing activities in the ~~three~~six months ended ~~March 31,~~June 30, 2021 of $90.8 million was primarily related to net proceeds received from our IPO. ~~There was no net cash provided by financing activities in the three months ended March 31, 2020.~~

Funding ~~requirements~~Requirements

To date, we have not generated any revenues from the commercial sale of approved drug products, and we do not expect to generate substantial revenue for at least the next few years. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised. We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate significant revenue unless and until we obtain regulatory approval of, and commercialize, our product candidates. WeFurther, we do not know when, or if, we will generate any revenue under the LianBio Agreement as future payments are conditioned upon the achievement of development and commercialization milestones that are uncertain as of this date. Although we expect our expenses to remain relatively consistent in the near-term, we expect our expenses to increase in the long-term in connection with our ongoing activities, particularly as we continue the research and development of, ~~continue or~~ initiate additional clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. ~~Furthermore, we expect to incur additional costs associated with operating as a public company.~~ We anticipate that we will need substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain

marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available in the near term, if at all.

We believe that ~~the~~our existing cash, ~~and~~ cash equivalents and marketable securities will enable us to fund our planned operations for at least the next 12 months. Upon completion of our portfolio prioritization review later this year, we will provide further details into our operating ~~expenses~~plans and capital ~~expenditure requirements into 2023.~~resources. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drugs, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:

•

the scope, progress, costs and results of our ongoing and planned clinical trials of omilancor, NX-13 and ~~NX-13;~~LABP-104;

•

the incremental clinical and manufacturing costs that we may incur in relation to the timing and next steps for omilancor, NX-13 and LABP-104 that we plan to announce later this year;

•

the costs related to facilities and operations;

•

the costs and results of discovery ~~work using our LANCE precision medicine platform;~~work;

•

the scope, progress, costs and results of preclinical development, laboratory testing and clinical trials for any future product candidates we may decide to pursue;

•

the extent to which we in-license or acquire rights to other products, product candidates or technologies;

•

the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development;

•

the number and development requirements of other product candidates that we may pursue;

•

the costs, timing and outcome of regulatory review of our product candidates;

•

the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates ~~for which~~if we receive marketing approval;

•

the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

•

our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements; and

•

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, and defending against any intellectual property-related claims.

Further, our operating results may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Our future commercial revenue, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if at all. Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements, ~~and~~ marketing and distribution ~~arrangements.~~arrangements or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ~~your~~the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect ~~your~~the rights ~~as a common stockholder.~~of existing stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

~~Contractual obligations, commitments~~Critical Accounting Policies and ~~contingencies~~

~~We enter into contracts in the normal course of business with third-party contract organizations for clinical trials, preclinical studies, manufacturing~~Significant Judgments and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice and therefore we believe that our non-cancelable obligations under these agreements are not material.

~~Off-balance sheet arrangements~~

~~We have not entered into any off-balance sheet arrangements.~~

~~Critical accounting policies and significant judgments and estimates~~Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events 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 values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

~~While our~~

Our significant accounting policies are described in ~~more detail in~~Note 1 to the ~~notes to our~~condensed consolidated financial statements ~~appearing elsewhere~~included in ~~this Quarterly~~our Annual Report ~~we believe that~~on Form 10-K for the ~~following~~fiscal year ended December 31, 2021. The accounting policies and estimates that are ~~those~~ most critical to ~~the judgments~~a full understanding and ~~estimates used in the preparation~~evaluation of our ~~consolidated~~reported financial ~~statements.~~results are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There were no material changes to our critical accounting policies during the six months ended June 30, 2022.

~~Research and development expenses~~

The majority of our operating expenses to date have been incurred in research and development activities. As part of the process of preparing our consolidated financial statements, we estimate our accrued research and development expenses at each consolidated balance sheet date. This process involves reviewing purchase orders and open contracts, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each consolidated balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments as necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by CROs with research and development activities for which we have not yet been invoiced.

We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

~~Stock-Based Compensation~~

We account for share-based compensation awards in accordance with FASB ASC Topic 18, Compensation—Stock Compensation (ASC 718). ASC 718 requires all share-based payments, including grants of stock options, to be recognized in the consolidated statements of operations and comprehensive income (loss) based on their respective fair values.

The fair value of our stock options has been determined using the Black-Scholes option-pricing model. The Black-Sholes option-pricing model requires the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to the lack of historical and implied volatility data of our common stock, the expected stock price volatility has been estimated based on the historical volatilities of a specified group of companies in our industry for a period equal to the expected life of the option. We selected companies with comparable characteristics, including enterprise value, risk profiles and position within the industry and with historical share price information sufficient to meet the expected term of the stock options. The historical volatility data has been computed using the daily closing prices for the selected companies.

The expected life of the options granted represents the period of time that options granted are expected to be outstanding and is calculated using the simplified method, which is the mid-point between the vesting date and the end of the contractual term for each option. The risk-free interest rate is based on a zero coupon, United States Treasury instrument whose term is consistent with the expected life of the stock option. We have not paid, and do not anticipate paying, cash dividends on our shares of common stock; therefore, the expected dividend yield is zero.

We recognize the grant-date fair value of an award as compensation expense on a straight-line basis over the requisite service period, which typically corresponds to the vesting period for the award. In certain circumstances the amount of compensation cost recognized is adjusted to be at least equal to the portion of the grant-date value of the award that was vested at the balance sheet date. We have elected to account for forfeitures as they occur and, upon forfeiture of an award prior to vesting, we reverse any previously recognized compensation expense related to that award.

2221

~~Emerging growth company status~~

We qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or JOBS Act. As an “emerging growth company” we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:



the option to present only two years of audited consolidated financial statements and only two years of related “Management’s discussion and analysis of financial condition and results of operations”;



~~not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;~~



not being required to comply with any requirements that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (i.e., an auditor discussion and analysis);



~~reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and~~



~~exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.~~

We may take advantage of these provisions until December 31, 2026, the last day of our fiscal year following the fifth anniversary of the completion of our IPO. However, if any of the following events occur prior to the end of such five-year period, (i) our annual gross revenue exceeds $1.07 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period or (iii) we become a “large accelerated filer,” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act), we will cease to be an emerging growth company prior to the end of such five-year period. We will be deemed to be a “large accelerated filer” at such time that we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700.0 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act, for a period of at least 12 months and (c) have filed at least one annual report pursuant to the Exchange Act. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period.

~~Furnish the information required by Item 303 of Regulation S-K (§ 229.303 of this chapter).~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act 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. Disclosure controls and procedures include, without limitation, controls and procedures 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 accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer ~~who also serves as our~~(our principal executive officer and principal financial ~~officer and our principal accounting officer,~~officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report. Based on such evaluation, our Chief Executive Officer has concluded that as of ~~March 31, 2021,~~June 30, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Quarterly Report was (a) reported within the time periods specified by SEC rules and regulations, and (b) communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding any required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended ~~March 31, 2021~~June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Internal Controls

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Our management, including our Chief Executive Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may be involved in various legal or regulatory proceedings. We are not currently subject to any material legal or regulatory proceedings.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K, together with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. If any of the Risk Factors were to actually occur, our business, financial condition, results of operations and our potential future growth prospects could be materially and adversely affected. Under the circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.

If we fail to comply or regain compliance with the continued listing standards of the Nasdaq Global Market, we may be delisted and the price of our common stock, our ability to access the capital markets and our financial condition could be negatively impacted.

Our common stock is currently listed on Nasdaq under the symbol “LABP.” To maintain the listing of our common stock on the Nasdaq Global Market, we are required to meet certain listing requirements, including, among others, maintaining a minimum closing bid price of $1.00 per share. In June 2022, the decline in the market price of our common stock resulted in a notice that we are not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Global Market. If we are not able to regain compliance within the compliance period offered by Nasdaq, we could be delisted, which would have a further material adverse effect on market prices of our common stock and stockholder liquidity. We intend to actively monitor the bid price of our common stock and will consider available options to regain compliance with the listing requirement; however, there can be no assurance that we will be able to regain compliance with the listing requirement or will otherwise be in compliance with other Nasdaq listing criteria. If the Nasdaq Global Market delists our securities from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant negative consequences including:

•

limited availability of market quotations for our securities;

•

a determination that the common stock is a “penny stock” which will require brokers trading in the common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of common stock;

•

a limited amount of analyst coverage; and

•

a decreased ability to issue additional securities or obtain additional financing in the future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~(a) Recent~~Unregistered Sales of ~~Unregistered~~ Equity Securities

On February 8, 2021, upon the closing of our initial public offering, all shares of our then-outstanding convertible preferred stock were automatically converted into 20,549,478 shares of common stock. The issuance of such shares of common stock was exempt from registration under Section 3(a)(9) of the Securities Act.

None.

~~(b)~~ Use of Proceeds

On February 3, 2021, our Registration Statement on Form S-1, as amended (File No. 333-252083), was declared effective in connection with our initial public offering, in which we issued and sold 6,250,000 shares of our common stock at a public offering and received net proceeds of $90.5 million, after deducting underwriters' discounts and commissions and expenses payable by us. The joint book-running managers of our initial public offering were J.P. Morgan Securities LLC, Jefferies LLC and SVB Leerink LLC, and Raymond James & Associates, Inc. acted as lead manager. There has been no material change in the planned use of proceeds from our initial public offering as described in our prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on February 4, 2021.

~~c) Issuer Purchases of Equity Securities~~

~~None.~~

Item 6. Exhibits.

The exhibits listed on the Exhibit Index are either filed or furnished with this report or incorporated herein by reference.


Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 00139971), filed with the Securities and Exchange Commission on February 8, 2021).
3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 to the Company’s to the Company’s Registration Statement on Form S-1 (File No. 333-252083), filed with the Securities and Exchange Commission on January 28, 2021).
~~10.1~~10.1*+		~~Form~~Separation and Release of ~~Indemnification~~Claims Agreement ~~with Executive Officers~~by and ~~Directors (incorporated by reference to Exhibit 10.3 to~~between the ~~Company’s Registration Statement on Form S-1 (File No. 333-252083), filed with the Securities~~Company and ~~Exchange Commission on January 28, 2021).~~Jyoti Chauhan, dated May 4, 2022.
~~10.2+~~10.2*+		~~2021 Employee Stock Purchase Plan (incorporated~~Employment Agreement by ~~reference to Exhibit 10.5 to~~and between the ~~Company's Registration Statement on Form S-1 (File No. 333-252083), filed with the Securities~~Company and ~~Exchange Commission on January 28, 2021.~~
~~10.3+~~		Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K (File No. 001-39971), filed with the Securities and Exchange Commission on March 30, 2021).Gregory Oakes, effective as of June 20, 2022.
31.1*		Certification of Principal Executive and Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*#		Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101.INS~~101.INS*		Inline XBRL Instance ~~Document~~Document. – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
~~101.SCH~~101.SCH*		Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
~~101.CAL~~101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
~~101.DEF~~101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
~~101.LAB~~101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.
~~101.PRE~~101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
~~104~~104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

~~+ Indicates management contract or compensatory plan.~~

# This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

+ Indicates management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Landos Biopharma, Inc.

Date: ~~May 17, 2021~~August 11, 2022	By:	/s/ ~~Josep Bassaganya-Riera, Ph.D.~~Gregory Oakes
		~~Josep Bassaganya-Riera, Ph.D.~~Gregory Oakes
		~~Chairman,~~ President and Chief Executive Officer
		(Principal Executive and Financial ~~and Accounting~~
		Officer)


	March 31,			December 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	8,572		$	2,416
Marketable securities, available for sale		97,786			25,718
Incentive and tax receivables		1			154
Prepaid expenses and other current assets		3,386			202
Deferred offering costs		0			1,398
Total current assets		109,745			29,888
Property, plant and equipment-net		465			444
Total assets	$	110,210		$	30,332
Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	8,200		$	8,606
Accrued liabilities		364			1,939
Other current liabilities		255			489
Total current liabilities		8,819			11,034
Other liabilities		212			276
Total liabilities		9,031			11,310

Commitments and Contingencies		—			—
Convertible preferred stock, $0.01 par value; 0 shares authorized, issued or outstanding as of March 31, 2021; 11,260,608 shares authorized, issued and outstanding as of December 31, 2020: aggregate liquidation preference of $70,254 as of December 31, 2020		0			73,037

Stockholders’ equity (deficit):
Preferred stock, $0.01 par value; 10,000,000 shares authorized, 0 shares issued or outstanding as of March 31, 2021; 0 shares authorized, issued or outstanding as of December 31, 2020 Common stock, $0.01 par value; 200,000,000 shares authorized, 39,866,669 shares issued and outstanding as of March 31, 2021; 37,410,450 shares authorized, 12,767,909 shares issued and outstanding as of December 31, 2020		399			71
Additional paid-in-capital		166,429			1,633
Accumulated other comprehensive (loss) gain		(102	)		10
Accumulated deficit		(65,547	)		(55,729	)
Total stockholders' equity (deficit)		101,179			(54,015	)
Total liabilities, convertible preferred stock and stockholders’ equity	$	110,210		$	30,332


	Three Months Ended
	March 31,
	2021			2020
Operating expenses:
Research and development	$	7,254		$	4,690
General and administrative		2,646			1,080
Total operating expenses		9,900			5,770
Loss from operations		(9,900	)		(5,770	)
Other income (expenses):
Interest expense		—			(1	)
Gain/(loss) from foreign exchange		18			(222	)
Other income, net		64			197
Other income (expense), net		82			(26	)
Net loss		(9,818	)		(5,796	)
Net loss per share, basic and diluted		(0.38	)		(0.49	)
Weighted-average shares used to compute net loss per share, basic and diluted		26,070,455			11,874,723
Net loss		(9,818	)		(5,796	)
Unrealized gain/(loss) on available-for-sale securities		(112	)		(686	)
Comprehensive loss		(9,930	)		(6,482	)


	December 31, 2020
	Level 1		Level 2		Level 3		Aggregate fair value
Assets:
Money market funds	$	265	$	—	$	—	$	265
Fixed income securities		—		23,343		—		23,343
Asset backed securities		—		2,375		—		2,375
Total assets	$	265	$	25,718	$	—	$	25,983


	Number of Shares			Number of Options Outstanding			Weighted Average Exercise Price		Weighted Remaining Contract Term (in years)		Aggregate Intrinsic Value (in thousands)
Balances as of December 31, 2020		2,003,587			1,249,218		$	0		—	$	-
Authorized		0			—		$	—		—
Granted		(349,650	)		349,650		$	16.00		—
Exercised		0			(299,282	)	$	1.86		—
Forfeited		0			—		$	0		—
Balances as of March 31, 2021		1,653,937			1,299,586		$	5.67		9.67	$	5,151
Options exercisable at March 31, 2021					256,478		$	6.68		9.66	$	756
Options vested and expected to vest at March 31, 2021					1,299,586		$	5.67		9.67	$	5,151