Verastem, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except per share amounts)


		Three months ended June 30,				Six months ended June 30,
		2023		2022		2023		2022
Revenue:
Sale of COPIKTRA license and related assets	$		—	$	—	$	—	$	2,596
Total revenue			—		—		—		2,596
Operating expenses:
Research and development			12,893		14,888		24,908		28,530
Selling, general and administrative			7,399		6,514		14,728		12,448
Total operating expenses			20,292		21,402		39,636		40,978
Loss from operations			(20,292)		(21,402)		(39,636)		(38,382)
Other income (expense)			(40)		6		(47)		34
Interest income			1,122		84		2,098		130
Interest expense			(1,121)		(640)		(1,890)		(696)
Change in fair value of preferred stock tranche liability			(3,950)		—		(520)		—
Net loss		$	(24,281)	$	(21,952)	$	(39,995)	$	(38,914)
Net loss per share—basic and diluted⁽¹⁾		$	(1.37)	$	(1.41)	$	(2.32)	$	(2.51)

Weighted average common shares outstanding used in computing net loss per share—basic and diluted⁽¹⁾			17,732		15,539		17,231		15,530

Net loss		$	(24,281)	$	(21,952)	$	(39,995)	$	(38,914)
Unrealized gain (loss) on available-for-sale securities			(5)		(17)		1		(164)
Comprehensive loss		$	(24,286)	$	(21,969)	$	(39,994)	$	(39,078)

(1) Amounts have been retroactively restated to reflect the 1-for-12 reverse stock split effected on May 31, 2023 (see Note 1. Nature of business of the accompanying notes to the condensed consolidated financial statements).

See accompanying notes to the condensed consolidated financial statements.

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Verastem, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~CONVERTIBLE PREFERRED STOCK AND ~~COMPREHENSIVE LOSS~~STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except ~~per~~ share ~~amounts)~~data)



												Accumulated
										Additional		other				Total
	Series B Convertible Preferred Stock			Series A Convertible Preferred Stock			Common stock⁽¹⁾			paid-in		comprehensive		Accumulated		stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		capital⁽¹⁾		income		deficit		equity
Balance at December 31, 2022	—	$	—	1,000,000	$	—	16,711,761	$	2	$	784,912	$	—	$	(737,523)	$	47,391
Net loss	—		—	—		—	—		—		—		—		(15,714)		(15,714)
Unrealized gain on available-for-sale marketable securities	—		—	—		—	—		—		—		6		—		6
Issuance of common stock resulting from vesting of restricted stock units	—		—	—		—	17,658		—		—		—		—		—
Stock-based compensation expense	—		—	—		—	—		—		1,313		—		—		1,313
Issuance of common stock under Employee Stock Purchase Plan	—		—	—		—	6,874		—		29		—		—		29
Issuance of Series B Convertible Preferred Stock, net of issuance costs of $1,901 and preferred stock tranche liability of $6,940	1,200,000		21,159	—		—	—		—		—		—		—		—
Balance at March 31, 2023	1,200,000	$	21,159	1,000,000	$	—	16,736,293	$	2	$	786,254	$	6	$	(753,237)	$	33,025
Net loss	—		—	—		—	—		—		—		—		(24,281)		(24,281)
Unrealized (loss) on available-for-sale marketable securities	—		—	—		—	—		—		—		(5)		—		(5)
Issuance of common stock resulting from vesting of restricted stock units	—		—	—		—	16,176		—		—		—		—		—
Stock-based compensation expense	—		—	—		—	—		—		1,432		—		—		1,432
Issuance of common stock, and pre-funded warrants, net of issuance cost of $6,351	—		—	—		—	8,489,409		1		91,419		—		—		91,420
Balance at June 30, 2023	1,200,000	$	21,159	1,000,000	$	—	25,241,878	$	3	$	879,105	$	1	$	(777,518)	$	101,591


						Accumulated
						other
				Additional		comprehensive				Total
	Common stock⁽¹⁾			paid-in		(loss)		Accumulated		stockholders'
	Shares	Amount		capital⁽¹⁾		income		deficit		equity
Balance at December 31, 2021	15,440,830	$	2	$	751,234	$	34	$	(663,711)	$	87,559
Net loss	—		—		—		—		(16,962)		(16,962)
Unrealized (loss) on available-for-sale marketable securities	—		—		—		(147)		—		(147)
Issuance of common stock resulting from at-the-market transactions, net	23,824		—		575		—		—		575
Issuance of common stock resulting from vesting of restricted stock units	58,043		—		—		—		—		—
Stock-based compensation expense	—		—		1,646		—		—		1,646
Issuance of common stock under Employee Stock Purchase Plan	4,803		—		100		—		—		100
Balance at March 31, 2022	15,527,500	$	2	$	753,555	$	(113)	$	(680,673)	$	72,771
Net loss	—		—		—		—		(21,952)		(21,952)
Unrealized (loss) on available-for-sale marketable securities	—		—		—		(17)		—		(17)
Issuance of common stock resulting from at-the-market transactions, net	83,870		—		1,240		—		—		1,240
Issuance of common stock resulting from exercise of stock options	6,378		—		92		—		—		92
Issuance of common stock resulting from vesting of restricted stock units	16,734		—		—		—		—		—
Stock-based compensation expense	—		—		1,758		—		—		1,758
Balance at June 30, 2022	15,634,482	$	2	$	756,645	$	(130)	$	(702,625)	$	53,892

See accompanying notes to the condensed consolidated financial statements.

Three months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Operating expenses:

Research and development

$
17,743

$
4,216

$
35,170

$
12,887

General and administrative

5,394

3,843

14,582

12,315

Total operating expenses

23,137

8,059

49,752

25,202

Loss from operations

(23,137)

(8,059)

(49,752)

(25,202)

Interest income

121

137

416

417

Interest expense

(110)

—

(231)

—

Net loss

$
(23,126)

$
(7,922)

$
(49,567)

$
(24,785)

Net loss per share—basic and diluted

$
(0.61)

$
(0.21)

$
(1.33)

$
(0.67)

Weighted-average number of common shares used in net loss per share—basic and diluted

37,630

36,992

37,207

36,986

Net loss

$
(23,126)

$
(7,922)

$
(49,567)

$
(24,785)

Unrealized (loss) gain on available-for-sale securities

7

(17)

(27)

17

Comprehensive loss

$
(23,119)

$
(7,939)

$
(49,594)

$
(24,768)

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the Company has received $1.8 million of cash proceeds in which was initially recorded as deferred liabilities on the balance sheet. The Company recognizes grants as contra research and development expense in the consolidated statement of operations and comprehensive loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. The Company recorded $0.7 million and $0.8 million of the proceeds as a reduction of research and development expense during the three and six months ended June 30, 2023, respectively. As of June 30, 2023 and December 31, 2022, the Company recorded $0.7 million as deferred liabilities related to the PanCAN Grant in the consolidated balance sheets.

3. Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):


	June 30, 2023		December 31, 2022
Cash and cash equivalents	$	183,086	$	74,933
Restricted cash		1,240		856
Total cash, cash equivalents and restricted cash	$	184,326	$	75,789

Amounts included in restricted cash as of June 30, 2023, and December 31, 2022 represent (i) cash received pursuant to the PanCAN Grant restricted for future expenditures for specific research and development activities of $1.0 million and $0.6 million, respectively, and (ii) cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amount of $0.2 million. Cash received pursuant to the PanCAN Grant is included in prepaid expenses and other current assets on the condensed consolidated balance sheets as of June 30, 2023, and December 31, 2022. The letters of credit are included in non-current restricted cash on the condensed consolidated balance sheets as of June 30, 2023, and December 31, 2022.

4. Fair value of financial instruments

The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1 inputs	Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.
Level 2 inputs	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs	Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

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Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands):




	September 30, 2017

									June 30, 2023
Description	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Financial assets
Cash equivalents	$	49,389	$	49,389	$	—	$	—	$	179,042	$	176,544	$	2,498	$	—
Short-term investments		8,994		—		8,994		—
Total financial assets	$	58,383	$	49,389	$	8,994	$	—	$	179,042	$	176,544	$	2,498	$	—
Preferred stock tranche liability									$	7,460	$	—	$	—	$	7,460


	December 31, 2022
Description	Total		Level 1		Level 2		Level 3
Financial assets
Cash equivalents	$	73,613	$	72,617	$	996	$	—
Short-term investments		12,961		—		12,961		—
Total financial assets	$	86,574	$	72,617	$	13,957	$	—

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December 31, 2016

Description

Total

Level 1

Level 2

Level 3

Financial assets

Cash equivalents

$
30,540

$
20,540

$
10,000

$
—

Short-term investments

48,548

—

48,548

—

Total financial assets

$
79,088

$
20,540

$
58,548

$
—

The Company’s cash equivalents and short-term investments ~~are comprised~~consist of U.S. Government money market funds, ~~and~~ corporate bonds, agency bonds and commercial paper of publicly traded companies. ~~These~~The investments and cash equivalents have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing ~~third-party~~third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and ~~market based~~market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by ~~third-party~~third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of ~~September~~June 30, ~~2017 and~~2023 or December 31, ~~2016.~~2022.

A preferred stock tranche liability was recorded as a result of the entry into the Securities Purchase Agreement (defined herein) (see Note 11. Capital Stock). The fair value measurement of the preferred stock tranche liability is classified as Level 3 under the fair value hierarchy. The fair value of the preferred stock tranche liability was determined using a Monte-Carlo simulation. The inputs to the Monte-Carlo include the risk-free rate, stock price volatility, expected dividends and remaining term. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement.

Below are the inputs used to value the preferred stock tranche liability at January 24, 2023 and June 30, 2023:


	June 30, 2023		January 24, 2023
Risk-free interest rate	5.24-5.47	%	4.41-4.84	%
Volatility	110	%	90	%
Dividend yield	—		—
Remaining term (years)	1.1		1.5

The following table represents a reconciliation of the preferred stock right liability recorded in connection with the entry into the Securities Purchase Agreement:


January 1, 2023	$	—
Fair value recognized upon entering into Securities Purchase Agreement		6,940
Fair value adjustment		520
June 30, 2023	$	7,460

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Fair Value of Financial Instruments

The fair value of the Company’s 2018 issued 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”) was approximately $0.3 million as of June 30, 2023, and December 31, 2022, which equals the carrying value of the 2018 Notes on each respective date. The fair value of the 2018 Notes is influenced by the Company’s stock price, stock price volatility, and current market yields and was determined using Level 3 inputs.

The fair value of the Company’s long-term debt is was determined using a discounted cash flow analysis with current applicable rates for similar instruments as of the condensed consolidated balance sheet ~~dates and an assessment~~dates. The Company estimates that the fair value of ~~the credit rating~~its long-term debt was approximately $39.3 million as of June 30, 2023, which differs from the ~~Company. The~~ carrying value of $39.7 million. The Company estimates that the ~~Company’s debt approximates~~ fair value ~~because~~of its long-term debt was approximately $24.9 million as of December 31, 2022, which differs from the ~~Company’s interest rate yield is near current market rates for comparable debt instruments.~~carrying value of $24.5 million. The fair value of the Company’s long-term debt was determined using Level 3 inputs.

4.5. Investments

Cash, cash equivalents, restricted cash and investments consist of the following (in thousands):


	June 30, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash, cash equivalents & restricted cash:
Cash and money market accounts	$	181,828	$	—	$	—	$	181,828
Corporate bonds, agency bonds and commercial paper (due within 90 days)		2,497		1		—		2,498
Total cash, cash equivalents, restricted cash and investments	$	184,325	$	1	$	—	$	184,326

September 30, 2017




Gross

Gross


Amortized

Unrealized

Unrealized

Fair


Cost

Gains

Losses

Value

Cash and cash equivalents:

Cash and money market accounts

$
51,270

$
—

$
—

$
51,270

Total cash and cash equivalents

$
51,270

$
—

$
—

$
51,270

Investments:

Corporate bonds and commercial paper (due within 1 year)

$
8,992

$
2

$
—

$
8,994

Total investments

$
8,992

$
2

$
—

$
8,994

Total cash, cash equivalents, and investments

$
60,262

$
2

$
—

$
60,264


	December 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash, cash equivalents & restricted cash:
Cash and money market accounts	$	74,794	$	—	$	—	$	74,794
Corporate bonds, agency bonds and commercial paper (due within 90 days)		995		—	$	—		995
Total cash, cash equivalents & restricted cash:	$	75,789	$	—	$	—	$	75,789
Investments:
Corporate bonds, agency bonds and commercial paper (due within 1 year)	$	12,961	$	2	$	(2)	$	12,961
Total investments	$	12,961	$	2	$	(2)	$	12,961
Total cash, cash equivalents, restricted cash and investments	$	88,750	$	2	$	(2)	$	88,750

~~Table of Contents~~

December 31, 2016




Gross

Gross


Amortized

Unrealized

Unrealized

Fair


Cost

Gains

Losses

Value

Cash and cash equivalents:

Cash and money market accounts

$
22,349

$
—

$
—

$
22,349

Overnight repurchase agreements

10,000

—

—

10,000

Total cash and cash equivalents

$
32,349

$
—

$
—

$
32,349

Investments:

Corporate bonds and commercial paper (due within 1 year)

$
48,519

$
53

$
(24)

$
48,548

Total investments

$
48,519

$
53

$
(24)

$
48,548

Total cash, cash equivalents, and investments

$
80,868

$
53

$
(24)

$
80,897

There were no realized gains or losses on investments for the three ~~and nine~~or six months ended ~~September~~June 30, ~~2017~~2023, or ~~2016.~~2022. Accrued interest receivable is excluded from the amortized cost and estimated fair value of the Company's investments. Accrued interest receivable of $0.2 million and $0.1 million is presented within the prepaid expenses and other current assets on the condensed consolidated balance sheets at June 30, 2023 and December 31, 2022, respectively. There were no investments ~~that~~in an unrealized loss position as of June 30, 2023. There were two debt securities in an unrealized loss position as of December 31, 2022. None of these investments had been in an unrealized loss position for more than 12 months as of ~~September 30, 2017 or~~ December 31, 2016. There were 2 debt securities in an unrealized loss position for less than 12 months at September 30, 2017 and there were 14 debt securities that had been in an unrealized loss position for less than 12 months at December 31, 2016.2022. The ~~aggregate unrealized loss on~~fair value of these securities as of ~~September 30, 2017 and~~ December 31, ~~2016~~2022 was ~~approximately $400 and $24,000, respectively,~~$6.0 million and the ~~fair value~~aggregate unrealized loss was ~~$2.5 million and $23.6 million, respectively.~~immaterial. The Company considered the decline in the market value for these securities to be primarily attributable to current economic ~~conditions. As it was~~conditions and not ~~more likely than not that~~credit related. At December 31, 2022, the Company ~~would be required~~had

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the intent and ability to ~~sell these~~hold such securities ~~before the recovery of their amortized cost basis, which may be at maturity,~~until recovery. As a result, the Company did not ~~consider these~~record any charges for credit-related impairments for its investments ~~to be other-than-temporarily impaired~~ as of ~~September 30, 2017.~~December 31, 2022.

5.6. Accrued expenses

Accrued expenses consist of the following (in thousands):

September 30, 2017

December 31, 2016

License fees (1)

$
6,000

$
—

Contract research organization costs

3,669

3,258

Compensation and related benefits

1,581

2,505

Professional fees

608

403

Deferred rent

186

175

Consulting fees

173

527

Other

38

28

$
12,255

$
6,896

~~(1)~~

~~See Note 10. License Agreements for additional information~~


	June 30, 2023		December 31, 2022
Research and development expenses	$	7,702	$	8,535
Compensation and related benefits		2,640		3,844
Professional fees		836		469
Consulting fees		1,066		902
Interest		308		192
Commercialization costs		176		148
Other		1,028		893
Total accrued expenses	$	13,756	$	14,983

~~6. Long-term debt~~

7. Debt

On March ~~21, 2017 (Closing Date)~~25, 2022 (the “Closing Date”), ~~Verastem, Inc. (Borrower)~~the Company entered into a term loan facility of up to $25.0 million (Term Loan) with Hercules Capital, Inc., a Maryland corporation (Hercules), the proceeds of which have been and will be used for its ongoing research and development programs and for general corporate purposes. The Term Loan is governed by a loan and security agreement ~~dated March 21, 2017 (Loan Agreement)~~(the “Loan Agreement”) with Oxford, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”), pursuant to which ~~provides for~~the Lenders have agreed to lend the Company up to ~~four separate advances subject~~an aggregate principal amount of $150.0 million in a series of term loans (the “Term Loans”).

Pursuant to ~~certain conditions~~the Loan Agreement, the Company received an initial Term Loan of ~~funding. The first tranche of $2.5~~$25.0 million ~~was drawn~~ on the Closing ~~Date. On October 12, 2017, the Borrower drew~~Date and may borrow an additional ~~$7.5~~$125.0 million of Term Loans at its option upon the satisfaction of certain conditions as follows:

$15.0 million (the “Term B Loan”), when the Company has either (a) received the Regulatory Milestone Payment (as defined in the Secura APA) from Secura of $35.0 million which is due upon receipt of regulatory approval of COPIKTRA in the United States for the treatment of peripheral T-cell lymphoma (“PTCL”) or (b) received at least $50.0 million in unrestricted cash proceeds from the sale or issuance of equity securities after the Closing Date (the “Term B Milestones”). The Company may draw the Term B Loan within 60 days after the occurrence of one of the Term B Milestones, but no later than March 31, 2023.

ii.

$25.0 million (the “Term C Loan”), when the Company has received accelerated or full approval from the FDA of avutometinib for the treatment of LGSOC (the “Term C Milestone”). The Company may draw the Term C Loan within 60 days after the occurrence of the Term C Milestone, but no later than March 31, 2024.

iii.

$35.0 million (the “Term D Loan”), when the Company has achieved at least $50.0 million in gross product revenue calculated on a trailing six-month basis (the “Term D Milestone”). The Company may draw the Term D Loan within 30 days after the occurrence of the Term D Milestone, but no later than March 31, 2025.

iv.

$50.0 million (the “Term E Loan”), at the sole discretion of the Lenders.

On March 22, 2023, the Company drew down the $15.0 million Term B Loan, having received at least $50.0 million in unrestricted cash proceeds from the sale or issuance of equity securities.

The Term Loans bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap. Interest is payable monthly in arrears on the first calendar day of each calendar month. As a result of the Term B Loan drawdown, beginning (i) April 1, 2025, or (ii) April 1, 2026, if either (A) avutometinib has received FDA approval for the treatment of LGSOC or (B) COPIKTRA has received FDA approval for the treatment of PTCL, the Company shall repay the Term

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Loans in consecutive equal monthly payments of principal, together with applicable interest, in arrears. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on March 1, 2027.

The Company is required to make a final payment of 5.0% of the original principal amount of the Term Loans that are drawn, payable at maturity or upon any earlier acceleration or prepayment of the Term Loans (the “Final Payment Fee”). The Company may prepay all, but not less than all, of the Term Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount of the applicable Term Loan if prepaid on or before the first anniversary date of the funding date of such Term Loan, (ii) 2.0% of the principal amount of the applicable Term Loan if prepaid after the first anniversary and on or before the second anniversary of the funding date of such Term Loan, and (iii) 1.0% of the principal amount of the applicable Term Loan if prepaid after the second anniversary of the applicable funding date of such Term Loan. All Term Loans are subject to a facility fee of 0.5% of the principal amount.

The Loan Agreement contains no financial covenants. The Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warrants, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and a material adverse change. The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, ~~and used $6.0 million~~termination of the proceeds to make a milestone payment pursuant to the Company’s license agreement with Infinity Pharmaceuticals, Inc. (Infinity). See “Note 10. License Agreements” for additional information related to the milestone payment.

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~~The~~ Term Loan commitments and the right to foreclose on the collateral securing the obligations. During the existence of an event of default, the Term Loans will ~~mature on December 1, 2020. Each advance accrues~~accrue interest at a ~~floating~~rate per annum ~~rate~~ equal to 5.0% above the ~~greater of either (a) 10.5% or (b)~~otherwise applicable interest rate.

In connection with the ~~lesser of (i) 12.75% and (ii)~~Loan Agreement, the ~~sum of (x) 10.5% plus (y) (A) the prime rate minus (B) 4.5%. As of September 30, 2017, the~~Company granted Oxford a security interest rate was 10.5%. The Term Loan provides for interest-only payments until November 1, 2018. The interest-only period may be extended to May 1, 2019 if the Borrower obtains minimum cash proceeds of $20.0 million from a sale of equity securities or subordinated debt and/or ongoing commercial partnerships. Thereafter, amortization payments will be payable monthly in twenty-six installments (or, if the period requiring interest-only payments has been extended to May 1, 2019, in twenty installments) of principal and interest (subject to recalculation upon a change in prime rates).

~~The Term Loan is secured by a lien on substantially~~ all of the ~~assets of the Borrower, other than~~Company’s personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and ~~contains customary covenants~~proceeds of intellectual property), and ~~representations.~~a negative pledge on intellectual property.

The Company assessed all terms and features of the Loan Agreement in order to identify any potential embedded features that would require ~~bifurcation or any beneficial conversion features.~~bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the Loan Agreement, including put and call features. The Company determined that all features of the Loan Agreement were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s assessment through June 30, 2023.

The debt issuance costs and the Final Payment Fee have been recorded as a debt discount which are being accreted to interest expense through the maturity date of the Term Loan using the effective interest method. The components of the carrying value of the debt as of June 30, 2023, and December 31, 2022, are detailed below (in thousands):


	June 30, 2023		December 31, 2022
Principal loan balance	$	40,000	$	25,000
Final Payment Fee		419		225
Debt issuance costs, net of accretion		(680)		(699)
Long-term debt, net of discount	$	39,739	$	24,526

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The following table sets forth total interest expense for the three and six month periods ended June 30, 2023 and 2022:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Contractual Interest	$	949	$	515	$	1,581	$	556
Amortization of debt discount and issuance costs		57		54		115		64
Amortization of Final Payment Fee		115		71		194		76
Total	$	1,121	$	640	$	1,890	$	696

As of June 30, 2023, future principal payments ~~under the Loan Agreement~~due are as follows (in thousands):


2023		—
2024		—
2025		15,000
2026		20,000
2027		5,000
Total principal payments	$	40,000

8. Leases

On April 15, 2014, the Company entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts. Effective February 15, 2018, the Company amended its lease agreement to relocate within the facility to another location consisting of 27,810 square feet of office space (the “Amended Lease Agreement”). The Amended Lease Agreement extended the expiration date of the lease from September 2019 through June 2025. Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $0.7 million, which increases during the lease term to $1.1 million for the last twelve-month period.

The Company accounted for its Needham, Massachusetts office space as an operating lease. The Company’s lease contains an option to renew and extend the lease terms and an option to terminate the lease prior to the expiration date. The Company has not included the lease extension or the termination options within the right-of-use asset and lease liability on the condensed consolidated balance sheets as neither option is reasonably certain to be exercised. The Company’s lease includes variable non-lease components (e.g., common area maintenance, maintenance, consumables, etc.) that are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred. The Company does not have any other operating or finance leases.

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As of June 30, 2023, a right-of-use asset of $1.5 million and lease liability of $1.9 million are reflected on the condensed consolidated balance sheets. The elements of lease expense were as follows (dollar amounts in thousands):


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Lease Expense
Operating lease expense	$	221	$	221	$	442	$	442
Total Lease Expense	$	221	$	221	$	442	$	442
Other Information - Operating Leases
Operating cash flows paid for amounts included in measurement of lease liabilities	$	262	$	257	$	525	$	514


		June 30, 2023
Other Balance Sheet Information - Operating Leases
Weighted average remaining lease term (in years)		2.0
Weighted average discount rate		14.6%
Maturity Analysis
2023		535
2024		1,081
2025		546
Total	$	2,162
Less: Present value discount		(275)
Lease Liability	$	1,887

9. Notes Payable

In February 2023, the Company entered into a finance agreement with AFCO Premium Credit LLC (“AFCO”). Pursuant to the terms of the agreement, AFCO loaned the Company the principal amount of $1.4 million, which accrues interest at 7.4% per annum, to fund a portion of the Company’s insurance policies. The Company is required to make monthly payments of $0.1 million through October 2023 including principal and interest. The agreement assigns AFCO a security interest in (i) all unearned premiums and dividends which may become payable under the insurance policies financed pursuant to this agreement, (ii) loss payments which reduce the unearned premiums, and (iii) the Company’s interest in any state insurance guarantee fund related to any of the insurance policies financed pursuant to this agreement. The outstanding balance at June 30, 2023 was $0.6 million recorded as note payable on the condensed consolidated balance sheets.

10. Convertible Senior Notes

2018 Notes

On October 17, 2018, the Company closed a registered direct public offering of $150.0 million aggregate principal amount of 2018 Notes for net proceeds of approximately $145.3 million. The 2018 Notes are governed by the terms of a base indenture for senior debt securities (the “2018 Base Indenture”), as supplemented by the first supplemental indenture thereto (the “2018 Notes Supplemental Indenture” and together with the 2018 Base Indenture, the “2018 Indenture”), each dated October 17, 2018, by and between the Company and Wilmington Trust, National Association (“Wilmington”), as trustee. The 2018 Notes are senior unsecured obligations of the Company and bear interest at a rate of 5.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2019. The 2018 Notes will mature on November 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms.

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The 2018 Notes are convertible into shares of the Company’s common stock, par value $0.0001 per share, together, if applicable, with cash in lieu of any fractional share, at a conversion rate of 11.6314 shares of common stock per $1,000 principal amount of the 2018 Notes, such conversion rate reflects an adjustment to account for the Reverse Stock Split. Upon conversion, converting noteholders will be entitled to receive accrued interest on their converted 2018 Notes.

The Company has the right, exercisable at its option, to cause all 2018 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2018 Indenture) per share of the Company’s common stock equals or exceeds 130% of the conversion price on each of at least 20 VWAP Trading Days (as defined in the 2018 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date the Company first issued the 2018 Notes.

The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stock dividends and payment of cash dividends, but will not be adjusted for any accrued and unpaid interest.

Prior to November 1, 2022, the Company did not have the right to redeem the 2018 Notes. After November 1, 2022, the Company may elect to redeem the 2018 Notes, in whole or in part, at a cash redemption price equal to the principal amount of the 2018 Notes to be redeemed, plus accrued and unpaid interest, if any.

Unless the Company has previously called all outstanding 2018 Notes for redemption, the 2018 Notes will be subject to repurchase by the Company at the holders’ option on each of November 1, 2023, November 1, 2028, November 1, 2033, November 1, 2038 and November 1, 2043 (or, if any such date is not a business day, on the next business day) at a cash repurchase price equal to the principal amount of the 2018 Notes to be repurchased, plus accrued and unpaid interest, if any.

If a “Fundamental Change” (as defined in the 2018 Indenture) occurs at any time, subject to certain conditions, holders may require the Company to purchase all or any portion of their 2018 Notes at a purchase price equal to 100% of the principal amount of the 2018 Notes to be purchased, plus accrued and unpaid interest.

The 2018 Indenture includes customary covenants and set forth certain events of default after which the 2018 Notes may be declared immediately due and payable and set forth certain types of bankruptcy or insolvency events of default involving the Company or certain of its subsidiaries after which the 2018 Notes become automatically due and payable.

The Company determined that the expected life of the 2018 Notes was equal to the period through November 1, 2023, as this represents the point at which the 2018 Notes are subject to repurchase by the Company at the option of the holders. Accordingly, for the 2018 Notes, the total debt discount, inclusive of the fair value of the embedded conversion feature derivative at issuance is being amortized using the effective interest method through November 1, 2023 at the effective interest rate of 15.65%.

The Company assessed all terms and features of the 2018 Notes in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the 2018 Notes, including the conversion, put and call features. The conversion feature was initially bifurcated as an embedded derivative but subsequently qualified for a scope exception to derivative accounting upon the Company’s stockholders approving an increase in the number of authorized shares of common stock in December 2018. The Company determined that all other features of the 2018 Notes were clearly and closely associated with the debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company’s condensed consolidated financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s original assessment through June 30, 2023.

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The components of the carrying value of the 2018 Notes as of ~~September~~June 30, ~~2017~~2023 and December 31, 2022 are detailed below (in thousands):

Remainder of 2017

$
—
2018

146
2019

936
2020

1,418
Total

$
2,500


	June 30, 2023		December 31, 2022
2018 Notes principal balance	$	300	$	300
Debt issuance costs, net of accretion		(10)		(25)
2018 Notes, net	$	290	$	275

7.2019 Notes

In the fourth quarter of 2019, the Company entered into privately negotiated agreements to exchange approximately $121.7 million aggregate principal amount of the 2018 Notes for (i) approximately $66.9 million aggregate principal amount of 5.00% Convertible Senior Second Lien Notes due 2048 (the “2019 Notes”), (ii) an aggregate of approximately $12.1 million in 2018 Notes principal repayment and (iii) accrued interest on the 2018 Notes through the exchange date. As of March 31, 2020, all 2019 Notes had converted into shares of common stock and are no longer outstanding.

2020 Notes

On November 6, 2020, the Company entered into a privately negotiated agreement with an investor who was a holder of the Company’s 2018 Notes to exchange approximately $28.0 million aggregate principal amount of 2018 Notes for approximately $28.0 million aggregate principal amount of newly issued 5.00% Convertible Senior Notes due 2048 (the “2020 Notes”). The issuance of the 2020 Notes closed on November 13, 2020. In the third quarter of 2021, all 2020 Notes have converted into shares of common stock and are no longer outstanding.

11. Capital stock

Under the amended and restated certificate of incorporation, the Company’s board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

June 2023 Public Offering

On June 15, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with RBC Capital Markets, LLC and Cantor Fitzgerald & Co. (“Cantor”), as representatives of several underwriters (the “Underwriters”) to offer 7,181,409 shares of the Company’s common stock, at a price to the public of $9.75 per share, less the underwriting discounts and commissions, and, in lieu of shares of common stock to certain investors, pre-funded warrants to purchase up to an aggregate of 1,538,591 shares of common stock at a price to the public of $9.749 (the “Pre-Funded Warrants”) per Pre-Funded Warrant, which represents the per share public offering price for the shares of common stock less the $0.001 per share exercise price for each such Pre-Funded Warrant (the “June 2023 Offering”). In addition, the Company granted the Underwriters an option to purchase, at the public offering price less any underwriting discounts and commissions, an additional 1,308,000 shares of common stock, exercisable for 30 days from the date of the Underwriting Agreement, which the Underwriters exercised in full on June 16, 2023. The June 2023 Offering closed on June 21, 2023.

The Company may not effect the exercise of any Pre-Funded Warrant, and a holder will not be entitled to exercise any portion of any Pre-Funded Warrant if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased

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or decreased at the holder’s election upon 61 days’ notice to the Company subject to the terms of such Pre-Funded Warrants, provided that such percentage may in no event exceed 19.99%.

Each Pre-Funded Warrant has an exercise price equal to $0.001 per share of common stock. The exercise price and the number of shares of common stock issuable upon exercise of each Pre-Funded Warrant is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common stock as well as upon any distribution of assets, including cash, stock or other property, to the Company’s stockholders. The Pre-Funded Warrants are expirable as of June 21, 2023, do not expire and are exercisable in cash or by means of a cashless exercise. In addition, upon the consummation of an acquisition (as described in the Pre-Funded Warrant agreements), each Pre-Funded Warrant will automatically be converted into the right of the holder of such Pre-Funded Warrant to receive the kind and amount of securities, cash or other property that such holders would have received had they exercised such Pre-Funded Warrant immediately prior to such acquisition, without regard to any limitations on exercise contained in the Pre-Funded Warrants

The Pre-Funded Warrants cannot not require cash settlement, are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, and do not embody an obligation for the Company to repurchase its common stock shares and permit the holders to receive a fixed number of shares of common stock upon exercise. Additionally, the Pre-Funded Warrants do not provide any guarantee of value or return. Accordingly, the Pre-Funded Warrants are classified as a component of permanent equity. After deducting for commissions and other offering expenses, the Company received net proceeds of approximately $91.4 million from the sale of 8,489,409 shares of common stock and 1,538,591 Pre-Funded Warrants, of which approximately $0.5 million of offering expenses is within accounts payable and accrued expenses as of June 30, 2023.

Series B Convertible Preferred Stock

On January 24, 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain purchasers pursuant to which the Company agreed to sell and issue to the purchasers in a private placement (the “Private Placement”) up to 2,144,160 shares of its Series B convertible preferred stock, par value $0.0001 per share (the “Series B Convertible Preferred Stock”), in two tranches. On January 24, 2023, the Company filed the Certificate of Designation of the Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock Certificate of Designation”) setting forth the preferences, rights and limitations of the Series B Convertible Preferred Stock with the Secretary of State of the State of Delaware. The Series B Convertible Preferred Stock Certificate of Designation became effective upon filing.

Each share of the Series B Convertible Preferred Shares is convertible into 3.5305 shares of the Company’s common stock, such conversion rate reflects an adjustment to account for the Reverse Stock Split, at the option of the holders at any time, subject to certain limitations, including that the holder will be prohibited from converting Series B Convertible Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99% (the “Conversion Blocker”) of the total common stock then issued and outstanding immediately following the conversion of such shares of Series B Convertible Preferred Stock. Holders of the Series B Convertible Preferred Stock are permitted to increase the Conversion Blocker to an amount not to exceed 19.99% upon 60 days’ notice.

The Company agreed to sell and issue in the first tranche of the Private Placement 1,200,000 shares of Series B Convertible Preferred Stock at a purchase price of $25.00 per share of Series B Convertible Preferred Stock (equivalent to $7.0812 per share of common stock on a post-Reverse Stock Split basis). The first tranche of the Private Placement closed on January 27, 2023. The Company received gross proceeds from the first tranche of the Private Placement of approximately $30.0 million, before deducting fees to the placement agent and other offering expenses payable by the Company (“Series B Convertible Preferred Stock Proceeds”).

In addition, the Company agreed to sell and issue in the second tranche of the Private Placement 944,160 shares of Series B Convertible Preferred Stock at a purchase price of $31.77 per share of Series B Convertible Preferred Stock (equivalent to $9.00 per share of common stock on a post-Reverse Stock Split basis) if at any time within 18 months

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following the closing of the first tranche the 10-day volume weighted average price of the Company’s common stock (as quoted on Nasdaq and as calculated by Bloomberg) should reach at least $13.50 per share, such threshold reflects an adjustment to account for the Reverse Stock Split (which may be further adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as needed) with aggregate trading volume during the same 10-day period of at least $25 million within 18 months from the closing date of the initial tranche. (the “Second Tranche Right”). The second tranche of the Private Placement is expected to close within seven trading days of meeting the second tranche conditions and will be subject to additional, customary closing conditions. If the Second Tranche Right conditions are satisfied, the Company anticipates receiving gross proceeds from the second tranche of the Private Placement of approximately $30.0 million, before deducting fees to the placement agent and other offering expenses payable by the Company.

The Series B Convertible Preferred Stock ranks (i) senior to the common stock; (ii) senior to all other classes and series of equity securities of the Company that by their terms do not rank senior to the Series B Convertible Preferred Stock; (iii) senior to all shares of the Company’s Series A Convertible Preferred Stock the equity securities described in (i)-(iii), the “Junior Stock”); (iv) on parity with any class or series of capital stock of the Company hereafter created specifically ranking by its terms on parity with the Series B Convertible Preferred Stock (the “Parity Stock”); (v) junior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to any Series B Convertible Preferred Stock (“Senior Stock”); and (vi) junior to all of the Company’s existing and future debt obligations, including convertible or exchangeable debt securities, in each case, as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily and as to the right to receive dividends.

In the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Company, and subject to the prior and superior rights of any Senior Stock, each holder of shares of Series B Convertible Preferred Stock will be entitled to receive, in preference to any distributions of any of the assets or surplus funds of the Company to the holders of the common stock and any of the Company’s securities that are Junior Stock and pari passu with any distribution to the holders of any Parity Stock, an amount equal to $1.00 per share of Series B Convertible Preferred Stock, plus an additional amount equal to any dividends declared but unpaid on such shares, before any payments shall be made or any assets distributed to holders of the common stock or any of our securities that Junior Stock.

So long as any shares of the Series B Convertible Preferred Stock remain outstanding, the Company cannot without the affirmative vote or consent of the holders of majority of the shares of the Series B Convertible Preferred Stock then-outstanding, in which the holders of the Series B Convertible Preferred Stock vote separately as a class: (a) amend, alter, modify or repeal (whether by merger, consolidation or otherwise) the Series B Convertible Preferred Stock Certificate of Designation, the Company’s certificate of incorporation, or the Company’s bylaws in any manner that adversely affects the rights, preferences, privileges or the restrictions provided for the benefit of, the Series B Convertible Preferred Stock; (b) issue further shares of Series B Convertible Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series B Convertible Preferred Stock; (c) authorize or issue any Senior Stock; or (d) enter into any agreement to do any of the foregoing that is not expressly made conditional on obtaining the affirmative vote or written consent of the majority of then-outstanding Series B Convertible Preferred Stock. Holders of Series B Convertible Preferred Stock are entitled to receive when, as and if dividends are declared and paid on the common stock, an equivalent dividend, calculated on an as-converted basis. Shares of Series B Convertible Preferred Stock are otherwise not entitled to dividends.

The Company classified the first tranche of the Series B Convertible Preferred Stock as temporary equity in the condensed consolidated balance sheets as the Company could be required to redeem the Series B Convertible Preferred Stock if the Company cannot convert the Series B Convertible Preferred Stock into shares of common stock for any reason including due to any applicable laws or by the rules or regulations of any stock exchange, interdealer quotation system, or other self-regulatory organization with jurisdiction over the Company which is not solely in the control of the Company. If the Company were required to redeem the Series B Convertible Preferred Stock, it would be based upon the volume-weighted-average price of common stock on an as converted basis on the date the holders provided a conversion notice to the Company. As of June 30, 2023, the Company did not adjust the carrying value of the Series B Convertible Preferred Stock since it was not probable the holders would be unable to convert the Series B Convertible Preferred

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Stock into shares of common stock due to any reason including due to any applicable laws or by the rules or regulations of any stock exchange, interdealer quotation system, or other self-regulatory organization with jurisdiction over the Company.

The Company evaluated the Second Tranche Right under ASC 480 and determined that it met the requirements for separate accounting from the initial issuance of Series B Convertible Preferred Stock as a freestanding financial instrument. The Company then determined the Second Tranche Right should be liability classified pursuant to ASC 480. As a result, the Company classified the Second Tranche Right as a non-current liability within the condensed consolidated balance sheets and the Second Tranche Right was initially recorded at fair value and is subsequently re-measured at fair value at the end of each reporting period. The fair value of the Second Tranche Right on the date of issuance was determined to be $6.9 million based on a Monte-Carlo valuation and the Company allocated $6.9 million of the Series B Convertible Preferred Stock Proceeds to this liability and recorded this amount as preferred stock tranche liability. On June 30, 2023, the fair value of the Second Tranche Right was determined to be $7.5 million, and the Company recorded this amount as preferred stock tranche liability on the condensed consolidated balance sheets. The Company recorded the mark-to-market adjustment of $4.0 million and $0.5 million, for the three and six months ended June 30, 2023, respectively, under change in fair value of preferred stock tranche liability within the condensed consolidated statements of operations and loss.

The Company determined that all other features of the securities offered pursuant to the Securities Purchase Agreement were clearly and closely associated with the equity host and did not require bifurcation or the fair value of the feature was immaterial to the Company's condensed consolidated financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s original assessment through June 30, 2023.

Series A Convertible Preferred Stock

On November 4, 2022, the Company entered into an exchange agreement (the “Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS LP and MSI BVF SPV, LLC (collectively referred to as “BVF”), pursuant to which BVF exchanged 833,333 shares of the Company’s common stock (as adjusted to account for the Reverse Stock Split) for 1,000,000 shares of newly designated Series A convertible preferred stock, par value $0.0001 per share (the “Series A Convertible Preferred Stock”) (the “Exchange”).

Each share of the Series A Convertible Preferred Stock is convertible into 0.833 shares of the Company’s common stock (as adjusted to account for the Reverse Stock Split) at the option of the holder at any time, subject to certain limitations, including that the holder will be prohibited from converting Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99% (the “Conversion Blocker”) of the total common stock then issued and outstanding immediately following the conversion of such shares of Preferred Stock. Holders of the Series A Preferred Stock are permitted to increase the Conversion Blocker to an amount not to exceed 19.99% upon 60 days’ notice.

Shares of Series A Convertible Preferred Stock will generally have no voting rights, except as required by law and except that the consent of a majority of the holders of the outstanding Series A Convertible Preferred Stock will be required to amend the terms of the Series A Convertible Preferred Stock. In the event of the Company’s liquidation, dissolution or winding up, holders of Series A Convertible Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock. Holders of Series A Preferred Stock are entitled to receive when, as and if dividends are declared and paid on the common stock, an equivalent dividend, calculated on an as-converted basis. Shares of Series A Convertible Preferred Stock are otherwise not entitled to dividends.

The Series A Convertible Preferred Stock (i) senior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms junior to the Series A Convertible Preferred Stock; (ii) on parity with the common stock and any class or series of capital stock of the Company created specifically ranking by its terms on parity with the Series A Convertible Preferred Stock; and (iii) junior to the Series B Convertible Preferred Stock and to any class or series of capital stock of the Company created specifically ranking by its terms senior to any Series A Convertible Preferred

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Stock, in each case, as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily.

At-the-market equity offering program

In August 2021, the Company entered into a sales agreement with Cantor pursuant to which the Company can offer and sell up to $100.0 million of its common stock at the current market prices from time to time through Cantor as sales agent (the “August 2021 ATM”). During the three and six months ended June 30, 2022, the Company sold 83,870 shares and 107,694 shares (each as adjusted to account for the Reverse Stock Split), respectively, under the August 2021 ATM for net proceeds of approximately $1.2 million and $1.8 million, respectively, (after deducting commissions and other offering expenses). There were no sales under the August 2021 ATM for the six months ended June 30, 2023.

12. Stock-based compensation

Stock options

A summary of the Company’s stock option activity and related information for the six months ended June 30, 2023 is as follows:


	Shares	Weighted-average exercise price per share		Weighted-average remaining contractual term (years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2022	1,168,105	$	33.63	7.1	$	18
Granted	884,749		7.77
Forfeited/cancelled	(33,416)		49.17
Expired	(12,415)		116.92
Outstanding at June 30, 2023	2,007,023	$	21.45	8.0	$	257
Vested at June 30, 2023	786,462	$	35.28	6.1	$	36

The fair value of each stock option granted during the six months ended June 30, 2023 and 2022 was estimated on the grant date using the Black-Scholes option-pricing model using the following weighted-average assumptions:


	Six months ended June 30,
	2023		2022
Risk-free interest rate	3.56	%	2.82	%
Volatility	90	%	87	%
Dividend yield	—		—
Expected term (years)	6.1		5.6

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Restricted stock units

A summary of the Company’s restricted stock unit activity and related information for the six months ended June 30, 2023 is as follows:


	Shares	Weighted-average grant date fair value per share
Outstanding at December 31, 2022	172,909	$	25.82
Granted	8,058	$	6.52
Vested	(34,183)	$	26.15
Forfeited/cancelled	(4,451)	$	16.31
Outstanding at June 30, 2023	142,333	$	24.95

Employee stock purchase plan

At the Special Meeting of Stockholders, held on December 18, 2018, the stockholders approved the 2018 Employee Stock Purchase Plan (“2018 ESPP”). On June 21, 2019, the board of directors of the Company amended and restated the 2018 ESPP, to account for certain non-material changes to the plan’s administration and, effective May 30, 2023, in connection with the Reverse Stock Split, the board of directors amended and restated the 2018 ESPP to account for the adjustments to the share reserves (the “Amended and Restated 2018 ESPP”). The Amended and Restated 2018 ESPP provides eligible employees with the opportunity, through regular payroll deductions, to purchase shares of the Company’s common stock at 85% of the lesser of the fair market value of the common stock on (a) the date the option is granted, which is the first day of the purchase period, and (b) the exercise date, which is the last business day of the purchase period. The Amended and Restated 2018 ESPP generally allows for two six-month purchase periods per year beginning in January and July, or such other periods as determined by the compensation committee of the Company’s board of directors. The fair value of shares expected to be purchased under the Amended and Restated 2018 ESPP was calculated using the following weighted-average assumptions:


	Six months ended June 30,
	2023		2022
Risk-free interest rate	4.77	%	0.22	%
Volatility	106	%	50	%
Dividend yield	—		—
Expected term (years)	0.5		0.5

For the six months ended June 30, 2023 and 2022, the Company recognized less than $0.1 million in each period of stock-based compensation expense under the Amended and Restated 2018 ESPP. During the six months ended June 30, 2023, the Company issued 6,874 shares of common stock (as adjusted to account for the Reverse Stock Split) for proceeds of less than $0.1 million under the Amended and Restated 2018 ESPP.

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13. Net loss per share

Basic ~~and diluted net~~ loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options, are considered to be common stock equivalents and are only included in the calculationperiod. For purposes of ~~diluted~~calculating net loss per share, ~~when~~weighted-average number of common shares outstanding includes the weighted average effect of the Pre-Funded Warrants issued in June 2023, the exercise of which requires little or no consideration for the delivery of shares of common stock. Diluted net loss per common share is calculated by increasing the denominator by the weighted-average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options, restricted stock units, and employee stock purchase plan shares (using the “treasury stock” method), and the 2018 Notes, Series A Convertible Preferred Stock, and Series B Convertible Preferred Stock (using the “if-converted” method), unless their effect on net loss per share is ~~dilutive.~~

anti-dilutive.

The following potentially dilutive securities (each as adjusted to reflect the Reverse Stock Split) were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Three months ended June 30,		Six months ended June 30,
	2023	2022	2023	2022
Outstanding stock options	2,007,023	1,378,172	2,007,023	1,378,172
Outstanding restricted stock units	142,333	216,797	142,333	216,797
2018 Notes	3,489	3,489	3,489	3,489
Employee stock purchase plan	7,396	5,391	7,396	5,391
Series A Convertible Preferred Stock	833,333	—	833,333	—
Series B Convertible Preferred Stock	4,236,570	—	4,236,570	—
Total potentially dilutive securities	7,230,144	1,603,849	7,230,144	1,603,849

Three months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Outstanding stock options

8,431,355

5,880,808

8,431,355

5,880,808

Outstanding warrants

—

142,857

—

142,857

8,431,355

6,023,665

8,431,355

6,023,665

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~~8. Stock‑based compensation~~14. License, collaboration and commercial agreements

Secura

~~Stock options~~

~~A summary of~~On August 10, 2020, the ~~Company’s stock option activity~~Company and ~~related information for~~Secura signed the ~~nine months ended~~Secura APA and on September 30, ~~2017 is as follows:~~

Weighted-average


Weighted-average

remaining

Aggregate

exercise price per

contractual term

intrinsic value


Shares

share

(years)

(in thousands)

Outstanding at December 31, 2016

5,848,470

$
6.35

8.0

$
62

Granted

2,864,930

$
2.14

Exercised

(98,857)

$
0.92

Forfeited/cancelled

(183,188)

$
2.29

Outstanding at September 30, 2017

8,431,355

$
5.08

8.0

$
15,010

Vested at September 30, 2017

4,257,760

$
7.46

7.0

$
4,843

Vested and expected to vest at September 30, 2017(1)

8,431,355

$
5.08

8.0

$
15,010

~~(1)~~

~~This represents the number of vested options as of September 30, 2017, plus the number of unvested options expected to vest as of September 30, 2017.~~

~~The fair value of each stock option granted during~~2020, the ~~nine months ended September 30, 2017 and 2016 was estimated on the grant date using the Black-Scholes option-pricing model using the following weighted-average assumptions:~~

Nine months ended September 30,

2017

2016
Risk-free interest rate

1.98
%

1.47
%
Volatility

79
%

75
%
Dividend yield

—

—

Expected term (years)

5.9

5.9

In June 2016, the Company granted stock options to purchase a total of 500,000 shares of common stock to certain employees that vest only upon the achievement of specified performance conditions. In October 2016, the Company determined that 50% of performance conditions had been achieved and as a result 250,000 shares vested and the Company recognized stock-based compensation expense of approximately $222,000 for the year ended December 31, 2016. In September 2017, the Company determined that the remaining performance conditions had been achieved and as a result the remaining 250,000 shares vested and the Company recognized stock-based compensation expense of approximately $379,000 during the three months ended September 30, 2017. The increase in stock-based compensation expense recognized for the awards which vested during the three months ended September 30, 2017, as compared to the awards which vested during the year ended December 31, 2016, is a result of the revaluation of an award held by a non-employee to fair value on the vesting date.

~~Restricted stock units~~

The approximate total fair value of restricted stock units (RSUs) vested during the three and nine months ended September 30, 2016 was $0 and $65,000, respectively. As of September 30, 2016, all RSUs had vested and there was no remaining unrecognized stock-based compensation expense. There were no RSUs granted during or subsequent to the three and nine months ended September 30, 2016.

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During the first quarter of 2013, the Company amended the terms of certain RSUs related to a total of 697,060 shares of common stock to allow for tax withholdings greater than the minimum required statutory withholding amount. As a result of this change in the terms of the awards, the outstanding RSUs were considered to be liability instruments. As a result of this modification, the Company recorded a liability for the fair value of the awards as of each reporting date with the change in fair value recorded through the statement of operations. During the three and nine months ended September 30, 2016, the Company made approximate deposits with the taxing authorities of $0 and $5,000 in respect of the tax liability for awards that settled during the period. As of September 30, 2016, the Company had no remaining tax liability related to these awards.

~~9. Common Stock~~

On March 30, 2017, the Company terminated the at-the-market equity offering program established in December 2013 and established a new at-the-market equity offering program pursuant to which it was able to offer and sell up to $35.0 million of its common stock at then current market prices from time to time through Cantor Fitzgerald & Co. (Cantor), as sales agent. On August 28, 2017, the Company amended its sales agreement with Cantor to increase the maximum aggregate offering price of shares of common stock that can be sold under the at-the-market equity offering program to $75.0 million. Through September 30, 2017, the Company sold 2,853,753 shares under this program for net proceeds of approximately $14.1 million (after deducting commissions and other offering expenses).

As of November 6, 2017, the Company has sold an additional 544,368 shares of common stock under the at-the-market equity offering program with net proceeds of $2.5 million (after deducting commissions and other offering expenses).

~~10. License agreements~~

transaction closed.

Pursuant to the ~~terms~~Secura APA, the Company sold to Secura its exclusive worldwide license, including related assets, for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib. The sale included certain intellectual property related to duvelisib in oncology indications, certain existing duvelisib inventory, claims and rights under certain contracts pertaining to duvelisib. Pursuant to the Secura APA, Secura assumed all operational and financial responsibility for activities that were part of the Company’s duvelisib oncology program, including all commercialization efforts related to duvelisib in the United States and Europe, as well as the Company’s ongoing duvelisib clinical trials. Further, Secura assumed all obligations with existing collaboration partners developing and commercializing duvelisib, which include Yakult Honsha Co., Ltd. (“Yakult”), CSPC Pharmaceutical Group Limited (“CSPC”), and Sanofi. Additionally, Secura assumed all royalty payment obligations due under the amended and restated license agreement with Infinity Pharmaceuticals, Inc.

Pursuant to the terms of the Secura APA, Secura paid the Company ~~is required~~an up-front payment of $70.0 million in September 2020 and has agreed to ~~make~~pay the ~~following~~Company (i) regulatory milestone payments up to ~~Infinity in cash or, at our election, in whole or in part, in shares~~$45.0 million, consisting of ~~our common stock: (i) $6.0~~a payment of $35.0 million upon ~~determination that the results~~receipt of ~~the DUO study meet certain pre-specified criteria and (ii) $22.0 million upon the~~regulatory approval of ~~a New Drug Application (NDA)~~COPIKTRA in the United States for the treatment of PTCL and a payment of $10.0 million upon receipt of the first regulatory approval for the commercial sale of COPIKTRA in the European Union for the treatment of PTCL, (ii) sales milestone payments of up to $50.0 million, consisting of $10.0 million when total worldwide net sales of COPIKTRA exceed $100.0 million, $15.0 million when total worldwide net sales of COPIKTRA exceed $200.0 million and $25.0 million when total worldwide net sales of COPIKTRA exceed $300.0 million, (iii) low double-digit royalties on the annual aggregate net sales above $100.0 million in the United States, European Union, and the United Kingdom of Great Britain and Northern Ireland and

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(iv) 50% of all royalty, milestone and sublicense revenue payments payable to Secura under the Company’s existing license agreements with Sanofi, Yakult, and CSPC, and 50% of all royalty and milestone payments payable to Secura under any license or ~~an application for marketing authorization~~sublicense agreement entered into by Secura in certain jurisdictions.

The Company evaluated the Secura APA in accordance with ASC 606 as the Company concluded that the counterparty, Secura, is a customer. The Company identified the following bundled performance obligation under the Secura APA:

●

a bundled performance obligation consisting of delivery of the duvelisib global license and intellectual property, certain existing duvelisib inventory, certain duvelisib contracts and clinical trials, certain regulatory approvals, and certain regulatory documentation and books and records (the “Bundled Secura Performance Obligation”).

The Company concluded that the duvelisib global license and intellectual property were not distinct within the context of the contract (i.e. separately identifiable) because the other assets including certain existing duvelisib inventory, certain duvelisib contracts and clinical trials, certain regulatory ~~authority~~approval, and certain regulatory documentation and books and records do not have stand-alone value from other duvelisib global license and intellectual property and Secura could not benefit from them without the duvelisib global license and intellectual property. Consistent with the guidance under ASC 606-10-25-16A, the Company disregarded immaterial promised goods and services when determining performance obligations.

The Company has determined that the upfront payment of $70.0 million, future potential milestone payments and royalties including from Secura’s sublicensees should be allocated to the delivery of the Bundled Secura Performance Obligation.

The Company determined $0.1 million of future potential royalties the Company expects to receive pursuant to the Secura APA were not constrained as of June 30, 2023. When estimating the amount of royalties to be received that were not constrained, the Company used the expected value method as there are a range of possible outcomes. When estimating royalties to be received, the Company used a combination of internal projections and forecasts and data from external sources. The Company determined that all other future potential royalties were constrained under the guidance as of June 30, 2023. As part of the Company’s evaluation of the constraint on future royalties, the Company considered a number of factors in determining whether there is significant uncertainty associated with future events that would result in royalty payments. Those factors include: the likelihood and magnitude of revenue reversals related to future royalties, the amount of variable consideration is highly susceptible to factors outside of the Company’s influence, the amount of time to resolve the uncertainty, and lack of significant history of selling COPIKTRA outside of the United ~~States~~States.

As the consideration for future royalties is conditional, the Company recorded a ~~product in an oncology indication containing duvelisib.~~

~~Upon achievement~~corresponding contract asset for the expected royalties. Portions of the ~~positive top-line results from~~contract asset are reclassified to accounts receivable when the ~~Phase 3 DUO study~~right to consideration becomes unconditional. As of June 30, 2023 and December 31, 2022, the contract asset has been recorded within prepaid and other current assets on ~~September 6, 2017,~~the condensed consolidated balance sheets.

The following table presents changes in the Company’s contract asset for the six months ended June 30, 2023 (in thousands):


Contract Asset:	December 31, 2022		Additions		Reclassification to receivable		June 30, 2023
Contract asset - Secura	$	96	$	—	$	(34)	$	62
Total	$	96	$	—	$	(34)	$	62

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During three and six months ended June 30, 2023, the Company determined all future potential milestones were excluded from the transaction price, as all other milestone amounts were fully constrained under the guidance as of June 30, 2023. As part of the Company’s evaluation of the constraint, the Company considered a number of factors in determining whether there is significant uncertainty associated with the future events that ~~the pre-specified criteria stipulated~~would result in the ~~license agreement had been met. Accordingly,~~milestone payments. Those factors included: the ~~Company made a milestone payment~~likelihood and magnitude of ~~$6.0 million~~revenue reversals related to ~~Infinity in October 2017. The Company recorded~~future milestones, the ~~$6.0 million as research and development expense in the statement~~amount of ~~operations for the period ended September 30, 2017.~~

~~11. Reduction in force~~

~~In October 2015, the Company announced a reduction of workforce by approximately 50%~~variable consideration that is highly susceptible to ~~20 full time employees. All affected employees received severance pay and outplacement assistance. As a result~~factors outside of the ~~reduction in force~~Company’s influence and ~~associated costs,~~ the ~~Company paid one-time severance and~~uncertainty about the consideration is not expected to be resolved for an extended period of time. All future potential milestone payments were fully constrained as the risk of significant revenue reversal related ~~costs of $1.1 million. Of~~to these ~~one-time severance and related costs, approximately $349,000 was paid through December 31, 2015 and approximately $78,000 and approximately $713,000 was paid in~~amounts has not yet been resolved.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016. As~~2022, the Company recognized $0.0 million and $2.6 million, respectively, of ~~September 30, 2016, all one-time severance~~sale of COPIKTRA license and related ~~costs had been paid~~assets revenue within the statements of operations and comprehensive loss. The sale of COPIKTRA license and related assets revenue for the six months ended June 30, 2022 primarily related to one regulatory milestone for $2.5 million achieved by Secura’s sublicensee, CSPC, and $0.1 million related to royalties on COPIKTRA sales in the six months ended June 30, 2022, and future royalties expected to be received pursuant to the Secura APA that were not constrained.

15. Income taxes

The Company did not record a federal or state income tax provision or benefit for the three and six months ended June 30, 2023 and 2022, respectively, due to the expected loss before income taxes to be incurred for the years ended December 31, 2023 and 2022, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets.

16. Commitments and contingencies

The Company has no ~~liability remained.~~other commitments other than minimum lease payments as disclosed in Note 8. Leases.

~~12.~~

17. Subsequent events

The Company reviews all activity subsequent to the end of the quarter but prior to issuance of the condensed consolidated financial statements for events that could require disclosure or that could impact the carrying value of assets or liabilities as of the balance sheet date. ~~There are no~~The Company is not aware of any material subsequent ~~events to the three and nine months ended September 30, 2017 other than those disclosed in these notes to the condensed consolidated financial statements.~~events.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form ~~10‑Q.~~10-Q. The following discussion contains ~~forward‑looking~~forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these ~~forward‑looking~~forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2016.~~2022. Please also refer to the sections under headings ~~“Forward‑Looking~~“Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2016.~~2022.

OVERVIEW

~~OVERVIEW~~

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

Our most advanced product candidates, ~~duvelisib~~avutometinib and defactinib, ~~utilize a multi-faceted approach to treat cancers originating either in the blood or major organ systems. We~~ are ~~currently evaluating these compounds~~being investigated in both preclinical and clinical studies ~~as potential therapies~~ for ~~certain cancers,~~the treatment of various solid tumors, including, ~~leukemia, lymphoma,~~but not limited to low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer ~~ovarian~~(“NSCLC”), colorectal cancer ~~mesothelioma,~~(“CRC”), pancreatic cancer, and ~~pancreatic cancer.~~melanoma. We believe that ~~these compounds~~avutometinib may be beneficial as ~~therapeutics either~~a therapeutic as a single ~~agents~~agent or when used together in combination with ~~immuno-oncology agents~~defactinib, other pathway inhibitors, or other current and emerging standard of care treatments in ~~aggressive~~ cancers that ~~are poorly served by~~do not adequately respond to currently available therapies.

~~Duvelisib targets the Phosphoinositide 3-kinase (PI3K) signaling pathway. The PI3K signaling pathway plays a central role in cancer proliferation and survival. Duvelisib~~Avutometinib is an ~~investigational oral therapy designed~~orally available first-in-class unique small molecule RAF/MEK clamp. In contrast to ~~attack both malignant B-cells~~other MEK inhibitors that are commercially available and ~~T-cells~~in development, avutometinib is a dual RAF/MEK clamp that blocks MEK kinase activity and ~~disrupt~~induces the ~~tumor microenvironment~~formation of dominant negative RAF-MEK complexes preventing phosphorylation of MEK by A-Raf proto-oncogene, serine/threonine kinase (“ARAF”), B-Raf proto-oncogene serine/threonine kinase (“BRAF”) and C-raf proto-oncogene serine/threonine kinase (“CRAF”). MEK-only inhibitors (e.g. trametinib) may have limited efficacy because they induce MEK phosphorylation (“pMEK”) by relieving extracellular-signal-regulated-kinase (“ERK”)-dependent feedback inhibition of RAF. By inhibiting RAF-mediated phosphorylation of MEK, avutometinib has the advantage of not inducing pMEK. This unique mechanism of avutometinib enables it to ~~help thwart their growth~~inhibit ERK signaling more effectively and may confer enhanced therapeutic activity against mitogen-activated pathway kinase (“MAPK”) pathway-driven cancers.

Avutometinib has been shown to inhibit signaling and proliferation ~~for patients~~of tumor cell lines with ~~lymphatic cancers through the dual inhibition~~a variety of ~~PI3K delta~~MAPK pathway alterations including Kirsten rat sarcoma viral oncogene homolog (“KRAS”), neuroblastoma rat sarcoma viral oncogene homolog (“NRAS”), and ~~gamma. Duvelisib is being developed for the treatment~~BRAF mutations, among others. Avutometinib has demonstrated strong antitumor activity in combination with (i) agents targeting parallel pathways (e.g. inhibitors of ~~patients with hematological cancers including Chronic Lymphocytic Leukemia~~FAK, CDK4/6 and ~~Small Lymphocytic Lymphoma (CLL/SLL) and indolent Non-Hodgkin Lymphoma (iNHL)~~mTOR), ~~which includes Follicular Lymphoma (FL), Peripheral T-Cell Lymphoma (PTCL) and~~(ii) agents targeting other subtypes of lymphoma. Duvelisib has U.S. Food and Drug Administration (FDA) Fast Track Designation for patients with CLL or PTCL who have received at least one prior therapy and for patients with FL who have received at least two prior therapies. In addition, duvelisib has orphan drug designation for patients with CLL, SLL and FLnodes in the ~~United States~~MAPK pathway (e.g. anti-EGFR, SOS1, KRAS G12C, and ~~European Union.~~KRAS G12D inhibitors), (iii) chemotherapy, and (iv) anti-PD-1.

~~Duvelisib~~Defactinib is an oral small molecule inhibitor of FAK and proline-rich tyrosine kinase (“PYK2”) that is currently being evaluated ~~in late- and mid-stage clinical trials, including DUO™,~~as a randomized, Phase 3 monotherapy study in patients with relapsed or refractory CLL/SLL, and DYNAMO™, a single-arm, Phase 2 monotherapy study in patients with refractory iNHL. Both DUO and DYNAMO achieved their primary endpoints upon top-line analysis of efficacy data. We anticipate submitting a New Drug Application (NDA) to the FDA requesting the full approval of duvelisibpotential combination therapy for ~~the treatment of patients with CLL/SLL and accelerated approval for the treatment of patients with FL in the first quarter of 2018.~~

~~Defactinib targets the Focal Adhesion Kinase (FAK) signaling pathway.~~various solid tumors. FAK is a non-receptor tyrosine kinase encoded by the ~~PTK-2~~protein tyrosine kinase-2 (“PTK-2”) gene that is involved in cellular adhesion and, in cancer, metastatic capability. Defactinib ~~is a targeted inhibitor~~targets malignant cells both directly and through modulation of the ~~FAK signaling pathway. Similar to duvelisib, defactinib is also orally available and designed to be a potential therapy for patients to take at home under the advice of their physician.~~tumor microenvironment. Defactinib has received orphan drug designation in ovarian cancer in the United States, ~~and the European Union, and in mesothelioma in the United States,~~ the European Union, and Australia.

Preclinical research by our scientists and collaborators at world-renowned research institutions has described the effect of FAK inhibition as enhancing immune response by decreasing immuno-suppressive cells, increasing cytotoxic T cells and reducing stromal density, which allows tumor-killing immune cells to enter the tumor. Furthermore, it has been shown that FAK activation in response to MAPK inhibitor therapy may bypass MAPK pathway blockade by driving tumor growth through activation of downstream pathways such as RhoA and YAP, supporting the clinical evaluation of avutometinib in combination with defactinib for treatment of cancers harboring MAPK alterations.

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

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

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

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

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

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

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

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

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

Target enrollment of the primary cohort (n=72) in the combination arm of RAMP 201 has been completed. Continued enrollment in the combination arm of RAMP 201 is ongoing to expand the clinical experience in anticipation of RAMP 301.

In September 2021, we entered into a clinical collaboration agreement with Amgen, Inc. (“Amgen”) to evaluate the combination of avutometinib with Amgen’s KRAS G12C inhibitor LUMAKRAS^® (sotorasib) in a Phase ~~1b study~~1/2 trial

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entitled RAMP 203. The Phase 1/2 trial will evaluate the safety, tolerability and efficacy of avutometinib in combination with ~~Merck & Co.’s PD-1 inhibitor pembrolizumab and gemcitabine~~LUMAKRAS in patients with KRAS G12C NSCLC who have not been previously treated with a KRAS G12C inhibitor, as well as in patients who have progressed on a KRAS-G12C inhibitor. The study will investigate the potential benefits of a more complete vertical blockade of the MAPK pathway with the combination of avutometinib (RAF/MEK inhibition) with LUMAKRAS (KRAS G12C inhibition) in KRAS G12C locally advanced ~~pancreatic cancer,~~or metastatic NSCLC. The RAMP 203 trial has progressed to the recommended Phase 2 dose of 4 mg avutometinib in combination with 960 mg of LUMAKRAS and initiation of Part B dose expansion in patients who are G12C inhibitor treatment naïve and in patients who experienced disease progression on prior G12C monotherapy.

In November 2021, we entered into a clinical collaboration agreement with Mirati Therapeutics, Inc. (“Mirati”) to evaluate the combination of avutometinib with Mirati’s KRAS G12C inhibitor KRAZATI^® (adagrasib) in a Phase 1/2 ~~clinical collaboration with Pfizer Inc. (Pfizer)~~trial entitled RAMP 204. The Phase 1/2 trial will evaluate the safety, tolerability and ~~Merck KGaA to evaluate defactinib~~efficacy of avutometinib in combination with ~~avelumab, an anti-PD-L1 antibody,~~KRAZATI in patients with ~~ovarian cancer, and~~KRAS G12C NSCLC who have progressed on a ~~Phase 1/2 study~~KRAS G12C inhibitor. The trial will build on preclinical data showing a deeper blockade of MAPK pathway signaling resulting in ~~collaboration~~enhanced anti-tumor efficacy with ~~Cancer Research UK and Merck & Co. for~~ the combination of KRAZATI (KRAS G12C inhibition) and avutometinib (RAF/MEK inhibition) relative to either agent alone. The RAMP 204 trial is open and enrolling. Dose escalation is ongoing.

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

Our operations to date have been organizing and staffing our company, business planning, raising capital, identifying and acquiring potential product candidates, ~~and~~ undertaking preclinical studies and clinical trials for our product ~~candidates. To date, we have not generated any revenues.~~candidates and initiating U.S. commercial operations following the approval of COPIKTRA through our ownership period ending in September 2020. We have financed our operations to date primarily through ~~private placements~~public offerings of ~~preferred~~our common stock and pre-funded warrants, sales of common stock under our ~~initial public~~at-the-market equity offering ~~in February 2012, our follow-on offerings in July 2013 and January 2015,~~programs, our loan and security agreement executed with Hercules Capital, Inc. ~~(Hercules)~~(“Hercules”) in March 2017, as amended, the upfront payments and milestone payments under our license and collaboration agreements with Sanofi, CSPC Pharmaceutical Group Limited (“CSPC”), and Yakult Honsha Co., Ltd. (“Yakult”), the upfront payment and milestone payments received under the Secura APA, the issuance of the 2018 Notes (defined herein) in October 2018, the proceeds in connection with the private investment in public equity (the “PIPE”), our loan and security agreement executed with Oxford Finance LLC (“Oxford”) in March 2022, and sales of ~~common stock under~~Series B Convertible Preferred Stock (as defined below). Additionally, from our ~~at-the market equity offering programs.~~U.S. commercial launch of COPIKTRA on September 24, 2018 through our ownership period ending in September 2020, we financed a portion of our operations through product revenue.

As of ~~September~~June 30, ~~2017,~~2023, we had an accumulated deficit of ~~$284.9~~$777.5 million. Our net loss was ~~$23.1~~$24.3 million, ~~$49.6~~$40.0 million, ~~$7.9~~$22.0 million and ~~$24.8~~$38.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively. We expect to incur significant expenses and ~~increasing~~may continue to incur operating losses for the foreseeable ~~future.~~future as a result of the continued research and development of avutometinib and defactinib. As of June 30, 2023, we had cash, cash equivalents and investments of $183.1 million. We expect our ~~expenses~~existing cash resources will be sufficient to ~~increase in connection~~fund our planned operations through at least 12 months from the date of issuance of these condensed consolidated financial statements.

We expect to finance the future development costs of our clinical product portfolio with our ~~ongoing activities, particularly as~~existing cash, cash equivalents and investments, through future milestones and royalties received pursuant to the Secura APA, through our loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to, collaboration agreements, future offerings of our equity, or the incurrence of debt. However, there is no

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guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If we ~~continue the research and development~~fail to obtain additional future capital, we may be unable to complete our planned preclinical studies and clinical trials and obtain approval of ~~and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our~~certain investigational product candidates we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. Adequate additional financing may not be available to us on acceptable terms,from the FDA or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so.foreign regulatory authorities.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

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

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

The critical accounting policies we identified in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022, related to revenue recognition, collaborative agreements, accrued and prepaid research and development expenses, stock-based compensation, and ~~stock-based compensation. There~~leases. During the six months ended June 30, 2023, there were no material changes to ~~these~~our critical accounting policies in the three and nine months ended September 30, 2017. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (SEC) on March 23, 2017.

The Company has elected to follow the extended transition period guidance provided for in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. The Company will disclose the date on which adoption of such standards is required for non-emerging growth companies and the date on which the Company will adopt the recently issued accounting standards.

policies.

1631

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RESULTS OF OPERATIONS

Comparison of the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022


	Three months ended June 30,
	(dollar amounts in thousands)
	2023		2022		Change		% Change
Operating expenses:
Research and development		12,893		14,888		(1,995)	(13)%
Selling, general and administrative		7,399		6,514		885	14%
Total operating expenses		20,292		21,402		(1,110)	(5)%
Loss from operations		(20,292)		(21,402)		1,110	(5)%
Other income (expense)		(40)		6		(46)	(767)%
Interest income		1,122		84		1,038	1236%
Interest expense		(1,121)		(640)		(481)	75%
Change in fair value of preferred stock tranche liability		(3,950)		—		(3,950)	100%
Net loss	$	(24,281)	$	(21,952)	$	(2,329)	11%

Research and development expense.Research and development expense for the three months ended ~~September~~June 30, ~~2017 (2017 Quarter)~~2023 (the “2023 Quarter”) was ~~$17.7~~$12.9 million compared to ~~$4.2~~$14.9 million for the three months ended ~~September~~June 30, ~~2016 (2016 Quarter)~~2022 (the “2022 Quarter”). The ~~$13.5~~$2.0 million ~~increase~~decrease from the ~~2016~~2022 Quarter to the ~~2017~~2023 Quarter was primarily ~~related to the achievement~~driven by a decrease of $2.0 million of drug substance and drug product costs, a ~~$6.0~~decrease of $1.3 million ~~milestone pursuant to our license agreement with Infinity Pharmaceuticals, Inc. (Infinity),~~of contract research organization (“CRO”) costs, partially offset by an increase of ~~$4.8~~$0.4 million in ~~contract research organization (CRO) expense for outsourced biology, development and clinical services, which includes our clinical~~investigator sponsored trial (“IST”) costs, an increase of ~~approximately $2.0~~$0.4 million in ~~consulting fees,~~investigator fee costs, an increase of $0.3 million of personnel costs, including non-cash stock compensation, and $0.2 million in ~~stock-based compensation~~pre-clinical trial costs.

Research and development expenses consist of ~~approximately $423,000~~costs associated with our research activities, including the development of our product candidates. Research and ~~an increase in personnel related~~development expenses include product/ product candidate and/or project-specific costs, ~~of approximately $153,000.~~

as well as unallocated costs. We allocate the expenses related to external research and development services, such as CROs, clinical sites, manufacturing organizations and consultants, by ~~project. The table below summarizes our allocation of research and development expenses to our clinical programs, including duvelisib and defactinib, for the 2017 Quarter and the 2016 Quarter.~~project and/or product candidate. We use our employee and infrastructure resources in a cross-functional manner across multiple research and development projects. Our project costing methodology does not allocate personnel, infrastructure and other indirect costs to specific clinical ~~programs. These~~programs or projects.

Product/ product candidate/ project specific costs include:

●

direct third-party costs, which include expenses incurred under agreements with CROs, the cost of consultants who assist with the development of our product candidates on a program-specific basis, clinical site costs, and any other third-party expenses directly attributable to the development of the product candidates;

●

costs related to contract manufacturing operations including manufacturing costs in connection with producing product candidates for use in conducting preclinical and clinical studies. Costs associated with manufacturing avutometinib are included in “Avutometinib manufacturing and non-clinical trial specific” category below as these costs relate to both the “Avutometinib + defactinib” and “Avutometinib + other combinations” categories and are not specifically allocated to any particular project. Costs to produce defactinib are included in “Avutometinib + defactinib” below; and

●

license fees.

Unallocated costs include:

●

research and development employee-related expenses, including salaries, benefits, travel, and stock-based compensation expense;

●

cost of consultants, including our scientific advisory board, who assist with our research and development but are not allocated to a specific program; and

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●

facilities, depreciation, and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, and laboratory supplies.

The table below summarizes our direct research and development expenses for our product/ product candidates/ projects and our unallocated research and development ~~expenses are summarized in the table below and include approximate personnel related~~ costs ~~of $1.2 million and $1.1 million~~ for the ~~2017~~2023 Quarter and the ~~2016~~2022 Quarter.


	Three months ended June 30,
	2023		2022		Change

	(in thousands)
Product/ product candidate / project specific costs
Avutometinib + defactinib	$	5,462	$	8,024	$	(2,562)
Avutometinib + other combinations		1,453		651		802
Avutometinib manufacturing and non-clinical trial specific		1,122		1,714		(592)
COPIKTRA		49		14		35
Unallocated costs
Personnel costs, excluding stock-based compensation		2,979		2,768		211
Stock-based compensation expense		503		470		33
Other unallocated expenses		1,325		1,247		78
Total research and development expense	$	12,893	$	14,888	$	(1,995)

The $2.6 million decrease in avutometinib + defactinib costs from the 2022 Quarter ~~respectively.~~to the 2023 Quarter is primarily driven by a decrease in RAMP 202 trial costs, and drug substance and drug product costs for defactinib, partially offset by an increase in pre-clinical costs for avutometinib and defactinib. The $0.8 million increase of avutometinib + other combinations costs from the 2022 Quarter to the 2023 Quarter is primarily driven by an increase in RAMP 203 trial costs, RAMP 204 trial costs, and IST costs. The $0.6 million decrease in avutometinib manufacturing and non-clinical trial specific costs from the 2022 Quarter to the 2023 Quarter is primarily driven a decrease in drug substance and drug product costs for avutometinib, and pre-clinical collaboration costs for avutometinib.

Three months ended September 30,


2017

2016

(in thousands)

(in thousands)

Duvelisib

$
13,600

$
—

Defactinib

807

1,029

Unallocated and other research and development expense

2,676

2,950

Unallocated stock-based compensation expense

660

237

Total research and development expense

$
17,743

$
4,216

~~General~~Selling, general and administrative ~~expense.~~ ~~General~~expense. Selling, general and administrative expense for the ~~2017~~2023 Quarter was ~~$5.4~~$7.4 million compared to ~~$3.8~~$6.5 million for the ~~2016~~2022 Quarter. The increase of ~~$1.6~~$0.9 million from the ~~2016~~2022 Quarter to the ~~2017~~2023 Quarter primarily resulted from ~~increases in~~an increase of $0.4 million of consulting and professional fees, an increase of ~~$1.3~~$0.1 million of additional costs in anticipation of potential launch of avutometinib and ~~personnel costs~~defactinib in LGSOC, and an increase of ~~approximately $330,000.~~$0.4 million in travel and other costs.

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

Interest income.Interest income ~~remained flat~~for the 2023 Quarter was $1.1 million compared to $0.1 million for the 2022 Quarter. The increase of $1.0 million from the ~~2016~~2022 Quarter to the ~~2017~~2023 Quarter in interest income is primarily ~~as a result of higher~~driven by an increase in interest rates on ~~investments in the 2017 Quarter, offset by a lower investment cost basis.~~debt securities.

Interest expense.Interest expense for the ~~2017~~2023 Quarter was ~~approximately $110,000 related~~$1.1 million compared to ~~our~~$0.6 million for the 2022 Quarter. The increase of $0.5 million from the 2022 Quarter to the 2023 Quarter was primarily driven by the interest expense pursuant to the loan and security agreement ~~executed~~entered into with ~~Hercules~~Oxford on March 25, 2022 including an additional $15.0 million debt drawdown on March 22, 2023.

Change in ~~March 2017. We did not incur any interest expense~~fair value of preferred stock tranche liability. The change in fair value of the ~~2016~~preferred stock tranche liability of $4.0 million for the 2023 Quarter was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement (defined herein). There was no preferred stock tranche liability outstanding during the 2022 Quarter.

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Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022


	Six months ended June 30,
	(dollar amounts in thousands)
	2023		2022		Change		% Change
Revenue:
Sale of COPIKTRA license and related assets	$	—	$	2,596	$	(2,596)	(100)%
Total revenue		—		2,596		(2,596)	(100)%
Operating expenses:
Research and development		24,908		28,530		(3,622)	(13)%
Selling, general and administrative		14,728		12,448		2,280	18%
Total operating expenses		39,636		40,978		(1,342)	(3)%
Loss from operations		(39,636)		(38,382)		(1,254)	3%
Other income (expense)		(47)		34		(81)	(238)%
Interest income		2,098		130		1,968	1514%
Interest expense		(1,890)		(696)		(1,194)	172%
Change in fair value of preferred stock tranche liability		(520)		—		(520)	100%
Net loss	$	(39,995)	$	(38,914)	$	(1,081)	3%

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

Research and development expense.Research and development expense for the ~~nine months ended September 30, 2017 (2017 Period)~~2023 Period was ~~$35.2~~$24.9 million compared to ~~$12.9~~$28.5 million for the ~~nine months ended September 30, 2016 (2016 Period).~~2022 Period. The ~~$22.3~~$3.6 million ~~increase~~decrease from the ~~2016~~2022 Period to the ~~2017~~2023 Period was primarily ~~related to~~driven by a decrease of $2.7 million of drug substance and drug product costs, a decrease of $1.9 million of CRO costs, partially offset by an increase of ~~$11.2~~$0.6 million in ~~CRO expense for outsourced biology, development~~IST costs and ~~clinical services, which includes our clinical trial costs, the achievement of a $6.0 million milestone pursuant to our license agreement with Infinity,~~ an increase of ~~$3.5~~$0.4 million ~~in consulting fees, an increase in~~of personnel ~~related~~ costs, ~~of $1.4 million, and a net increase of approximately $207,000 in stock-based compensation and other expenses.~~including non-cash stock compensation.

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~~We allocate the expenses related to external research and development services, such as CROs, clinical sites, manufacturing organizations and consultants by project.~~ The table below summarizes our ~~allocation of~~direct research and development expenses tofor our ~~clinical programs, including duvelisib~~product/ product candidates/ projects and ~~defactinib, for the 2017 Period and the 2016 Period. We use~~ our employee and infrastructure resources across multiple research and development projects. Our project costing methodology does not allocate personnel and other indirect costs to specific clinical programs. These unallocated research and development ~~expenses are summarized in the table below and include approximate personnel related~~ costs ~~of $3.9 million and $2.6 million~~ for the ~~2017~~2023 Period and the ~~2016~~2022 Period.


	Six months ended June 30,
	2023		2022		Change

	(in thousands)
Product/ product candidate / project specific costs
Avutometinib + defactinib	$	10,196	$	13,929	$	(3,733)
Avutometinib + other combinations		2,571		933		1,638
Avutometinib manufacturing and non-clinical trial specific		2,777		4,884		(2,107)
COPIKTRA		79		85		(6)
Unallocated costs
Personnel costs, excluding stock-based compensation		5,891		5,523		368
Stock-based compensation expense		964		920		44
Other unallocated expenses		2,430		2,256		174
Total research and development expense	$	24,908	$	28,530	$	(3,622)

The $3.7 million decrease in avutometinib + defactinib costs from the 2022 Period ~~respectively.~~to the 2023 Period is primarily driven by a decrease in RAMP 202 trial costs, and RAMP 201 trial costs. The $1.6 million increase of avutometinib + other combinations costs from the 2022 Period to the 2023 Period is primarily driven by an increase in RAMP 203 trial costs, RAMP 204 trial costs and IST Costs. The $2.1 million decrease in avutometinib manufacturing

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and non-clinical trial specific costs from the 2022 Period to the 2023 Period is primarily driven a decrease in drug substance and drug product costs for avutometinib, CRO costs, and pre-clinical collaborations.

Nine months ended September 30,


2017

2016

(in thousands)

(in thousands)

Duvelisib

$
23,125

$
—

Defactinib

2,326

3,387

Unallocated and other research and development expense

8,578

8,760

Unallocated stock-based compensation expense

1,141

740

Total research and development expense

$
35,170

$
12,887

~~General~~Selling, general and administrative ~~expense.~~ ~~General~~expense. Selling, general and administrative expense for the ~~2017~~2023 Period was ~~$14.6~~$14.7 million compared to ~~$12.3~~$12.4 million for the ~~2016~~2022 Period. The increase of $2.3 million from the ~~2016~~2022 Period to the ~~2017~~2023 Period primarily resulted from ~~increases~~an increase $0.8 million in consulting and professional fees, an increase of ~~$3.1~~$0.7 million of additional costs in anticipation of potential launch of avutometinib and ~~personnel~~defactinib in LGSOC, an increase of $0.6 million of costs associated with financing activities, and an increase $0.2 million in travel and other costs.

Other Income (expense). Other expense for the 2023 Period was less than $0.1 million compared to other income of ~~approximately $213,000, partially offset by~~less than $0.1 million in the 2022 Period. Other expense for the 2023 Period was comprised of changes in foreign currency exchange rates. Other income for the 2022 Period was comprised of a ~~decrease~~gain on the sale of fixed assets and changes in ~~stock-based compensation expense of $1.0 million.~~foreign currency exchange rates.

Interest income.Interest income ~~remained flat~~for the 2023 Period was $2.1 million compared to $0.1 million for the 2022 Period. The increase of $2.0 million from the ~~2016~~2022 Period to the ~~2017~~2023 Period in interest income is primarily ~~as a result of higher~~driven by an increase in interest rates on ~~investments in the 2017 Period, offset by a lower investment cost basis.~~debt securities.

Interest expense.Interest expense for the ~~2017~~2023 Period was ~~approximately $231,000 related~~$1.9 million compared to ~~our~~$0.7 million for the 2022 Period. The increase of $1.2 million from the 2022 Period to the 2023 Period was primarily driven by the interest expense pursuant to the loan and security agreement ~~executed~~entered into with ~~Hercules~~Oxford on March 25, 2022 including an additional $15.0 million debt drawdown on March 22, 2023.

Change in ~~March 2017. We did not incur any interest expense~~fair value of preferred stock tranche liability. The change in fair value of the ~~2016~~preferred stock tranche liability of $0.5 million for the 2023 Period was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement (defined herein). There was no preferred stock tranche liability outstanding during the 2022 Period.

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LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity

~~To date, we have not generated any revenues.~~ We have financed our operations to date primarily through public and private ~~placements~~offerings of ~~preferred~~our common stock and pre-funded warrants, sales of common stock under our ~~initial public~~at-the-market equity offering ~~in February 2012, our follow-on offerings in July 2013 and January 2015,~~programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments and ~~sales of common stock~~ under our ~~at-the market equity offering programs.~~

license and collaboration agreements with Sanofi, Yakult, and CSPC, the upfront payment under the Secura APA, the issuance of 2018 Notes in October 2018, the proceeds in connection with the PIPE, the Loan Agreement with Oxford, and the issuance of Series B Convertible Preferred Stock. With the commercial launch of COPIKTRA in the United States in September 2018 through our ownership period ending in September 2020, we financed a portion of our operations through product revenue. As of September 30, ~~2017,~~2020, we have sold our COPIKTRA license and no longer sell COPIKTRA in the United States. We expect to finance a portion of our business through future potential milestones and royalties received pursuant to the Secura APA.

As of June 30, 2023, we had ~~$60.3~~$183.1 million inof cash, cash equivalents, and investments. We primarily invest our cash, cash equivalents and investments in a U.S. Government money market ~~fund and~~funds, agency bonds, corporate bonds and commercial paper of publicly traded companies.

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

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Cash flows

The following table sets forth the primary sources and uses of cash for the ~~2017~~2023 Period and the ~~2016~~2022 Period (in thousands):


	Six months ended June 30,
	2023		2022
Net cash (used in) provided by:
Operating activities	$	(40,190)	$	(31,975)
Investing activities		13,196		48,513
Financing activities		135,531		26,160
Increase in cash, cash equivalents and restricted cash	$	108,537	$	42,698

Nine months ended September 30,

2017

2016

Net cash (used in) provided by:







Operating activities

$
(36,983)

$
(23,532)

Investing activities

39,444

35,941

Financing activities

16,460

(5)

Increase in cash and cash equivalents

$
18,921

$
12,404

Operating activities. The use of cash in both periods resulted primarily from our net losses adjusted for non-cash charges and changes in the components of working ~~capital, payments~~capital. Our cash outflow from net losses adjusted for non-cash charges and adjustments was $36.7 million and $35.4 million for the 2023 Period and the 2022 Period, respectively. Non-cash charges and adjustments were primarily related to change in fair value of ~~one-time severance~~the preferred stock tranche liability and ~~related costs of approximately $713,000~~stock-based compensation expense in the ~~2016~~2023 Period and stock-based compensation expense in the 2022 Period. Our cash outflow from operating activities due to changes in operating assets and liabilities was $3.5 million for the 2023 Period. Our cash inflow from operating activities due to changes in operating assets and liabilities was $3.4 million for the 2022 Period. Cash outflow due to changes in operating assets and liabilities for the 2023 Period was primarily driven by a decrease of $1.6 million in accrued expenses and other liabilities, and an increase of $1.5 million in prepaid expenses, other current assets and other assets. The increase in prepaid expenses, other current assets, and other assets is exclusive of cash received from PanCAN and used on the RAMP 205 study. Cash inflow due to changes in operating assets and liabilities for the 2022 Period was primarily driven by an increase of $2.0 million in accrued expenses and other liabilities and a decrease of $1.6 million in prepaid expenses, other current assets, and other assets. Cash used in operating activities was $40.2 million and $32.0 million for the 2023 Period and the 2022 Period, respectively.

Investing activities.The cash provided by investing activities for the ~~2017~~2023 Period ~~reflects~~relates to the net purchases of investments of $13.2 million. The cash provided by investing activities for the 2022 Period relates to the net maturities of investments of ~~$39.4~~$48.5 million. ~~The cash provided in investing activities for the 2016 Period reflects the net maturities~~

Table of ~~investments of $35.9 million.~~Contents

Financing activities. The cash provided by financing activities for the ~~2017~~2023 Period primarily represents ~~$14.1~~$91.9 million of proceeds from our previously disclosed public offering in June 2023 of common stock and pre-funded warrants to purchase shares of our common stock, net of issuance costs, $28.1 million of proceeds received from issuance of Series B Convertible Preferred Stock, net of issuance costs, $14.9 million of proceeds received pursuant to the loan and security agreement with Oxford, $1.4 million of proceeds received from insurance premium financing and less than $0.1 million of proceeds received related to our employee stock purchase plan, partially offset by $0.9 million of payments on insurance premium financing. The cash provided by financing activities for the 2022 Period primarily represents $24.1 million of net proceeds received from the loan and security agreement with Oxford, $1.8 million of net proceeds received under our at-the market equity offering program, and $0.2 million of proceeds received related to exercise of stock options and employee stock purchase plan. Refer to Note 11. Capital Stock to our unaudited condensed consolidated financial statements included in this quarterly report for additional details on the January 2023 offering of our Series B Convertible Preferred Stock, the June 2023 offering of our common stock and pre-funded warrants to purchase shares of our common stock, and our at-the-market equity ~~program, $2.4 million~~offering program; Note 7. Debt to our unaudited condensed consolidated financial statements included in ~~net proceeds received from a~~this quarterly report for additional details on the loan and security agreement ~~executed~~ with ~~Hercules, and approximately $91,000 received from the exercise of stock options, offset by approximately $138,000 of deferred financing costs. The cash used~~Oxford; Note 9. Notes Payable to our unaudited condensed consolidated financial statements included in ~~financing activities~~this quarterly report for ~~the 2016 Period represents approximately $5,000 used to satisfy the tax withholding obligations on certain restricted stock units that were net settled by employees.~~

On March 21, 2017 (Closing Date), Verastem, Inc. (Borrower) entered into a term loan facility of up to $25.0 million (Term Loan) with Hercules, the proceeds of which have been and will be used for our ongoing research and development programs and for general corporate purposes. The Term Loan is governed by a loan and security agreement, dated March 21, 2017, which provides for up to four separate advances subject to certain conditions of funding. The first tranche of $2.5 million was drawnadditional details on the ~~Closing Date. On October 12, 2017, the Borrower drew an additional $7.5 million under the Loan Agreement, and used $6.0 million of the proceeds to make a milestone payment pursuant to our license~~finance agreement with ~~Infinity.~~

~~The Term Loan will mature on December 1, 2020. Each advance accrues interest at a floating per annum rate equal~~AFCO Premium Credit LLC related to insurance premium financing and the ~~greater of either (a) 10.5% or (b) the lesser of (i) 12.75% and (ii) the sum of (x) 10.5% plus (y) (A) the prime rate minus (B) 4.5%. The Term Loan provides for interest-only~~monthly payments until November 1, 2018. The interest-only period may be extended to May 1, 2019 if the Borrower obtains minimum cash proceeds of $20.0 million from a sale of equity securities or subordinated debt and/or ongoing commercial partnerships. Thereafter, amortization payments will be payable monthly in twenty-six installments (or, if the period requiring interest-only payments has been extended to May 1, 2019, in twenty installments) of principal and interest ~~(subject~~ related thereto; and Note 10. Convertible Senior Notes to ~~recalculation upon a change in prime rates).~~

~~The Term Loan is secured by a lien on substantially all of the assets of the Borrower, other than intellectual property and contains customary covenants and representations.~~

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On March 30, 2017, we terminated the at-the-market equity offering program established in December 2013 and established a new at-the-market equity offering program pursuant to which we were able to offer and sell up to $35.0 million of our common stock at then current market prices from time to time through Cantor Fitzgerald & Co. (Cantor), as sales agent. On August 28, 2017, we amended our sales agreement with Cantor to increase the maximum aggregate offering price of shares of common stock that can be sold under the at-the-market program to $75.0 million. Through September 30, 2017, we sold 2,853,753 shares under this program for net proceeds of approximately $14.1 million (after deducting commissions and other offering expenses).

As of November 6, 2017, we sold an additional 544,368 shares of common stock under the at-the-market equity offering program with net proceeds of $2.5 million (after deducting commissions and other offering expenses).

~~Funding requirements~~

~~We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses and operating losses will increase substantially if and as we:~~

~~prepare our NDA filing for duvelisib and for the anticipated commercialization of duvelisib;~~

~~continue our ongoing clinical trials, including with our most advanced product candidates duvelisib and defactinib;~~

~~initiate additional clinical trials for our product candidates;~~

~~maintain, expand and protect our intellectual property portfolio;~~

~~acquire or in-license other products and technologies;~~

~~hire additional clinical, development 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~~

~~establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval.~~

~~Without additional funding, we do not believe that we have sufficient funds to meet our obligations within the next twelve months from the date of issuance of these~~unaudited condensed consolidated financial ~~statements. These factors raise substantial doubt about~~statements included in this quarterly report for details on our ~~ability to continue as a going concern. Because~~5.00% Convertible Senior Notes due 2048.

Table of ~~the numerous risks and uncertainties associated with the development and commercialization~~Contents

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The disclosure of our ~~product candidates,~~contractual obligations and commitments was reported in our Annual Report on Form 10-K for the ~~extent to which we may enter into collaborations with third parties for development~~year ended December 31, 2022. There have not been any material changes from the contractual obligations and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates. Our future capital requirements will depend on many factors, including:

~~the scope, progress and results of our ongoing and potential future clinical trials;~~

~~the extent to which we acquire or in-license other products and technologies;~~

~~the costs, timing and outcome of regulatory review of our product candidates (including our efforts to seek approval and fund the preparation and filing of regulatory submissions);~~

~~the costs and timing of future commercialization activities for such product candidates, for which we receive marketing approval;~~

~~revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;~~

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~~the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property related claims; and~~

~~our ability to establish collaborations on favorable terms, if at all.~~

~~Until~~commitments previously disclosed in such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. Debt 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 collaborations, strategic alliances or licensing arrangements with third parties, 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 product candidates that we would otherwise prefer to develop and market ourselves.report.

~~OFF-BALANCE SHEET ARRANGEMENTS~~

~~We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.~~

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~

Risk.

We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents and investments of ~~$60.3 million and $80.9~~$183.1 million as of ~~September~~June 30, ~~2017 and December 31, 2016, respectively,~~2023, consisting of cash, U.S. Government money market funds, ~~and~~agency bonds, corporate bonds and commercial paper of publicly traded companies. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because most of our investments are interest bearing. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration of most of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

We ~~have contracts~~contract with CROs and contract manufacturers globally which may be denominated in foreign currencies. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of ~~September~~June 30, ~~2017,~~2023, an immaterial amount of our total liabilities ~~was~~were denominated in currencies other than the functional currency.

On March ~~21, 2017,~~25, 2022, we entered into ~~a term loan facility of up to~~the Loan Agreement, under which we borrowed $25.0 million ~~with Hercules Capital, Inc. (Term Loan). An initial term loan was made on~~in March ~~21, 2017~~2022 and $15.0 million in ~~an aggregate principal amount~~March 2023, for a total of $40.0 million. The Term Loans under the Loan Agreement bear interest at a floating rate equal to ~~$2.5 million and an additional $7.5 million on October 12, 2017. The Term Loan bears interest per annum equal to~~(a) the greater of ~~either (a) 10.5% or (b)~~(i) the ~~lesser of (i) 12.75%~~one-month CME Secured Overnight Financing Rate and (ii) ~~the sum of (x) 10.5%~~0.13% plus ~~(y) (A) the prime rate minus (B) 4.5%~~(b) 7.37%, which is subject to an overall floor and cap. Changes in interest rates ~~can~~will cause interest charges to fluctuate under the ~~Term Loan. As of September 30, 2017, principal payable under the Term~~ Loan ~~was $2.5 million.~~Agreement. A 10% increase in current interest rates would have resulted in an immaterial increase in the amount of cash interest expense ~~paid~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023 due to the overall interest rate floor and cap.

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Item 4. Controls and ~~Procedures.~~Procedures.

Evaluation of disclosure controls and procedures

Our management, with the participation of our President and Chief Executive Officer (principal executive officer) and our ~~Chief Financial Officer,~~Vice President of Finance (principal financial and accounting officer), evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2017.~~2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934 (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~September~~June 30, ~~2017,~~2023, our President and Chief Executive Officer and our ~~Chief Financial Officer~~Vice President of Finance concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER ~~INFORMATION~~INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings.

None.

Item 1A. Risk ~~Factors.~~Factors.

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Item 1A. ~~(Risk Factors)~~Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2022 as filed with the SEC on March ~~23, 2017 and as supplemented or updated by the risk factors described below.~~ 14, 2023.

~~Risks Related to the Discovery, Development and Commercialization of Our Product Candidates~~

~~The currently reported results of the DUO study are based on top-line data and may differ from the final, complete study results once all data are fully analyzed.~~

~~The reported results of our DUO study consist of only top-line data.~~Top-line data are based on a preliminary analysis of efficacy and safety data, and therefore these currently reported results are subject to change following a completion of the more extensive data analysis we expect to perform. Top-line data are based on important assumptions, estimations, calculations and information currently available to us, and we have not had an opportunity to evaluate all of the data from the DUO study. As a result, the top-line results may differ from the final results, or different conclusions or considerations may qualify such top-line results, once the complete data have been fully evaluated. If these top-line data differ from the results of the full data or subsequent data from patients during the remainder of the DUO study or subsequent treatment, our ability to obtain or maintain approval for, and commercialize, duvelisib may be harmed, which could materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.

~~Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market~~

~~acceptance by physicians, patients, healthcare payors and others in the medical community necessary for~~

~~commercial success.~~

If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical community. If our product candidates do not achieve an adequate level of acceptance, or if we are unable to increase market acceptance of our products as compared to existing or competitive products, we may not generate significant product revenues and we may not become profitable. In addition, clinical studies of duvelisib showed side effects that may need to be managed to be profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

~~efficacy and potential advantages compared to alternative treatments;~~

~~the ability to offer our products for sale at competitive prices;~~

~~convenience and ease of administration compared to alternative treatments;~~

~~the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;~~

~~the line of therapy our products are designated under physician treatment guidelines;~~

~~changes in the standard of care for the targeted indications for our products;~~

~~limitations or warnings, including distribution or use restrictions, contained in the approved labeling for any of our products;~~

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~~the strength of marketing and distribution support;~~

~~sufficient third-party coverage or reimbursement;~~

~~the ability of the medical community to appropriately recognize and manage side effects;~~

~~safety concerns with similar products marketed by others; and~~

~~the prevalence and severity of any side effects as a result of treatment with our product candidates.~~

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. For example, a further review and analysis of this data may change the conclusions drawn from this unaudited data indicating less promising results than we currently anticipate.

In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. We do not know whether any clinical trial we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain regulatory approval to market our product candidates.

In addition, the design of a clinical trial may determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Although we view the top-line results from our Phase 3 DUO, Phase 2 DYNAMO and other studies as promising, the FDA or other regulatory authorities may require additional testing to substantiate our claims, which could delay or prevent marketing approval for duvelisib.

A failure of one or more clinical trials could indicate a higher likelihood that subsequent clinical trials of the same product candidate in the same or other indications or subsequent clinical trials of other related product candidates will be unsuccessful for the same reasons as the unsuccessful clinical trials.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

~~regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;~~

~~we may have delays in reaching or fail to reach agreement on clinical trial contracts or clinical trial protocols with prospective trial sites;~~

clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;

the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;

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~~our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;~~

regulators or institutional review boards may require that we or our investigators suspend or terminate clinical trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

~~the cost of clinical trials of our product candidates may be greater than we anticipate;~~

~~the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and~~

our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

~~be delayed in obtaining marketing approval for our product candidates;~~

~~not obtain marketing approval at all;~~

~~obtain approval for indications or patient populations that are not as broad as intended or desired;~~

obtain approval with labeling that includes significant use or distribution restrictions including imposition of a Risk Evaluation and Mitigation Strategy (REMS), or safety warnings, including boxed warnings;

~~be subject to additional post marketing testing requirements; or~~

~~have the product removed from the market after obtaining marketing approval.~~

The FDA and foreign regulatory authorities may determine that the results from our ongoing and future trials do not support regulatory approval and may require us to conduct an additional clinical trial or trials. If these agencies take such a position, the costs of development of our product candidates could increase materially and their potential market introduction could be delayed. The regulatory agencies could also require that we conduct additional clinical, nonclinical or manufacturing validation studies and submit that data before it will consider a New Drug Application (NDA). Our product development costs will also increase if we experience delays in clinical testing or marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

In September 2017, we announced top-line results from our Phase 3 DUO study of duvelisib. We plan to use these clinical data together with the data from our Phase 2 DYNAMO study and other clinical studies of duvelisib to submit an NDA to the FDA during the first quarter of 2018.

~~Defactinib is in Phase 1 and Phase 2 clinical trials and the development program continues to progress. The toxicities reported thus far are consistent with other drugs in this class.~~

As a result of adverse events observed to date, or further safety or toxicity issues that we may experience in our clinical trials in the future, we may not receive approval to market any product candidates, which could prevent us from ever generating revenue from the sale of products or achieving profitability. Results of our trials could reveal an unacceptably high severity and prevalence of side effects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our products candidates for any or all targeted indications.

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Many compounds that initially showed promise in early stage testing for treating cancer have later been found to cause side effects that prevented further development of the compound. In addition, while we and our clinical trial investigators currently determine if serious adverse or unacceptable side effects are drug related, the FDA or other non-U.S. regulatory authorities may disagree with our or our clinical trial investigators’ interpretation of data from clinical trials and the conclusion that a serious adverse effect or unacceptable side effect was not drug related.

~~Even if we are able to commercialize any product candidates, the products may become subject to unfavorable~~

~~pricing regulations or third-party coverage and reimbursement policies, which would harm our business.~~

The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. In the United States, recently passed legislation may significantly change the purchase of pharmaceutical products, resulting in lower prices and a reduction in product demand. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will cover and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, the level of reimbursement. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. Obtaining coverage and reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. If coverage and reimbursement is not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.

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~~Risks Related to Our Financial Position and Need for Additional Capital~~

~~We require additional financing to execute our operating plan and continue to operate as a going concern.~~

Our unaudited condensed consolidated financial statements for the quarter ended September 30, 2017 have been prepared assuming we will continue to operate as a going concern, but we believe that our continuing operating losses raise substantial doubt about our ability to continue as such. Because we continue to experience net operating losses, our ability to continue as a going concern is subject to our ability to obtain necessary capital from outside sources, including obtaining additional capital from the sale of our securities or assets, obtaining loans from financial institutions or entering into partnership arrangements. Our continued net operating losses increase the difficulty in obtaining such capital, and there can be no assurances that we will be able to obtain such capital on favorable terms or at all. If we are unable to obtain sufficient capital from the sale of our securities or from alternative sources, we may be required to reduce, defer, or discontinue certain or all of our research and development activities, including discontinuing development of duvelisib and defactinib, or we may not be able to continue as a going concern.

~~We have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and~~

~~may never achieve or maintain profitability.~~

Since inception, we have incurred significant operating losses. As of September 30, 2017, we had an accumulated deficit of $284.9 million. To date, we have not generated any revenues and have financed our operations through private placements of our preferred stock, public offerings of our common stock, and sales of our common stock pursuant to our at-the-market equity offering programs. In March 2017, Verastem, Inc. (Borrower) entered into a term loan facility with Hercules Capital, Inc. (Hercules), the proceeds of which will be used for our ongoing research and development programs and for general corporate purposes. We have devoted substantially all of our efforts to research and development. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:

~~prepare our NDA filing for duvelisib and for the anticipated commercialization of duvelisib;~~

~~continue our ongoing clinical trials with our product candidates, including with our most advanced product candidates duvelisib and defactinib;~~

~~initiate additional clinical trials for our product candidates;~~

~~maintain, expand and protect our intellectual property portfolio;~~

~~acquire or in-license other products and technologies;~~

~~hire additional clinical, development 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~~

~~establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval.~~

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To become and remain profitable, we must develop and eventually commercialize a product or products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining marketing approval for these product candidates and manufacturing, marketing and selling those products for which we may obtain marketing approval. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We will continue to need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

~~We expect our expenses to increase in connection with our ongoing activities, particularly as we continue~~

the clinical development of our product candidates. In addition, as we seek marketing approval for duvelisib on the basis of our clinical studies to date, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our clinical development programs or commercialization efforts.

~~Our future capital requirements will depend on many factors, including:~~

~~the scope, progress and results of our ongoing and potential future clinical trials;~~

~~the extent to which we acquire or in-license other product candidates and technologies;~~

~~the costs, timing and outcome of regulatory review of our product candidates (including our efforts to seek approval and fund the preparation and filing of regulatory submissions);~~

~~the costs and timing of future commercialization activities for such product candidates, for which we receive marketing approval;~~

~~revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;~~

~~the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property related claims; and~~

~~our ability to establish collaborations or partnerships on favorable terms, if at all.~~

Conducting clinical trials is a time consuming, expensive and uncertain process that takes 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 products that may not be commercially available for several years, if at all. Accordingly, even if we receive regulatory approval of one of our product candidates, it will take several years to achieve peak sales and we will need to continue to rely on additional financing to further our clinical development objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

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~~Risk Related to Our Indebtedness~~

~~Our level of indebtedness and debt service obligations could adversely affect our financial condition, and may make it more difficult for us to fund our operations.~~

In March 2017, the Borrower entered into a Loan and Security Agreement (the Loan Agreement), with Hercules. Under the Loan Agreement, Hercules will provide access to term loans with an aggregate principal amount of up to $25.0 million (the Term Loan). Concurrently with the closing of the Loan Agreement, the Borrower borrowed an initial tranche of $2.5 million. On October 12, 2017, the Borrower drew an additional $7.5 million under the Loan Agreement, and used $6.0 million of the proceeds to make a milestone payment pursuant to the Company’s license agreement with Infinity Pharmaceuticals, Inc.

All obligations under the Loan Agreement are secured by substantially all of the Borrower’s existing property and assets, excluding its intellectual property. This indebtedness may create additional financing risk for the Borrower, particularly if its business or prevailing financial market conditions are not conducive to paying off or refinancing its outstanding debt obligations at maturity. This indebtedness could also have important negative consequences, including:

we will need to repay our indebtedness by making payments of interest and principal, which will reduce the amount of money available to finance our operations, our research and development efforts and other general corporate activities; and

our failure to comply with the restrictive covenants in the Loan Agreement could result in an event of default that, if not cured or waived, would accelerate our obligation to repay this indebtedness, and Hercules could seek to enforce our security interest in the assets securing such indebtedness.

~~To the extent additional debt is added to the Borrower’s current debt levels, the risks described above could increase.~~

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

RECENT SALES OF UNREGISTERED SECURITIES

None.

PURCHASE OF EQUITY SECURITIES

We did not purchase any of our equity securities during the period covered by this Quarterly Report on Form 10-Q.

Item 3. Defaults Upon Senior ~~Securities.~~

Securities.

None.

Item 4. Mine Safety ~~Disclosures.~~

Disclosures.

None.

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Item 5. Other ~~Information.~~Information.

None.

~~The following disclosure is provided in accordance with and in satisfaction of the requirements of~~ Item ~~2.02 “~~~~Results of Operations and Financial Condition” of Form 8-K:~~

On November 7, 2017, Verastem, Inc. announced its financial results for the quarter ended September 30, 2017 and commented on certain corporate accomplishments and plans. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 hereto.

The information furnished in Item 5 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.

~~Item~~ 6. ~~Exhibits.~~

Exhibits.

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated herein by reference.

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EXHIBIT INDEX

c
3.1		Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed by the Registrant on March 12, 2019).
~~10.1~~ 3.2	*	~~Employment agreement, dated October 9, 2017,~~Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed by the Registrant on March 12, 2019).
3.3		Amended and ~~between~~Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.4 to Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-177677) filed by the Registrant on January 13, 2012).
3.4		Certificate of Amendment to the Restated Certificate of Incorporation of Verastem, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and ~~NgocDiep T. Le.~~Exchange Commission on May 21, 2020).
3.5		Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on November 7, 2022)
~~31.1~~ 3.6	*	Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on January 25, 2023)
3.7		Certificate of Amendment to the Restated Certificate of Incorporation of Verastem, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on May 31, 2023).
4.1		Form of Pre-Funded Warrant. (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on June 21, 2023).
10.1	*	Amended and Restated 2018 Employee Stock Purchase Plan
10.2	*	Amended and Restated 2012 Incentive Plan
10.3	*	Amended and Restated 2021 Equity Incentive Plan
31.1	*	Certification of ~~Chief~~Principal Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of ~~Chief~~Principal Financial and Accounting Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	*	Certification of ~~Chief~~Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	*	Certification of ~~Chief~~Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	*	Press Release issued by Verastem, Inc. on ~~November 7, 2017.~~August 8, 2023 (furnished herewith).
101.INS	*	Inline XBRL Instance Document
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		The cover page from this Current Report on form 10-Q, formatted in Inline XBRL

*	Filed or furnished herewith.

*Filed herewith.

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SIGNATURES

~~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.


			VERASTEM, INC.
	~~VERASTEM, INC.~~
Date: ~~November 7, 2017~~August 8, 2023	By:	/s/ ~~Robert Forrester~~DANIEL W. PATERSON

		~~Robert Forrester~~Daniel W. Paterson
		President and Chief Executive Officer
		(Principal executive officer)

Date: ~~November 7, 2017~~August 8, 2023	By:	/s/ ~~Julie B. Feder~~DANIEL CALKINS

		~~Julie B. Feder~~Daniel Calkins
		~~Chief Financial Officer~~Vice President, Finance
		(Principal financial and accounting officer)

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

For the quarterly period ended ~~September~~June 30, ~~2017~~2023
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Delaware (State or other jurisdiction of incorporation or organization)	27-3269467 (I.R.S. Employer Identification Number)
117 Kendrick Street, Suite 500 Needham, MA (Address of principal executive offices)	02494 (Zip Code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	VSTM	The Nasdaq Capital Market


Large accelerated filer ☐	Accelerated filer ☐	~~Non‑accelerated~~Non-accelerated filer ☐☒ (Do not check if a smaller reporting company)	Smaller reporting company ☒	Emerging growth company ☒☐

PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1528
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2138
Item 4.	Controls and Procedures	2238
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	2339
Item 1A.	Risk Factors	2339
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2939
Item 3.	Defaults Upon Senior Securities	2939
Item 4.	Mine Safety Disclosures	2939
Item 5.	Other Information	3039
Item 6.	Exhibits	3039
EXHIBIT INDEX		40
SIGNATURES		41



	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	183,086	$	74,933
Short-term investments		—		12,961
Accounts receivable, net		2		31
Prepaid expenses and other current assets		6,875		4,945
Total current assets		189,963		92,870
Property and equipment, net		40		92
Right-of-use asset, net		1,494		1,789
Restricted cash		241		241
Other assets		20		58
Total assets	$	191,758	$	95,050
Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable	$	4,553	$	4,901
Accrued expenses		13,756		14,983
Note Payable		579		—
Deferred liabilities		744		710
Lease liability, short-term		865		794
Convertible senior notes		290		275
Total current liabilities		20,787		21,663
Non-current liabilities:
Long-term debt		39,739		24,526
Lease liability, long-term		1,022		1,470
Preferred stock tranche liability		7,460		—
Total liabilities		69,008		47,659
Convertible preferred stock:
Series B Convertible Preferred Stock, $0.0001 par value; 2,144 and 0 shares designated at June 30, 2023 and December 31, 2022, respectively; 1,200 and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		21,159		—
Stockholders’ equity:
Preferred Stock, $0.0001 par value; 5,000 shares authorized:
Series A Convertible Preferred Stock, $0.0001 par value; 1,000 shares designated, 1,000 shares issued and outstanding at June 30, 2023 and December 31, 2022		—		—
Common stock, $0.0001 par value; 300,000 shares authorized, 25,242 and 16,712 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively⁽¹⁾		3		2
Additional paid-in capital⁽¹⁾		879,105		784,912
Accumulated other comprehensive income		1		—
Accumulated deficit		(777,518)		(737,523)
Total stockholders’ equity		101,591		47,391
Total liabilities, convertible preferred stock and stockholders’ equity	$	191,758	$	95,050



	September 30,		December 31,
	2017		2016
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	51,270	$	32,349
Short-term investments		8,994		48,548
Prepaid expenses and other current assets		940		398
Total current assets		61,204		81,295
Property and equipment, net		989		1,417
Restricted cash		162		162
Other assets		784		755
Total assets	$	63,139	$	83,629
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,363	$	4,095
Accrued expenses		12,255		6,896
Total current liabilities		19,618		10,991
Non-current liabilities:
Long-term debt		2,335		—
Other non-current liabilities		201		341
Total liabilities		22,154		11,332
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized, no shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		—		—
Common stock, $0.0001 par value; 100,000 shares authorized, 39,945 and 36,992 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		4		4
Additional paid-in capital		325,886		307,587
Accumulated other comprehensive income		2		29
Accumulated deficit		(284,907)		(235,323)
Total stockholders’ equity		40,985		72,297
Total liabilities and stockholders’ equity	$	63,139	$	83,629


	Three months ended				Nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Operating expenses:
Research and development	$	17,743	$	4,216	$	35,170	$	12,887
General and administrative		5,394		3,843		14,582		12,315
Total operating expenses		23,137		8,059		49,752		25,202
Loss from operations		(23,137)		(8,059)		(49,752)		(25,202)
Interest income		121		137		416		417
Interest expense		(110)		—		(231)		—
Net loss	$	(23,126)	$	(7,922)	$	(49,567)	$	(24,785)
Net loss per share—basic and diluted	$	(0.61)	$	(0.21)	$	(1.33)	$	(0.67)
Weighted-average number of common shares used in net loss per share—basic and diluted		37,630		36,992		37,207		36,986

Net loss	$	(23,126)	$	(7,922)	$	(49,567)	$	(24,785)
Unrealized (loss) gain on available-for-sale securities		7		(17)		(27)		17
Comprehensive loss	$	(23,119)	$	(7,939)	$	(49,594)	$	(24,768)


	December 31, 2016
Description	Total		Level 1		Level 2		Level 3
Financial assets
Cash equivalents	$	30,540	$	20,540	$	10,000	$	—
Short-term investments		48,548		—		48,548		—
Total financial assets	$	79,088	$	20,540	$	58,548	$	—


	September 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Cash and cash equivalents:
Cash and money market accounts	$	51,270	$	—	$	—	$	51,270
Total cash and cash equivalents	$	51,270	$	—	$	—	$	51,270
Investments:
Corporate bonds and commercial paper (due within 1 year)	$	8,992	$	2	$	—	$	8,994
Total investments	$	8,992	$	2	$	—	$	8,994
Total cash, cash equivalents, and investments	$	60,262	$	2	$	—	$	60,264



	September 30, 2017		December 31, 2016
License fees (1)	$	6,000	$	—
Contract research organization costs		3,669		3,258
Compensation and related benefits		1,581		2,505
Professional fees		608		403
Deferred rent		186		175
Consulting fees		173		527
Other		38		28
	$	12,255	$	6,896


				Weighted-average
		Weighted-average		remaining	Aggregate
		exercise price per		contractual term	intrinsic value
	Shares	share		(years)	(in thousands)
Outstanding at December 31, 2016	5,848,470	$	6.35	8.0	$	62
Granted	2,864,930	$	2.14
Exercised	(98,857)	$	0.92
Forfeited/cancelled	(183,188)	$	2.29
Outstanding at September 30, 2017	8,431,355	$	5.08	8.0	$	15,010
Vested at September 30, 2017	4,257,760	$	7.46	7.0	$	4,843
Vested and expected to vest at September 30, 2017(1)	8,431,355	$	5.08	8.0	$	15,010


	Nine months ended September 30,
	2017		2016
Risk-free interest rate	1.98	%	1.47	%
Volatility	79	%	75	%
Dividend yield	—		—
Expected term (years)	5.9		5.9


	Three months ended September 30,
	2017		2016
	(in thousands)		(in thousands)
Duvelisib	$	13,600	$	—
Defactinib		807		1,029
Unallocated and other research and development expense		2,676		2,950
Unallocated stock-based compensation expense		660		237
Total research and development expense	$	17,743	$	4,216