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

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

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

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

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

As of ~~August 3,~~November 2, 2021, the registrant had ~~43,019,620~~43,066,219 common shares, with no par value per share, outstanding.

~~Our ability to implement our~~ ~~business~~ strategy is subject to numerous risks and uncertainties. This summary does not include all material risks associated with our business and is not a conclusive ranking or prioritization of our risk factors. Further, placement of certain of these risks in the summary section as opposed to others does not constitute guidance that the risk factors included in the summary are the only material risks to consider when considering an investment in our securities. We believe that all risk factors presented in this Quarterly Report on Form 10-Q are important to an understanding of our company and should be given careful consideration. In addition, the summary of company specific risks does not include the appropriate level of detail necessary to fully understand these risks, and the corresponding risk factors that follow provide essential detail and context necessary to fully understand and appreciate these principal risks associated with our business.

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

CONDENSED CONSOLIDATED STATEMENTS OF NON-CONTROLLING INTEREST, CONVERTIBLE PREFERRED SHARES

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

CONDENSED CONSOLIDATED STATEMENTS OF NON-CONTROLLING INTEREST, CONVERTIBLE PREFERRED SHARES

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

Fusion Pharmaceuticals Inc., together with its consolidated subsidiaries (“Fusion” or the “Company”), is a clinical-stage oncology company focused on developing next-generation radiopharmaceuticals as precision medicines. The Company was formed and subsequently incorporated as Fusion Pharmaceuticals Inc. in December 2014 under the Canada Business Corporations Act. The Company was founded to advance certain intellectual property relating to radiopharmaceuticals that had been developed by the Centre for Probe Development and Commercialization, a radiopharmaceutical research and good manufacturing practice production center. The Company is headquartered in Hamilton, Ontario.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of the COVID-19 pandemic, the ability to secure additional capital to fund operations and commercial success of its product candidates. Product candidates currently under development will require extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned ~~subsidiaries,~~subsidiary, Fusion Pharmaceuticals US Inc. ~~and~~The Company’s Irish subsidiary, Fusion Pharmaceuticals (Ireland) Unlimited Company, ~~which the Company refers to as its Irish subsidiary. The Company’s Irish subsidiary~~ was majority-owned until June 2020 at which time it became a wholly-owned subsidiary and was subsequently re-registered in Ireland as an unlimited company in December 2020. As a result of consolidating the Irish subsidiary as majority-owned until June 2020, the Company reflected a non-controlling interest on the consolidated balance sheet; however, the Company did not recognize a non-controlling interest in the consolidated statements of operations and comprehensive loss as the majority-owned subsidiary had no operating activities and was an extension of the parent company. The Company's Irish subsidiary was liquidated and dissolved in September 2021. All intercompany accounts and transactions have been eliminated in consolidation.

On June 19, 2020, the Company effected a one-for-5.339 reverse share split of its issued and outstanding common shares and a proportional adjustment to the existing conversion ratios for each class of the Company’s Preferred Shares (see Note 8) and Preferred Exchangeable Shares (see Note 8). Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse share split and adjustment of the preferred share conversion ratios.

On June 25, 2020, the Company completed an initial public offering (“IPO”) of its common shares and issued and sold 12,500,000 common shares at a public offering price of $17.00 per share, resulting in net proceeds of $193.1 million after deducting underwriting fees, and after deducting offering costs.

Upon closing of the IPO, the Company’s outstanding preferred exchangeable shares automatically converted into convertible preferred shares then the outstanding convertible preferred shares automatically converted into shares of common shares (see Note 8). Upon conversion of the convertible preferred shares, the Company reclassified the carrying value of the convertible preferred shares to common shares and additional paid-in capital. In addition, the warrants to purchase the Company’s Series B convertible preferred shares and warrants to purchase preferred exchangeable shares of the Company’s Irish subsidiary were converted into warrants to purchase the Company’s common shares upon the closing of the IPO. As a result, the warrant liability was remeasured a final time on the closing date of the IPO and reclassified to shareholders’ equity (deficit).

In connection with the IPO on June 25, 2020, the Company filed an amended and restated articles of the corporation under laws governed by the Canada Business Corporations Act to authorize unlimited common shares with no par value.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations primarily with proceeds from sales of its convertible preferred shares, including borrowings under a convertible promissory note, which converted into convertible preferred shares, proceeds from sales of its Irish subsidiary’s preferred exchangeable shares, and most recently with the proceeds from the IPO completed in June 2020. The Company has incurred recurring losses since its inception, including net losses of $~~26.9~~19.4 million and $~~44.4~~63.8 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively and net losses of $~~44.7~~10.0 million and $~~55.0~~64.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. In addition, as of ~~June~~September 30, 2021, the Company had an accumulated deficit of $~~157.6~~177.0 million. The Company expects to continue to generate operating losses for the foreseeable future. As of the issuance date of these condensed consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.

The COVID-19 pandemic, which began in December 2019 and has spread worldwide, has caused many governments to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, heightened border security and other measures. The impact of this pandemic has been, and will likely continue to be, extensive in many aspects of society, which has resulted, and will likely continue to result, in significant disruptions to the global economy as well as businesses and capital markets around the world. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain.

In response to public health directives and orders and to help minimize the risk of the virus to employees, the Company has taken precautionary measures, including implementing work-from-home policies for certain employees. The impact of the virus and variants thereof, including work-from-home policies, may negatively impact productivity, disrupt the Company’s business, and delay its preclinical research and clinical trial activities and its development program timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct its business in the ordinary course. Specifically, the Company has experienced material delays in patient recruitment and enrollment in its ongoing Phase 1 clinical trial of FPI-1434 as a result of continued resourcing issues related to COVID-19 at trial sites and potentially due to concerns among patients about participating in clinical trials during a public health emergency. The Company may not be able to enroll additional patient cohorts on its planned timeline due to disruptions at its clinical trial sites and is unable to predict how the COVID-19 pandemic may affect its ability to successfully progress its clinical programs in the future. Other impacts to the Company’s business may include temporary closures of its suppliers or other third parties upon whom the Company relies and disruptions or restrictions on its employees’ ability to travel. Any prolonged material disruption to the Company’s employees, suppliers or other third parties upon whom the Company relies could adversely impact the Company’s preclinical research and clinical trial activities, financial condition and results of operations, including its ability to obtain financing.

The Company is monitoring the potential impact of the COVID-19 pandemic, including variants thereof, on its business and condensed consolidated financial statements. To date, the Company has not ~~experienced material business disruptions or~~ incurred impairment losses in the carrying values of its assets as a result of the pandemic and it is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in these condensed consolidated financial statements.

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuations of common shares, preferred share tranche rights and preferred share warrantsprior to the closing of the IPO, valuations of share-based awards and revenue recognition. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

The accompanying condensed consolidated balance sheet as of ~~June~~September 30, 2021, the condensed consolidated statement of operations and comprehensive loss, and the condensed consolidated statement of non-controlling interest, convertible preferred shares and shareholders’ equity (deficit) for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, and the condensed consolidated statement of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of ~~June~~September 30, 2021 and the results of its operations for three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 and its cash flows for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 are also unaudited. The results for the three and ~~six~~nine months ended ~~June~~September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

The accompanying balance sheet as of December 31, 2020 has been derived from the Company’s audited financial statements for the year ended December 31, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements as of December 31, 2020, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 25, 2021.

The reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s operating company in Canada, operating company in the U.S. and non-operating company in Ireland is also the U.S. dollar. As a result, the Company records no cumulative translation adjustments related to translation of unrealized foreign exchange gains or losses.

For the remeasurement of local currencies to the U.S. dollar functional currency of the Canadian and Irish entities, assets and liabilities are translated into U.S. dollars at the exchange rate in effect on the balance sheet date, and income items and expenses are translated into U.S. dollars at the average exchange rate in effect during the period. Resulting transaction gains (losses) are included in other income (expense), net in the consolidated statements of operations and comprehensive loss, as incurred.

Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in other income (expense), net in the consolidated statements of operations and comprehensive loss, as incurred.

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recorded $0.3 million and $0.2 million, respectively, of foreign currency gains in the condensed consolidated statements of operations and comprehensive loss. During the three and six months ended June 30, 2020, the Company recorded $0.2 million and less than ($0.1) million and $0.1 million, respectively, of foreign currency gains (losses) in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2020, the Company recorded less than ($0.1) million of foreign currency losses in the condensed consolidated statements of operations and comprehensive loss for both periods.

Cash and cash equivalents consist of standard checking accounts, money market accounts, and all highly liquid investments with an original maturity of three months or less at the date of purchase.

As of ~~June~~September 30, 2021 and December 31, 2020, the Company was required to maintain separate cash balances of $0.3 million to collateralize corporate credit cards with a bank, which was classified as restricted cash, current, on its condensed consolidated balance sheets. The Company also maintained a $0.1 million guaranteed investment certificate to fulfill certain contractual obligations which was classified as restricted cash, current, as of ~~June~~September 30, 2021 and December 31, 2020.

In connection with the Company’s lease agreement entered into in October 2019 (see Note 13), the Company maintains a letter of credit of $1.5 million for the benefit of the landlord. As of ~~June~~September 30, 2021, $0.3 million and $1.2 million of the underlying cash balance collateralizing this letter of credit was classified as restricted cash, current and non-current, respectively, on the Company’s condensed consolidated balance sheets based on the release date of the restrictions of this cash. As of December 31, 2020, the entire underlying cash balance collateralizing this letter of credit was classified as restricted cash, non-current, on the Company’s condensed consolidated balance sheets.

As of ~~June~~September 30, 2021 and December 31, 2020, the cash, cash equivalents and restricted cash of $~~29.5~~$40.3 million and $92.4 million, respectively, presented in the condensed consolidated statements of cash flows included cash and cash equivalents of $~~27.6~~$38.4 million and $90.5 million, respectively, and restricted cash of $1.9 million for both periods.

The Company determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company classifies its investments as current or non-current based on each instrument’s underlying maturity date. Investments with original maturities of greater than three months and less than twelve months are classified as current and are included in short-term investments in the condensed consolidated balance sheets. Investments with remaining maturities greater than one year from the balance sheet date are classified as non-current and are included in long-term investments in the condensed consolidated balance sheets. The Company’s investments are classified as available-for-sale, are reported at fair value and consist of U.S. government agency securities, corporate bonds, and commercial paper. Unrealized gains and losses are included in other comprehensive income (loss) as a component of shareholders’ equity (deficit) until realized. Amortization and accretion of premiums and discounts are recorded in interest income (expense). Realized gains and losses on debt securities are included in other income (expense), net.

If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s condensed consolidated statements of operations and comprehensive loss.

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds from the offering, either as a reduction to the carrying value of the preferred exchangeable shares or convertible preferred shares or in shareholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should an in-process equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss. The Company recorded $0.3 million of deferred offering costs as of ~~June~~September 30, 2021 in other non-current assets ~~(see Note 17)~~ and did 0t record any deferred offering costs as of December 31, 2020.

The Company considers the nature and contractual terms of arrangements and assesses whether an arrangement involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the activity. If the Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the activity, the Company accounts for such arrangement as a collaborative arrangement under ASC 808, Collaborative Arrangements. ASC 808 describes arrangements within its scope and considerations surrounding presentation and disclosure, with recognition matters subjected to other authoritative guidance, in certain cases by analogy.

For arrangements determined to be within the scope of ASC 808 where a collaborative partner is not a customer for certain research and development activities, the Company accounts for payments received for the reimbursement of research and development costs as a contra-expense in the period such expenses are incurred. This reflects the joint risk sharing nature of these activities within a collaborative arrangement. The Company classifies payments owed or receivables recorded as other current liabilities or prepaid expenses and other current assets, respectively, in the Company’s consolidated balance sheets.

If payments from the collaborative partner to the Company represent consideration from a customer in exchange for distinct goods and services provided, then the Company accounts for those payments within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). Please refer to Note 3, “Collaboration Agreement” for additional details regarding the Company’s Strategic Collaboration Agreement with AstraZeneca UK Limited (“AstraZeneca”) (the “AstraZeneca Agreement”).

In accordance with ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii)

determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the Company’s arrangements typically consist of a license to the Company’s intellectual property and/or research and development services. The Company may provide customers with options to additional items in such arrangements, which are accounted for separately when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. Amounts received, or that are unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract are recognized as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as the current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.

The Company’s revenue generating arrangements typically include upfront license fees, milestone payments and/or royalties.

If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

At the inception of an agreement that includes research and development milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach. The Company primarily uses the most likely amount approach as this approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of the estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty). The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

For the three and ~~six~~nine months ended ~~June~~September 30, 2021, the Company recorded ~~$0.5~~$0.3 million and $0.8 million, respectively, of revenue under collaboration agreements. Please refer to Note 3, “Collaboration Agreement” for additional details regarding revenue recognition under the AstraZeneca Agreement.

In determining whether an acquisition should be accounted for as a business combination or asset acquisition, the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is not deemed to be a business, and is instead deemed to be an asset. If this is not the case, the Company then further evaluates whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the Company concludes that the single identifiable asset or group of similar identifiable assets and activities is a business.

The Company accounts for business combinations using the acquisition method of accounting. Application of this method of accounting requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually. Acquired in-process research and development (“IPR&D”) is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. Transaction costs related to business combinations are expensed as incurred. Determining the fair value of assets acquired and liabilities assumed in a business combination requires management to use significant judgment and estimates, especially with respect to intangible assets.

During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, all adjustments are recorded in the consolidated statements of operations as operating expenses or income.

To date, the Company has not recorded any acquisitions as a business combination.

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire IPR&D with no alternative future use is charged to expense at the acquisition date.

Contingent consideration in asset acquisitions payable in the form of cash is recognized when payment becomes probable and reasonably estimable, unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the asset acquisition cost when acquired. Contingent consideration payable in the form of a fixed number of the Company’s own shares is measured at fair value as of the acquisition date and recognized when the issuance of the shares becomes probable. Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets, or, if related to IPR&D with no alternative future use, charged to expense.

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Prior to the settlement of the Company’s preferred share tranche right liability and prior to the conversion of the Company’s preferred share warrant liability, these instruments were carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above (see Note 4). The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 4). The carrying values of the Company’s amounts due for refundable investment tax credits and Canadian harmonized sales tax, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

The Company classified these preferred share tranche rights as a liability on its consolidated balance sheets as each preferred share tranche right was a freestanding financial instrument that may have required the Company to transfer assets upon the achievement of specified milestone events. Each preferred share tranche right liability was initially recorded at fair value upon the date of issuance of each preferred share tranche right and was subsequently remeasured to fair value at each reporting date. Changes in the fair value of the preferred share tranche right liability were recognized as a component of other income (expense) in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the preferred share tranche right liability were recognized until the respective preferred share tranche right was settled upon achievement of the specified milestones or it expired.

On May 15, 2020, the Company achieved the specified regulatory milestone associated with the Class B preferred share tranche right (see Note 8), which triggered the requirement of the Class B shareholders to participate in the Milestone Financing. Upon closing of the Milestone Financing on June 2, 2020, the Company issued and sold 36,806,039 Class B preferred shares at a price of $1.5154 per share and 4,437,189 Class B special voting shares at a price of $0.000001 per share and the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share, for aggregate gross proceeds of $62.5 million.

The Class B preferred share tranche right liability (see Note 8) was settled in connection with the achievement of the regulatory milestone associated with the Class B preferred share tranche right. Specifically, the fair value of the Class B preferred share tranche right liability was remeasured for the last time as of the Milestone Financing closing date, resulting in the Company recognizing a loss in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020 of $32.7 million for the change in the fair value of the tranche right liability between December 31, 2019 and June 2, 2020. Immediately thereafter, the balance of the Class B preferred share tranche right liability of $39.6 million was reclassified to Class B convertible preferred shares in an amount of $35.3 million and to non-controlling interest in the Company’s Irish subsidiary in an amount of $4.3 million on the consolidated balance sheet. For the ~~three and six~~nine months ended ~~June~~September 30, 2020, the Company recognized ~~losses~~a loss of ~~$31.6 million and~~ $32.7 million ~~respectively,~~ in the condensed consolidated statement of operations and comprehensive loss for the change in the fair value of the tranche right liability.

The Company classified warrants to purchase its convertible preferred shares and warrants to purchase preferred exchangeable shares of the Company’s Irish subsidiary as a liability on its consolidated balance sheets as these warrants were freestanding financial instruments that may have required the Company to transfer assets upon exercise (see Note 8). The preferred share warrant liability, which consisted of warrants to purchase Class B convertible preferred shares of the Company and warrants to purchase Class B preferred exchangeable shares of the Company’s Irish subsidiary, were initially recorded at fair value upon the date of issuance of each warrant and were subsequently remeasured to fair value at each reporting date. Changes in the fair value of the preferred share warrant liability were recognized as a component of other income (expense) in the consolidated statement of operations and comprehensive loss. Changes in the fair value of the preferred share warrant liability were recognized until each respective warrant was exercised, expired or qualified for equity classification.

Upon the closing of the IPO, the warrants to purchase its convertible preferred shares and warrants to purchase preferred exchangeable shares of the Company’s Irish subsidiary were converted into warrants to purchase shares of the Company’s common ~~shares~~.shares. As a result, the warrant liability was remeasured a final time on the closing date of the IPO and reclassified to shareholders’ equity (deficit) as the warrants qualify for equity classification.

Prior to January 1, 2021, the Company accounted for leases in accordance with ASC 840, Leases. At lease inception, the Company determined if an arrangement was an operating or capital lease. For operating leases, the Company recognized rent expense,

inclusive of rent escalation, holidays and lease incentives, on a straight-line basis over the lease term. The difference between rent expense recorded and the amount paid was charged to deferred rent. The Company presented lease incentives as deferred rent and amortized the incentives as a reduction to rent expense on a straight-line basis over the lease term. The Company classified deferred rent as current and noncurrent liabilities based on the portion of the deferred rent that was scheduled to mature within the proceeding twelve months.

Effective January 1, 2021, the Company accounts for leases in accordance with ASC 842, Leases. At contract inception, the Company determines if an arrangement is or contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If determined to be or contain a lease, the lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease. For each lease with a term greater than twelve months, the Company records a right-of-use asset and lease liability.

A right-of-use asset represents the economic benefit conveyed to the Company by the right to use the underlying asset over the lease term. A lease liability represents the obligation to make lease payments arising from the lease. The Company records amortization of operating right-of-use assets and accretion of lease liabilities as a single lease cost on a straight-line basis over the lease term. The Company elected the practical expedient to not separate lease and non-lease components and therefore measures each lease payment as the total of the fixed lease and associated non-lease components. Lease liabilities are measured at the lease commencement date and calculated as the present value of the future lease payments in the contract using the rate implicit in the contract, when available. If an implicit rate is not readily determinable, the Company uses its incremental borrowing rate measured as the rate at which the Company could borrow, on a fully collateralized basis, a commensurate loan in the same currency over a period consistent with the lease term at the commencement date. Right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments, less lease incentives granted by the lessor. The lease term is measured as the noncancelable period in the contract, adjusted for any options to extend or terminate when it is reasonably certain the Company will extend the lease term via such options based on an assessment of economic factors present as of the lease commencement date. The Company elected the practical expedient to not recognize leases with a lease term of twelve months or less.

The Company assesses its right-of-use assets for impairment consistent with the assessment performed for long-lived assets used in operations. If an impairment is recognized on operating lease right-of-use assets, the lease liability continues to be recognized using the same effective interest method as before the impairment and the operating lease right-of-use asset is amortized over the remaining term of the lease on a straight-line basis.

The Company’s operating leases are presented in the condensed consolidated balance sheet as operating lease right-of-use assets, classified as noncurrent assets, and operating lease liabilities, classified as current and noncurrent liabilities based on the discounted lease payments to be made within the proceeding twelve months. Variable costs associated with a lease, such as maintenance and utilities, are not included in the measurement of the lease liabilities and right-of-use assets but rather are expensed when the events determining the amount of variable consideration to be paid have occurred.

The Company has entered into various research, development and manufacturing contracts with research institutions and other companies. These agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research, development and manufacturing costs. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations to those third parties as of period end. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research, development and manufacturing activities, invoicing to date under the contracts, communication from the research institutions and other companies of any actual costs incurred during the period that have not yet been invoiced and the costs included in the contracts. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made by the Company. The historical accrual estimates made by the Company have not been materially different from the actual costs.

Comprehensive loss includes net loss as well as other changes in shareholders’ equity (deficit) that result from transactions and economic events other than those with shareholders. For the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, unrealized gains and losses on investments are included in other comprehensive income (loss) as a component of shareholders’ equity (deficit) until realized. ~~There was no difference between net loss and comprehensive loss for the three and six months ended June 30, 2020.~~

The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net income (loss) per share attributable to common shareholders is computed by dividing the net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) attributable to common shareholders is computed by adjusting net income (loss) attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common shareholders is computed by dividing the diluted net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, warrants and convertible preferred shares are considered potential dilutive common shares.

The Company’s convertible preferred shares contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common shareholders, such losses are not allocated to such participating securities. In periods in which the Company reported a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common shareholders for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), as subsequently amended, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors), and replaces the existing guidance in ASC 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine the recognition pattern of lease expense over the term of the lease. In addition, a lessee is required to record (i) a right-of-use asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense in its consolidated statement of operations for operating leases and amortization and interest expense in its consolidated statement of operations for financing leases. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases under ASC 840. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), which added an optional transition method that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented.

The Company early adopted the new leasing standard effective January 1, 2021, using the alternative modified retrospective transition approach applied to leases existing as of January 1, 2021. As a result, prior periods are presented in accordance with the previous guidance in ASC 840. The Company has elected to apply the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or the capitalization of initial direct costs for any existing leases. Additionally, the Company has elected not to separate lease and non-lease components and not to recognize leases with an initial term of twelve months or less.

The cumulative effect of the adoption of ASC 842 on the Company’s consolidated balance sheets as of January 1, 2021 was as follows (in thousands):

The adoption of ASC 842 did not have a material impact on the Company’s condensed consolidated statements of operations and comprehensive loss, statements of non-controlling interest, convertible preferred shares and shareholders’ equity (deficit) or statements of cash flows as of January 1, 2021.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its Simplification Initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for the Company for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We adopted ASU 2019-12 effective January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on our condensed consolidated financial statements.

The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. This guidance is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides clarification and reduces diversity in accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This guidance is effective for annual periods beginning after December 15, 2021, including interim periods within that fiscal year. Companies should apply the new standard prospectively to modifications or exchanges occurring after the effective date of the new standard. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2021-04 will have on its consolidated financial statements.

On October 30, 2020, the Company and AstraZeneca entered into the AstraZeneca Agreement pursuant to which the Company and AstraZeneca will work to jointly discover, develop and commercialize next-generation alpha-emitting radiopharmaceuticals and combination therapies for the treatment of cancer globally by leveraging the Company’s Targeted Alpha Therapies, or TATs, platform and expertise in radiopharmaceuticals with AstraZeneca’s leading portfolio of antibodies and cancer therapeutics, including DNA damage response inhibitors (“DDRis”). Each party retains full ownership over its existing assets.

The AstraZeneca Agreement consists of 2 distinct collaboration programs: novel TATs and combination therapies. Under the AstraZeneca Agreement, the parties may develop up to three novel TATs (the “Novel TATs Collaboration”). The parties will also evaluate up to five potential combination strategies involving the Company’s existing assets, including the Company’s lead candidate FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers (the “Combination Therapies Collaboration”).

The AstraZeneca Agreement expires on a TAT-by-TAT and combination-by-combination basis upon the later of the expiration of development and exclusivity obligations relating to such TAT or combination or, if such TAT or combination is commercialized as a product under the AstraZeneca Agreement, the expiration of the commercial life of such product. The Company and AstraZeneca can each terminate the AstraZeneca Agreement for the other party’s uncured material breach following the applicable notice period. Each of the Company and AstraZeneca may also terminate the AstraZeneca Agreement with respect to any TAT or combination product if such party determines that the continued development of such TAT or combination product is not commercially viable, or for a material safety issue with respect to such TAT or combination product.

The COVID-19 pandemic, which began in December 2019 and has spread worldwide, has caused many governments to implement measures to slow the ~~parties~~spread of the outbreak through quarantines, travel restrictions, heightened border security and other measures. The impact of this pandemic has been, and will likely continue to be, extensive in many aspects of society, which has resulted, and will likely continue to result, in significant disruptions to the global economy as well as businesses and capital markets around the world. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain.

In response to public health directives and orders and to help minimize the risk of the virus to employees, the Company has taken precautionary measures, including implementing work-from-home policies for certain employees. The impact of the virus and variants thereof, including work-from-home policies, may ~~develop up~~negatively impact productivity, disrupt the Company’s business, and delay its preclinical research and clinical trial activities and its development program timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to ~~three novel TATs.~~conduct its business in the ordinary course. Specifically, the Company has experienced material delays in patient recruitment and enrollment in its ongoing Phase 1 clinical trial of FPI-1434 as a result of continued resourcing issues related to COVID-19 at trial sites and potentially due to concerns among patients about participating in clinical trials during a public health emergency. The Company may not be able to enroll additional patient cohorts on its planned timeline due to disruptions at its clinical trial sites and ~~AstraZeneca will share development costs equally (with each party responsible for~~is unable to predict how the ~~cost of~~COVID-19 pandemic may affect its ~~own supply~~ability to successfully progress its clinical programs in ~~connection with such development). Either party has~~ the right to opt out of the co-development and co-commercialization arrangement at pre-determined timepoints and obtain exclusive rights to a novel TAT in exchange for milestone payments to the other party of up to $145.0 million per novel TAT and a low or high single-digit royalties on future sales (depending on the opt out time point). If neither party opts out, and unless otherwise agreed by the parties, AstraZeneca will lead worldwide commercialization activities for the novel TATs, subjectfuture. Other impacts to the Company’s ~~option~~business may include temporary closures of its suppliers or other third parties upon whom the Company relies and disruptions or restrictions on its employees’ ability to ~~co-promote~~travel. Any prolonged material disruption to the ~~TATs~~Company’s employees, suppliers or other third parties upon whom the Company relies could adversely impact the Company’s preclinical research and clinical trial activities, financial condition and results of operations, including its ability to obtain financing.

The Company is monitoring the potential impact of the COVID-19 pandemic, including variants thereof, on its business and condensed consolidated financial statements. To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of the pandemic and it is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in these condensed consolidated financial statements.

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuations of common shares, preferred share tranche rights and preferred share warrants prior to the closing of the IPO, valuations of share-based awards and revenue recognition. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

The accompanying condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statement of operations and comprehensive loss, and the condensed consolidated statement of non-controlling interest, convertible preferred shares and shareholders’ equity (deficit) for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statement of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2021 and the results of its operations for three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2021 and 2020 are also unaudited. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

The reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s operating company in Canada, operating company in the U.S. ~~All profits~~and non-operating company in Ireland is also the U.S. dollar. As a result, the Company records no cumulative translation adjustments related to translation of unrealized foreign exchange gains or losses.

During the three and nine months ended September 30, 2021, the Company recorded less than ($0.1) million and $0.1 million, respectively, of foreign currency gains (losses) in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2020, the Company recorded less than ($0.1) million of foreign currency losses in the condensed consolidated statements of operations and comprehensive loss for both periods.

Cash and cash equivalents consist of standard checking accounts, money market accounts, and all highly liquid investments with an original maturity of three months or less at the date of purchase.

As of September 30, 2021 and December 31, 2020, the Company was required to maintain separate cash balances of $0.3 million to collateralize corporate credit cards with a bank, which was classified as restricted cash, current, on its condensed consolidated balance sheets. The Company also maintained a $0.1 million guaranteed investment certificate to fulfill certain contractual obligations which was classified as restricted cash, current, as of September 30, 2021 and December 31, 2020.

In connection with the Company’s lease agreement entered into in October 2019 (see Note 13), the Company maintains a letter of credit of $1.5 million for the benefit of the landlord. As of September 30, 2021, $0.3 million and $1.2 million of the underlying cash balance collateralizing this letter of credit was classified as restricted cash, current and non-current, respectively, on the Company’s condensed consolidated balance sheets based on the release date of the restrictions of this cash. As of December 31, 2020, the entire underlying cash balance collateralizing this letter of credit was classified as restricted cash, non-current, on the Company’s condensed consolidated balance sheets.

As of September 30, 2021 and December 31, 2020, the cash, cash equivalents and restricted cash of $40.3 million and $92.4 million, respectively, presented in the condensed consolidated statements of cash flows included cash and cash equivalents of $38.4 million and $90.5 million, respectively, and restricted cash of $1.9 million for both periods.

The Company determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company classifies its investments as current or non-current based on each instrument’s underlying maturity date. Investments with original maturities of greater than three months and less than twelve months are classified as current and are included in short-term investments in the condensed consolidated balance sheets. Investments with remaining maturities greater than one year from the balance sheet date are classified as non-current and are included in long-term investments in the condensed consolidated balance sheets. The Company’s investments are classified as available-for-sale, are reported at fair value and consist of U.S. government agency securities, corporate bonds, and commercial paper. Unrealized gains and losses ~~resulting from such commercialization activities will be shared equally.~~are included in other comprehensive income (loss) as a component of shareholders’ equity (deficit) until realized. Amortization and accretion of premiums and discounts are recorded in interest income (expense). Realized gains and losses on debt securities are included in other income (expense), net.

The ~~Novel TATs Collaboration~~Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds from the offering, either as a reduction to the carrying value of the preferred exchangeable shares or convertible preferred shares or in shareholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should an in-process equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss. The Company recorded $0.3 million of deferred offering costs as of September 30, 2021 in other non-current assets and did 0t record any deferred offering costs as of December 31, 2020.

For arrangements determined to be within the scope of ASC 808 ~~as the Company and AstraZeneca are both active participants in the~~where a collaborative partner is not a customer for certain research and development activities, ~~and are exposed to significant risks and rewards that are dependent on commercial success~~the Company accounts for payments received for the reimbursement of ~~the activities of the arrangement. The~~ research and development ~~activities are~~costs as a ~~unit of account under~~contra-expense in the ~~scope of ASC 808 and are not promises to a customer under the scope of ASC 606.~~

~~The Company records its portion of the research and development expenses as the related~~period such expenses are incurred. ~~All~~This reflects the joint risk sharing nature of these activities within a collaborative arrangement. The Company classifies payments ~~received~~owed or ~~amounts due from AstraZeneca for reimbursement of shared costs are accounted for~~receivables recorded as an offset to research and development expense. For the three and six months ended June 30, 2021, the Company incurred $0.2 million and $0.3 million, respectively, in gross research and development expenses relating to the Novel TATs Collaboration which was offset by $0.1 million and $0.2 million, respectively, in amounts due from AstraZeneca for reimbursement of shared costs. As of June 30, 2021, the Company recorded $0.2 million due from AstraZeneca for reimbursement of shared costs inother current liabilities or prepaid expenses and other current ~~assets.~~

~~As part of the Combination Therapies Collaboration, the parties will evaluate up to five potential combination strategies involving~~assets, respectively, in the Company’s ~~existing assets, including~~consolidated balance sheets.

If payments from the Company’s lead candidate FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers. The Company received an upfront payment of $5.0 million from AstraZeneca in December 2020 associated with the Combination Therapies Collaboration. AstraZeneca will fully fund all research and development activities for the combination strategies, until such point ascollaborative partner to the Company ~~may opt-in to the clinical development activities.~~

~~The Company also has the right to opt-out of clinical development activities relating to these combination therapies. In such instance, the Company will be responsible~~represent consideration from a customer in exchange for repaying its share of the development costs via a royalty on the additional combination sales only if its drug is approved on the basis of clinical development solely conducted by AstraZeneca, in which case the royalty payments shall also include a variable risk premium based on the number of the Company’s product candidates to have received regulatory approval at that time.

Each party will have the sole right, on a country-by-country basis, to commercialize its respective contributed compound as a component of any combination therapy for which such party’s contributed compound may be commercialized under a separate marketing authorization from the other party’s contributed compound to such combination therapy. The parties will negotiate in good faith on a combination therapy-by-combination therapy basis the terms and conditions to co-commercialize any combination therapy that is to be commercialized under a single marketing authorization. During the period of time commencing with the inclusion of an available molecular target in the selection pool for development as a combination therapy and ending upon the end of the nomination period or earlier removal of such combination target from such pool, the Company will not undertake any preclinical or clinical studies combining the Company’s TAT platform with any compound modulating the activity of such combination target. Following selection of a target under the AstraZeneca Agreement and payment of an exclusivity fee by AstraZeneca, and provided that AstraZeneca enrolls its first patient in a clinical trial as further defined in the AstraZeneca Agreement within a pre-defined period of time of such selection, the Company will not undertake any preclinical or clinical studies combining the Company’s TAT platform with compounds modulating the same combination target for the duration of the evaluation period for such combination target, as further defined in the AstraZeneca Agreement. Within a certain time period following initiation of the evaluation period with respect to a combination target, AstraZeneca has the exclusive right to undertake, alone or in collaboration with the Company, all further clinical or preclinical combination studies with respect to a combination target by paying certain exclusivity fees. The Company is eligible to receive future payments of up to $40.0 million, including those for the achievement of certain clinical milestones and exclusivity fees.

The Company determined the research and development activities associated with the Combination Therapies Collaboration are a key component of its central operations and AstraZeneca has contracted with the Company to obtaindistinct goods and services ~~which are an output of the Company’s ordinary activities in exchange for consideration. Further,~~provided, then the Company ~~does not share the risks and rewards of the underlying research activities making AstraZeneca a customer~~accounts for ~~the Combination Therapies Collaboration which falls~~those payments within the scope of ASC ~~606.~~606, Revenue from Contracts with Customers (“ASC 606”). Please refer to Note 3, “Collaboration Agreement” for additional details regarding the Company’s Strategic Collaboration Agreement with AstraZeneca UK Limited (“AstraZeneca”) (the “AstraZeneca Agreement”).

~~To determine the appropriate amount of revenue to be recognized under~~Revenue from Contracts with Customers

In accordance with ASC 606, the Company ~~performed the following steps: (i) identify the~~recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the ~~contract, (ii) determine whether~~consideration which the ~~promised~~Company expects to receive in exchange for those goods or ~~services~~services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations ~~including whether they are distinct~~ in ~~the context of~~ the contract, (iii) ~~measure~~determine the transaction price, ~~including the constraint on variable consideration,~~ (iv) allocate the transaction price to the performance obligations within the contract and (v) recognize revenue when (or as) the Company satisfies ~~each~~a performance obligation.

~~Under~~The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company ~~accounts for (i)~~assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the Company’s arrangements typically consist of a license ~~it conveyed~~ to ~~AstraZeneca with respect to certain~~the Company’s intellectual property ~~and (ii) the obligations to perform~~and/or research and development ~~services as part of the Combination Therapies Collaboration as a single performance obligation under the AstraZeneca Agreement.~~services. The Company ~~concluded AstraZeneca’s~~may provide customers with options to additional items in such arrangements, which are accounted for separately when the customer elects to exercise such options, unless the option provides a material right to ~~purchase exclusive options~~the customer. Performance obligations are promises in a contract to ~~obtain certain development, manufacturing~~transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and ~~commercialization rights represent customer options~~(ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations ~~as they do not contain any discounts~~are combined with other promised goods or ~~other rights that would be considered~~services until such combined group of promises meet the requirements of a ~~material right in the arrangement. Such options will be accounted for upon AstraZeneca’s election.~~performance obligation.

The Company determined the transaction price under ASC 606 at the inception of the AstraZeneca Agreement to be the $5.0 million upfront payment. The cost reimbursement payments for all costs incurred by the Company under the Combination Therapies Collaboration represent variable consideration that is not constrained. Additionally, the clinical milestone payments represent variable consideration that is constrained. In making this assessment, the Company considered several factors, including the fact that achievement of the milestones are outside its control and contingent upon the future success of clinical trials and AstraZeneca’s actions. The payments related to the achievement of certain clinical milestones do not relate to separate, distinct performance obligations.

Under ASC 606, the Company recognizes revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimateddetermines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of ~~progress towards completion. Under ASC 606,~~consideration it expects to receive under the ~~estimated transaction price includes~~contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration ~~that is not constrained. The Company does not include~~and includes in the transaction price variable consideration to the extent ~~that~~ it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when ~~any~~the uncertainty associated with the variable consideration is subsequently resolved.

The ~~estimate~~Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the ~~Company’s measurement~~transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company’s revenue generating arrangements typically include upfront license fees, milestone payments and/or royalties.

At the inception of an agreement that includes research and development milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach. The Company primarily uses the most likely amount approach as this approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of the estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty). The Company updates the estimate of variable consideration ~~to be~~ included in the transaction price ~~will be updated~~ at each reporting date ~~as a change in estimate.~~which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

For ~~the clinical~~arrangements that include sales-based royalties, including milestone payments based on the ~~Company utilizes~~level of sales, and the ~~most likely amount method~~license is deemed to ~~determine~~be the ~~amounts recognized and timing of recognition. Once~~predominant item to which the constraint is removed, the clinical milestone payments will be accounted for with the research and development services for the purposes of revenue recognition which will occur over time as the services are provided. Upon the achievement of any milestone for specified clinical development events,royalties relate, the Company will ~~utilize the same cost-to-cost model with a cumulative catch-up recognized in the period in which any such event occurs.~~

~~The Company will re-evaluate the transaction price~~recognize revenue at the ~~end~~later of ~~each reporting period and as uncertain events are resolved,~~(i) when the related sales occur, or ~~other changes in circumstances occur, adjust its estimate~~(ii) when the performance obligation to which some or all of the ~~transaction price if necessary. As of December 31, 2020,~~royalty has been allocated has been satisfied (or partially satisfied).

For the three and nine months ended September 30, 2021, the Company recorded ~~the upfront fee as a contract liability~~$0.3 million and $0.8 million, respectively, of revenue under collaboration agreements. Please refer to Note 3, “Collaboration Agreement” for ~~deferred~~additional details regarding revenue ~~in its condensed consolidated balance sheet as it had yet to provide any services~~recognition under the AstraZeneca Agreement.

The ~~following table presents changes~~Company accounts for business combinations using the acquisition method of accounting. Application of this method of accounting requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually. Acquired in-process research and development (“IPR&D”) is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. Transaction costs related to business combinations are expensed as incurred. Determining the fair value of assets acquired and liabilities assumed in a business combination requires management to use significant judgment and estimates, especially with respect to intangible assets.

During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, all adjustments are recorded in the ~~Company’s contract assets and liabilities for the six months ended June 30, 2021 (in thousands):~~consolidated statements of operations as operating expenses or income.

~~During the three and six months ended June 30, 2021 and 2020,~~To date, the Company ~~recognized the following revenue (in thousands):~~has not recorded any acquisitions as a business combination.

The ~~current portion~~Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire IPR&D with no alternative future use is charged to expense at the acquisition date.

Contingent consideration in asset acquisitions payable in the form of ~~deferred revenue~~cash is recognized when payment becomes probable and ~~deferred revenue, net~~reasonably estimable, unless the contingent consideration meets the definition of ~~current portion, are $1.7 million and $2.9 million as~~a derivative, in which case the amount becomes part of ~~June 30, 2021, respectively, which reflects~~the asset acquisition cost when acquired. Contingent consideration payable in the form of a fixed number of the Company’s estimate of the revenue it expects to recognize within the next 12 months and beyond 12 months, respectively. The Company expects to recognize the revenue associated with the AstraZeneca Agreement in subsequent periods through the year ending December 31, 2024.

~~The following tables present information about the Company’s financial assets and liabilities that are~~own shares is measured at fair value as of the acquisition date and recognized when the issuance of the shares becomes probable. Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets, or, if related to IPR&D with no alternative future use, charged to expense.

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on ~~a recurring basis~~the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and ~~indicates~~minimize the ~~level~~use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, ~~used to determine such fair values (in thousands):~~

~~During~~of which the ~~six months ended June 30, 2021~~first two are considered observable and the ~~year ended December 31, 2020, there were no transfers between Level 1, Level 2 and Level 3.~~last is considered unobservable:

~~As of June 30, 2021, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):~~

~~As of December 31, 2020, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):~~

~~Prepaid expenses and other current assets consisted of the following (in thousands):~~

~~On June 19, 2020, the Company effected a one-for-5.339 reverse share split of its issued and outstanding common shares and a proportional adjustment~~Prior to the ~~existing conversion ratios for each class~~settlement of the Company’s Preferred Shares and Preferred Exchangeable Shares. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse share split and adjustment of the preferred share ~~conversion ratios.~~

~~On June 30, 2020,~~tranche right liability and prior to the Company closed its IPO of common shares and issued and sold 12,500,000 shares of common shares at a public offering price of $17.00 per share, resulting in net proceeds of approximately $193.1 million after deducting underwriting fees and offering costs.

Upon the closing of the IPO, all outstanding voting and non-voting common shares were converted to a single class of common shares authorized by the Company’s articles of the corporation, as amended and restated.

~~As of June 30, 2021, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue unlimited common shares, each with~~ no ~~par value per share.~~

~~Each common share entitles the holder to one vote on all matters submitted to a vote~~conversion of the Company’s ~~shareholders. Common shareholders~~preferred share warrant liability, these instruments were carried at fair value, determined according to Level 3 inputs in the fair value hierarchy described above (see Note 4). The Company’s cash equivalents and investments are ~~entitled to receive dividends, if any, as may be declared by the board of directors. Through June 30, 2021, 0 cash dividends had been declared or paid by the Company.~~

~~Prior~~carried at fair value, determined according to the ~~IPO,~~fair value hierarchy described above (see Note 4). The carrying values of the ~~Company issued Class A convertible preferred shares (the “Class A preferred shares”)~~Company’s amounts due for refundable investment tax credits and Canadian harmonized sales tax, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

The subscription agreements for the Company’s Class B convertible preferred shares (see Note 8) and its Irish subsidiary’s Class B preferred exchangeable shares (see Note 8) provided investors the right, or obligated investors, to participate in subsequent offerings of Class B convertible preferred shares or Class B preferred exchangeable shares together with Class B special voting shares in the event that specified development or regulatory milestones were achieved (the “Class B preferred ~~shares” and, together with the Class A preferred shares, the “Preferred Shares”~~share tranche right liability”). ~~As of December 31, 2020, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue an aggregate of 132,207,290 Preferred Shares, respectively, each with~~ no ~~par value per share.~~

In March 2019, the Company completed its first closing of its Class B preferred shares and issued and sold 30,207,129 Class B preferred shares at a price of $1.5154 per share for gross proceeds of $45.8 million (the “2019 Preferred Share Financing”).

In January 2020, the Company executed the First Amendment to the Class B Subscription Agreement (“Amended Class B Subscription Agreement”) whereby the Canada Pension Plan Investment Board (“CPP”) agreed to purchase an aggregate of $20.0 million of Class B preferred shares, at a price of $1.5154 per share, in two tranches. In January 2020, the Company issued and sold to CPP 6,598,917 Class B preferred shares, resulting in gross proceeds of $10.0 million (the “Additional Class B Closing”). The Company ~~incurred issuance costs of $0.1 million in connection with this transaction.~~

~~The~~classified these preferred share tranche rights ~~and preferences of the Class B~~as a liability on its consolidated balance sheets as each preferred shares sold under the Additional Class B Closing were the same as the rights and preferences of the Class B preferred shares issued and sold by the Company in March 2019. Accordingly, under the terms of the Amended Class B Subscription Agreement, upon the earlier occurrence of a specified development or specified regulatory milestone, CPPshare tranche right was obligated to purchase an additional 6,598,917 Class B preferred shares at a price of $1.5154 per share. The Company concluded that these rights or obligations of CPP to participate in the Milestone Financing of Class B preferred shares met the definition of a freestanding financial instrument that ~~was~~may have required ~~to be recorded as a liability at fair value as (i) the instruments are legally detachable and separately exercisable from the Class B preferred shares and (ii) the rights will require~~ the Company to transfer assets upon ~~future closings~~the achievement of specified milestone events. Each preferred share tranche right liability was initially recorded at fair value upon the ~~Class B~~date of issuance of each preferred ~~shares.~~

~~Upon~~share tranche right and was subsequently remeasured to fair value at each reporting date. Changes in the ~~Additional Class B Closing in January 2020, the Company recorded an additional liability for~~fair value of the preferred share tranche right liability were recognized as a component of ~~$1.1 million~~other income (expense) in the consolidated statement of operations and ~~a corresponding reduction to~~comprehensive loss. Changes in the ~~carrying~~fair value of the ~~Class B~~ preferred ~~shares.~~share tranche right liability were recognized until the respective preferred share tranche right was settled upon achievement of the specified milestones or it expired.

InOn May 15, 2020, the Company achieved the specified regulatory milestone associated with the Class B preferred share tranche right (see Note 8), which triggered the requirement of the Class B shareholders to participate in the Milestone Financing. Upon closing of the Milestone Financing on June 2, 2020, the Company issued and sold 36,806,039 Class B preferred shares at a price of $1.5154 per share and 4,437,189 Class B special voting shares at a price of $0.000001 per share and the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share, for aggregate gross proceeds of ~~$55.8~~$62.5 million.

The Class B preferred share tranche right liability (see Note 8) was settled in connection with the achievement of the regulatory milestone associated with the Class B preferred share tranche right. Specifically, the fair value of the Class B preferred share tranche right liability was remeasured for the last time as of the Milestone Financing closing date, resulting in the Company recognizing a loss in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020 of $32.7 million for the change in the fair value of the tranche right liability between December 31, 2019 and June 2, 2020. Immediately thereafter, the balance of the Class B preferred share tranche right liability of $39.6 million was reclassified to Class B convertible preferred shares in an amount of $35.3 million and to non-controlling interest in ~~Fusion Pharmaceuticals (Ireland) Limited~~the Company’s Irish subsidiary in an amount of $4.3 million on the consolidated balance sheet. For the ~~three and six~~nine months ended ~~June~~September 30, 2020, the Company recognized ~~losses~~a loss of ~~$31.6 million and~~ $32.7 million ~~respectively,~~ in the condensed consolidated statement of operations and comprehensive loss for the change in the fair value of the tranche right liability.

~~Upon the closing of the IPO, the Company converted the then outstanding Class A and Class B preferred shares into common shares at a conversion ratio of 5.339~~ Preferred Share Warrant Liability

~~In connection with each issuance and sale of~~purchase its ~~Class A~~convertible preferred shares and ~~Class B~~warrants to purchase preferred exchangeable shares of the Company’s Irish subsidiary issued and sold Class A and Class B preferred exchangeable shares (together, the “Preferred Exchangeable Shares”) to investors. Simultaneously with the issuance and sale of the Preferred Exchangeable Shares, the Company issued and soldas a liability on its ~~Class A and Class B special voting shares (together, the “Special Voting Shares”) to the same investors. Prior to the IPO, the Company’s Irish~~

subsidiary’s amended constitution authorized it to issue an aggregate of 28,874,378 Preferred Exchangeable Shares and 29,747,987 Preferred Exchangeable Shares, respectively, with a par value of $0.001 per share. Prior to the IPO, the Company’s articles of the corporation,consolidated balance sheets as ~~amended and restated, authorized~~these warrants were freestanding financial instruments that may have required the Company to ~~issue an aggregate of 28,874,378 Special Voting Shares and 29,747,987 Special Voting Shares, respectively, with a cash redemption value of $0.000001 per share.~~

In March 2019, in connection with the first closing of Class B preferred shares, as described above, the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share and the Company issued and sold 4,437,189 Class B special voting shares at a price of $0.000001 per share for aggregate gross proceeds of $6.7 million (the “2019 Preferred Exchangeable Share Financing”)transfer assets upon exercise (see Note 8).

~~In May 2020, the Company achieved the specified regulatory milestone associated with the Class B~~ The preferred share ~~tranche right,~~warrant liability, which ~~triggered the requirement~~consisted of the Class B shareholders to participate in the Milestone Financing. Upon closing of the Milestone Financing on June 2, 2020, the Company issued and sold 4,437,189 Class B special voting shares at a price of $0.000001 per share and the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share, for aggregate gross proceeds of $6.7 million.

Upon the closing of the IPO, the Company converted all of the outstanding Class A and Class B preferred exchangeable shares and Special Voting Shares into Class A and Class B preferred shares on a one-for-one basis then converted the Class A and Class B preferred shares into common shares at a conversion ratio of 5.339 Preferred Share to one common share.

In January 2020, in conjunction with the Company’s execution of the Amended Class B Subscription Agreement, the Company issued to the existing holders of Class B convertible preferred shares (excluding the investor in the Additional Class B Closing in January 2020) warrants to purchase 3,126,391 Class B convertible preferred shares, at an exercise price of $1.5154 per share, and Fusion Pharmaceuticals (Ireland) Limited issued to the existing holders of Class B preferred exchangeable shares warrants to purchase 873,609 Class B preferred exchangeable shares, at an exercise price of $1.5154 per share (collectively the “Preferred Share Warrants”). If the warrants to purchase Class B preferred exchangeable shares are exercised, at that same time, the shareholder is obligated to purchase from the Company an equal number of Class B special voting shares at a price of $0.000001 per share. The Preferred Share Warrants were issued for no consideration, and the specified exercise prices of each warrant are subject to adjustment for share dividends, share splits, combination or other similar recapitalization transactions as provided under the terms of the warrants.

The Preferred Share Warrants were immediately exercisable and expire two years from the date of issuance or upon the earlier occurrence of specified qualifying events, which include the consummation of a Deemed Liquidation Event and the closing of a qualifying share sale (as defined in the articles of the corporation, as amended and restated). Upon the closing of a qualified public offering, on specified terms, all outstanding warrants to purchase Class B convertible preferred shares of the Company and warrants to purchase Class B preferred exchangeable shares of ~~Fusion Pharmaceutics (Ireland) Limited will become warrants to purchase common shares~~the Company’s Irish subsidiary, were initially recorded at fair value upon the date of ~~the Company.~~

~~Upon~~ issuance of ~~the Preferred Share Warrants in January 2020, the Company recorded on its consolidated balance sheet a preferred share~~each warrant ~~liability of $1.4 million, equal~~and were subsequently remeasured to ~~the issuance-date~~ fair value of the Preferred Share Warrants, as well as a corresponding decrease of $1.3 million to additional paid-in capital, reducing that to zero, and an increase of $0.1 million to accumulated deficit for the remainder.

Upon the closing of the IPO, the warrants to purchase ~~3,126,391 of~~ its convertible preferred shares and warrants to purchase ~~873,609~~ preferred exchangeable shares of the Company’s Irish subsidiary were converted into warrants to purchase ~~749,197~~ shares of the Company’s common ~~shares at an exercise price of $8.10 per share.~~shares. As a result, the warrant liability was remeasured a final time on the closing date of the IPO and reclassified to shareholders’ equity (deficit) as the warrants qualify for equity classification.

Prior to January 1, 2021, the Company accounted for leases in accordance with ASC 840, Leases. At lease inception, the Company determined if an arrangement was an operating or capital lease. For ~~the three and six months ended June 30, 2020,~~operating leases, the Company recognized ~~losses~~rent expense,

inclusive of ~~$6.1 million~~rent escalation, holidays and ~~$6.4 million, respectively,~~lease incentives, on a straight-line basis over the lease term. The difference between rent expense recorded and the amount paid was charged to deferred rent. The Company presented lease incentives as deferred rent and amortized the incentives as a ~~component~~reduction to rent expense on a straight-line basis over the lease term. The Company classified deferred rent as current and noncurrent liabilities based on the portion of ~~other income (expense)~~the deferred rent that was scheduled to mature within the proceeding twelve months.

The Company’s operating leases are presented in the condensed consolidated ~~statement of operations~~balance sheet as operating lease right-of-use assets, classified as noncurrent assets, and ~~comprehensive loss to reflect an increase in fair value of the Preferred Share Warrant.~~

~~On August 17, 2020, a holder of common share warrants exercised 97,381 common share warrants through a cashless exercise~~operating lease liabilities, classified as current and ~~the Company issued~~ ~~38,340~~ ~~common shares with the remaining 59,041 warrants being cancelled to settle the exercise price. As of June 30, 2021, 651,816 common share warrants remained outstanding.~~

On June 18, 2020, the Company’s board of directors adopted the 2020 Stock Option and Incentive Plan (the “2020 Plan”), which became effective on June 24, 2020. The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, non-employee directors and consultants. The number of shares initially reserved for issuance under the 2020 Plan was 4,273,350, which was cumulatively increased on January 1, 2021 and shall be cumulatively increased each January 1 thereafter by 4% of the number of the Company’s common shares outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s compensation committee of the board of directors. The common shares underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of shares, expire or are otherwise terminated (other than by exercise) under the 2020 Plan and the 2017 Plan will be added back to the common shares available for issuance under the 2020 Plan. The total number of common shares reserved for issuance under the 2020 Plan was 6,126,083 shares as of June 30, 2021.

As of June 30, 2021, 2,712,551 shares, remained available for future grant under the 2020 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2020 Plan.

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) provides for the Company to grant incentive stock options or nonqualified stock options, restricted share awards and restricted share units to employees, officers, directors and non-employee consultants of the Company.

As of June 30, 2021 and December 31, 2020, 0 shares remained available for future grant under the 2017 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2020 Plan.

On June 18, 2020, the Company’s board of directors adopted the 2020 Employee Share Purchase Plan (the “ESPP”), which became effective on June 24, 2020. A total of 450,169 common shares were reserved for issuance under this plan. In addition, the number of common shares that may be issued under the ESPP was automatically increased on January 1, 2021 and shall be automatically increased each January 1 thereafter by the lesser of (i) 900,338 common shares, (ii) 1% of the number of the Company’s common shares outstanding on the immediately preceding December 31 and (iii) such lesser number of shares as determined by the Company’s compensation committee of the board of directors. The total number of common shares reserved for issuance under the ESPP was 867,427 shares as of June 30, 2021.

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected share volatilitynoncurrent liabilities based on the ~~historical volatility of~~discounted lease payments to be made within the proceeding twelve months. Variable costs associated with a ~~publicly traded set of peer companies~~lease, such as maintenance and ~~expects to continue to do so until such time as it has adequate historical data regarding~~utilities, are not included in the ~~volatility of its own traded share price. For options with service-based vesting conditions, the expected term~~measurement of the ~~Company’s stock options has been determined utilizing~~lease liabilities and right-of-use assets but rather are expensed when the ~~“simplified” method for awards that qualify as “plain-vanilla” options. The expected term~~events determining the amount of stock options granted to non-employee consultants is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

~~The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:~~

~~The following table summarizes the Company’s stock option activity since December 31, 2020:~~

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those options that had exercise prices lower than the fair value of the Company’s common shares. The intrinsic value for stock options exercised during the six months ended June 30, 2021 was $2.5 million. The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2021 and 2020 was $6.60 and $6.81 per share, respectively.

~~Share-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):~~

~~As of June 30, 2021, total unrecognized share-based compensation expense related to unvested share-based awards was $24.1 million, which is expected~~variable consideration to be recognized over a weighted-average period of 2.8 years. Additionally, as of June 30, 2021, the Company has unrecognized share-based compensation expense related to unvested stock options with performance-based vesting conditions for which performance has not been deemed probable of $1.0 million. paid have occurred.

~~License Agreement with the Centre for Probe~~Research, Development and ~~Commercialization Inc.~~

~~In November 2015, the Company entered into a license agreement with the Centre for Probe Development~~Manufacturing Contract Costs and Commercialization Inc. (“CPDC”), a related party (see Note 15) (the “CPDC Agreement”). Under the agreement, the Company was granted an exclusive, sublicensable, nontransferable, worldwide license under CPDC’s patent rights related to CPDC’s radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans, whether diagnostic or therapeutic. The Company has the right to grant sublicenses of its rights. The CPDC Agreement was amended in 2017; however, there were no material changes to the terms of the CPDC Agreement. Also in 2017, the Company entered into a second license agreement with CPDC, under which the Company was granted an exclusive, sublicensable, worldwide license under CPDC’s patent rights related to certain CPDC radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans. The Company has the right to grant sublicenses of its rights.Accruals

The Company has ~~no obligations under any of the agreements with CPDC to make any milestone payments or to pay any royalties or annual maintenance fees to CPDC.~~

~~During the three and six months ended June 30, 2021 and 2020, the Company did 0t make any payments to CPDC or recognize any research and development expenses under the license agreements with CPDC.~~

~~In December 2016, the Company~~ entered into a license agreement with ImmunoGen, Inc. (“ImmunoGen”) (the “ImmunoGen Agreement”). Under the agreement, the Company was granted an exclusive, sublicensable, worldwide license under ImmunoGen’s patent rights to use, develop, manufacture and commercialize any radiopharmaceutical conjugate that includes a certain compound and any resulting commercialized products. The Company has the right to grant sublicenses of its rights.

Under the ImmunoGen Agreement, the Company paid an upfront fee of $0.2 million to ImmunoGen. In addition, the Company is obligated to make aggregate milestone payments to ImmunoGen of up to $15.0 million upon the achievement of specifiedvarious research, development and regulatory milestones and of up to $35.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay tiered royalties of a low to mid single-digit percentage based on annual net sales by the Company and any of its affiliates and sublicensees. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country until ten years following the date of the first commercial sale in the United States and five years following the date of the first commercial sale in all non-U.S. countries. In addition, the Company is responsible for all costs and expenses incurred related to the development, manufacture, regulatory approval and commercialization of all licensed products.

Prior to regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 90 days’ prior written notice to ImmunoGen. Upon receipt of its first regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 180 days’ prior written notice to ImmunoGen. If the Company or ImmunoGen fails to complymanufacturing contracts with ~~any of its obligations or otherwise breaches the agreement, the other party may terminate the agreement. The ImmunoGen Agreement expires upon the expiration date of the last-to-expire royalty term.~~

~~During the three and six months ended June 30, 2021 and 2020, the Company did 0t make any payments to ImmunoGen or recognize any~~ research ~~and development expenses under the ImmunoGen Agreement.~~

In May 2019, the Company and MediaPharma S.r.l. (“MediaPharma”) entered into an asset acquisition and license agreement. Under the agreement, the Company purchased all right, title and interest to MediaPharma’s, and any of its affiliates’ and sublicensees’, patents to perform research and to develop, manufacture and commercialize a specified antibody that binds to targets for the prevention, treatment and diagnosis of all diseases and conditions. The Company accounted for this purchase as an asset acquisition. At the same time, the Company granted MediaPharma an exclusive, fully paid, worldwide, sublicensable license to use the specified compound for research, development, manufacturing and commercialization of a bispecific antibody drug conjugate, but not for use as a radiopharmaceutical.

In connection with the asset acquisition, the Company paid an upfront fee of $0.2 million to MediaPharma. In addition, the Company is obligated to make aggregate milestone payments to MediaPharma of up to $1.5 million upon the achievement of specified development milestones and of up to $23.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay royalties of a low single-digit percentage based on annual net sales by the Company. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country and will expire, on a country-by-country basis, upon the earlier of (i) eight years from the first commercial sale of a licensed product in such country, (ii) the date upon which all issued patents under the agreement have expired or (iii) the date upon which a product highly similar in composition to the licensed product and having no clinically meaningful differences is sold or marketed for sale in such country by a third party.

~~The Company is not entitled to any payments from MediaPharma for use of the license to the specified compound granted to MediaPharma.~~

~~During the three and six months ended June 30, 2021 and 2020, the Company did 0t make any payments to MediaPharma or recognize any research and development expenses under the MediaPharma Agreement.~~

~~Asset Acquisition from Rainier Therapeutics, Inc. and License Agreement with Genentech, Inc.~~

On March 10, 2020 (the “Closing”), the Company and Rainier Therapeutics, Inc. (“Rainier”) entered into an asset acquisition agreement (the “Rainier Agreement”). Under the agreement, the Company purchased all rights, title and interest to Rainier’s, and any of its affiliates’ and sublicensees’, patentsinstitutions and other ~~tangible~~companies. These agreements are generally cancelable, and intangible assets to perform research and to develop, manufacture and commercialize a specified compound of antibody molecules that bind to targets for the prevention, treatment and diagnosis of all diseases and conditions only using such compound as an antibody drug conjugate. The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, the license rights.

In connection with the asset acquisition, the Company paid an upfront fee of $1.0 million to Rainier and recognized this amount as research and development expense in the condensed consolidated statement of operations and comprehensive loss during the three months ended March 31, 2020, as the IPR&D acquired had no alternative future use as of the acquisition date.

Unless the Rainier Agreement was terminated pursuant to its terms, which termination initially could not have occurred later than eight months following the Closing (the “Outside Date”), the Company was obligated to pay Rainier an additional amount of $3.5 million and to issue 313,359 of the Company’s common shares on the Outside Date. If the Rainier Agreement was not terminated by the Outside Date, the Company is also obligated to make aggregate milestone payments to Rainier of up to $22.5 million and to issue up to 156,679 of the Company’s common shares upon the achievement of specified development and regulatory milestones, of which a $2.0 million milestone payment and the issuance of 156,679 common sharesrelated costs are ~~due upon the first patient dosed in a Phase 1 study of FPI-1966, and of up to $42.0 million upon the achievement of specified sales milestones.~~

In the event the Company enters into a transaction with a non-affiliated party relating to the license or sale of substantially all the Company’s rights to develop the specified compound of antibody molecules, the Company will be obligated to pay Rainier a specified percentage of the revenue from such transaction, in an amount ranging from 10% to 30%, based on how long after the Closing the transaction takes place.

The Rainier Agreement could have been terminated at any time prior to the Outside Date upon 30 days’ notice by the Company to Rainier or upon the mutual written consent of both parties. On October 8, 2020, the Company and Rainier entered into a first amendment to the Rainier Agreement (the “First Amended Rainier Agreement”) to extend certain terms of the Rainier Agreement. Specifically, the Outside Date was amended such that termination may not occur later than eleven months following the Closing, or February 10, 2021 (the “Revised Outside Date”). On February 8, 2021, the Company and Rainier entered into a second amendment to the First Amended Rainier Agreement, as amended (the “Second Amended Rainier Agreement”). Pursuant to the Second Amended Rainier Agreement, the Outside Date was further amended such that termination may not occur later than July 1, 2021, and such amendment was made in consideration for early payment of the additional $3.5 million owed to Rainier which the Company paid and recorded as research and development ~~expense during the three months ended March 31, 2021. On May 26, 2021, the~~expenses as incurred. The Company ~~notified Rainier of its intent to continue~~records accruals for estimated ongoing research, development ~~of the asset~~ and ~~issued 313,359 of its common shares to Rainier on July 1, 2021.~~

~~During the three months ended June 30, 2021, the Company recognized $2.6 million of research and development expense associated~~manufacturing costs. When billing terms under these contracts do not coincide with the ~~issuance~~timing of ~~313,359 of its common shares on~~when the Outside Date, as amended, pursuant to the Second Amended Rainier Agreement. During the six months ended June 30, 2021, the Company recognized $6.1 million of research and development expense associated with the payment of $3.5 million and the issuance of 313,359 of its common shares as noted above. During the six months ended June 30, 2020, the Company paid an upfront fee of $1.0 million to Rainier and recognized this as an expense as noted above.

In connection with the Rainier Agreement, in March 2020, the Company was assigned all of Rainier’s rights and obligations under an exclusive license agreement between BioClin Therapeutics, Inc. and Genentech, Inc. (“Genentech”) (the “Genentech License Agreement”). Pursuant to the Genentech License Agreement, the Company has an exclusive, worldwide, sublicensable license to make, use, research, develop, sell and import certain intellectual property and technology of Genentech relating to a specified antibody and any mutant antibody thereof (the “Licensed Antibodies”), including any products that contain a Licensed Antibody as an active ingredient (the “Products”), for all human uses.

~~Pursuant to the Genentech License Agreement,~~work is performed, the Company is ~~obligated~~required to ~~use commercially reasonable efforts~~make estimates of outstanding obligations to ~~develop~~those third parties as of period end. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research, development and ~~commercialize at least one Product~~manufacturing activities, invoicing to date under the contracts, communication from the research institutions and other companies of any actual costs incurred during the period that have not yet been invoiced and the ~~Company is solely responsible for~~costs included in the ~~costs associated with~~contracts. Significant judgments and estimates may be made in determining the ~~development, manufacturing, regulatory approval and commercialization~~accrued balances at the end of any ~~Products.~~reporting period. Actual results could differ from the estimates made by the Company. The manufacture of the antibody by any third-party contract manufacturing organization must be approved in advance by Genentech. Additionally, Genentech retains the right to use the Licensed Antibodies solely to research and develop molecules other than the Licensed Antibodies.

Comprehensive loss includes net loss as well as other changes in shareholders’ equity (deficit) that result from transactions and any of its affiliates and sublicensees, for the specified compound of antibody molecules and of a mid to high single-digit percentage based on annual net sales by the Company, and any of its affiliates and sublicensees, for anyeconomic events other compound containing mutant antibody molecules of the specified compound. In addition, the Company is obligated to pay to Genentech royalties of a low single-digit percentage based on quarterly net sales in any country in which the specified compound is not covered by a valid patent claim, andthan those sales will not be subject to the tiered royalties described above. All royalties may be reduced if the Company obtains a license under a third-party patent that includes the specified compound. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country until the later of (i) ten years following the date of the first commercial sale of a Product or (ii) the date the specified compound is no longer covered by an enforceable patent. Upon the expiration of the royalty term, the Company will have a fully paid-up license.

The Company has the right to terminate the Genentech License Agreement upon written notice to Genentech if the Company determines in its sole discretion that development or commercialization of Products is not economically or scientifically feasible or appropriate. In addition, if the Company or Genentech fails to comply with any of its obligations or otherwise breaches the agreement, the other party may terminate the agreement. The Genentech License Agreement expires on the date on which all obligations under the agreement related to milestone payments or royalties have passed or expired.

~~During~~shareholders. For the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, ~~the Company did 0t make any payments to Genentech or recognize any research~~unrealized gains and ~~development expenses under the Genentech License Agreement.~~

~~On May 15, 2020, the Company entered into~~losses on investments are included in other comprehensive income (loss) as a master services and license agreement with Yumab GmbH (“Yumab”) (the “Yumab Agreement”). Under the agreement, Yumab will assist the Company in discovering and developing certain antibodies from certain cell lines owned by Yumab. The Company plans to use the discovered antibodies in preclinical and clinical development. Under the Yumab Agreement, the Company is obligated to pay for services performed as defined in work orders under the agreement. In addition, the Company is obligated to make aggregate milestone payments to Yumabcomponent of ~~up to $3.9 million upon the achievement of specified development and regulatory milestones.~~

~~During the three and six months ended June 30, 2021 and 2020, the Company did 0t make any payments to Yumab or recognize any research and development expenses under the Yumab Agreement.~~

On December 10, 2020, the Company entered into a Collaboration Agreement and Supply Agreement with TRIUMF Innovations Inc. and TRIUMF JV (collectively, “the TRIUMF entities”) for the development, production and supply of actinium-225 to the Company. Under the Collaboration Agreement, the Company is obligated to pay the TRIUMF entities an aggregate of $5.0 million CAD upon the achievement of certain milestones. The parties may also negotiate for a second phase of the collaboration whereby the Company would make an additional financial investment for the future development, manufacture and supply of actinium-225.

As of December 31, 2020, the TRIUMF entities had achieved certain milestones totaling $3.0 million CAD (equivalent to $2.3 million at the time of payment) which was paid during the six months ended June 30, 2021 and is being amortized as research and development expense over the period of performance by the TRIUMF entities. During the three and six months ended June 30, 2021,shareholders’ equity (deficit) until realized.

the Company recognized the amortization of $0.5 million and $0.9 million, respectively, as research and development expense. The Company recorded the remaining $1.4 million of these milestone payments in prepaid expenses and other current assets as of June 30, 2021 based on its estimate of costs to be incurred over the 12 months following the balance sheet date.

On March 1, 2021, the Company and Ipsen Pharma SAS (“Ipsen”) announced that the parties had entered into an asset purchase agreement (the “Ipsen Agreement”) whereby the Company agreed to acquire Ipsen’s intellectual property and assets related to IPN-1087, a small molecule targeting neurotensin receptor 1 (“NTSR1”), a protein expressed on multiple solid tumor types. The Company intends to combine its expertise and proprietary TAT platform with IPN-1087 to create an alpha-emitting radiopharmaceutical targeting solid tumors expressing NTSR1. The Company and Ipsen submitted a pre-merger notification and report form with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice in accordance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). The acquisition closed after completion of this antitrust review on April 1, 2021. The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, the license rights.

Upon closing of the asset acquisition, the Company paid €0.6 million ($0.8 million at the date of payment) and issued an aggregate of 600,000 common shares to Ipsen under a share purchase agreement which was entered into concurrently with the Ipsen Agreement. Such common shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Company is also obligated to pay Ipsen up to an additional €67.5 million upon the achievement of certain development and regulatory milestones; low single digit royalties on potential future net sales; and up to ~~€350.0~~ million in net sales milestones, in each case, relating to products covered by the asset purchase agreement. The Company is responsible for paying to a third-party licensor up to a total of €70.0 million in development milestones for up to three indications and mid to low double-digit royalties on potential future net sales of products covered by the license agreement.

During the three and six months ended June 30, 2021, the Company recognized $6.4 million of research and development expense associated with the issuance of 600,000 of its common shares upon closing pursuant to the Ipsen Agreement. Additionally, during the three and six months ended June 30, 2021, the Company paid $0.8 million which was recognized as research and development expense.

The Ipsen Agreement includes a royalty step down whereby royalties owed to Ipsen will be reduced by certain percentages not to exceed 50%, in the aggregate, of the royalty owed under certain circumstances relating to loss of patent exclusivity, loss of regulatory exclusivity or generics entering a market. Under the asset purchase agreement Ipsen has agreed not to develop a molecule that targets NTSR1 and combines at least one NTSR1 binding moiety and a radionuclide or cytotoxic agent until the earlier of (i) the seventh anniversary of the closing date or (ii) the date of data base lock after completion of the first phase 3 clinical trial for IPN-1087.

On May 5, 2021, the Company entered into an agreement with two subsidiaries of Merck & Co. (“Merck”). Pursuant to the agreement, Merck will provide to the Company, at no cost, its anti-PD-1 (programmed death receptor-1) therapy, KEYTRUDA® (pembrolizumab) to evaluate in combination with the Company’s lead candidate, FPI-1434. The planned Phase 1 combination trial will evaluate safety, tolerability and pharmacokinetics of FPI-1434 in combination with pembrolizumab and is expected to initiate approximately six to nine months after achieving the recommended Phase 2 dose in the ongoing Phase 1 study of FPI-1434 monotherapy. Under the agreement, the Company will sponsor, fund and conduct the combination trial in accordance with an agreed-upon protocol and Merck agreed to manufacture and supply its compound, at its cost and for no charge to the Company, for use in the clinical trial.

The Company is domiciled in Canada and is primarily subject to taxation in that country. During the three and six months ended June 30, 2021, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in Canada in each period due to its uncertainty of realizing a benefit from those items. During the three and six months ended June 30, 2021, the Company recorded a tax provision of less than $0.1 million related to income tax obligations of its operating company in the U.S., which typically generates a profit for tax purposes, partially offset by discrete stock compensation items arising during the period. During the three and six months ended June 30, 2020, the Company recorded a tax provision of $0.2 million related to income tax obligations of its operating company in the U.S., which generates a profit for tax purposes.

The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate (“AETR”), adjusted for the effect of discrete items arising in that quarter. The impact of such inclusions could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter. For the three and six months ended June 30, 2021 and 2020, the Company excluded Canada and Ireland from the calculation of the AETR as the Company anticipates an ordinary loss in this jurisdiction for which no tax benefit can be recognized.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which primarily consist of net operating loss carryforwards. The Company has considered its history of cumulative net losses in Canada, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its Canadian deferred tax assets. As a result, as of June 30, 2021 and December 31, 2020, the Company has recorded a full valuation allowance against its net deferred tax assets in Canada.~~As a result of the decision to liquidate the Irish entity, the Irish deferred tax assets were reduced to 0 as of June 30, 2021 and December 31, 2020.~~

The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to ~~Common Shareholders~~dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic ~~and diluted~~ net ~~loss~~income (loss) per share attributable to common shareholders ~~was calculated as follows (in thousands, except share and per share amounts):~~

The Company’s potentially dilutive securities, which include stock options, convertible preferred shares, preferred exchangeable shares and common share warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduceis computed by dividing the net ~~loss per share. Therefore,~~income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding ~~used~~for the period. Diluted net income (loss) attributable to ~~calculate both basic~~common shareholders is computed by adjusting net income (loss) attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common shareholders is computed by dividing the diluted net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, warrants and convertible preferred shares are considered potential dilutive common shares.

The Company’s convertible preferred shares contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common shareholders, such losses are not allocated to such participating securities. In periods in which the Company reported a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the ~~same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted~~same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common shareholders for the ~~periods indicated because including them would have had~~three and nine months ended September 30, 2021 and 2020.

operating or financing lease and (ii) lease expense in its consolidated statement of operations for operating leases and amortization and interest expense in its consolidated statement of operations for financing leases. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases under ASC 840. In ~~January~~July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), which added an optional transition method that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented.

The Company ~~entered into an operating~~early adopted the new leasing standard effective January 1, 2021, using the alternative modified retrospective transition approach applied to leases existing as of January 1, 2021. As a result, prior periods are presented in accordance with the previous guidance in ASC 840. The Company has elected to apply the package of practical expedients requiring no reassessment of whether any expired or existing contracts are or contain leases, the lease classification of any expired or existing leases, or the capitalization of initial direct costs for ~~office space in Boston, Massachusetts, which was to expire in~~ ~~July 2023~~ ~~with no renewal options. In July 2020,~~any existing leases. Additionally, the Company ~~paid $0.1 million~~has elected not to ~~terminate this~~separate lease ~~effective immediately.~~

~~In August 2018, the Company entered into~~and non-lease components and not to recognize leases with an ~~operating lease for office space in Hamilton, Ontario. This lease was amended in September 2020 (“New Lease Commencement Date”) and expires in~~ ~~August 2030~~ ~~with a termination option upon~~initial term of twelve months ~~written notice any time after the fifth anniversary~~or less.

The cumulative effect of the ~~New Lease Commencement Date. If the termination option is not exercised, the Company may exercise a renewal option to extend the term for an additional~~ ~~five-year~~ ~~period to August 2035. As the Company is not reasonably certain to extend the lease beyond the allowable termination date, the lease term was determined to end in August 2026 for the purposes~~adoption of ~~measuring this lease.~~

~~In October 2019, the Company entered into an operating lease for office space in Boston, Massachusetts, which expires~~ ~~February 2026~~ and has no renewal options. In connection with entering into the original lease agreement, the Company issued a letter of credit of $1.5 million for the benefit of the landlord. As of June 30, 2021, $0.3 million and $1.2 million of the underlying cash balance collateralizing this letter of credit was classified as restricted cash, current and non-current, respectively,ASC 842 on the Company’s ~~condensed~~ consolidated balance sheets ~~based~~as of January 1, 2021 was as follows (in thousands):

The adoption of ASC 842 did not have a material impact on the ~~release date of the restrictions of this cash. As of December 31, 2020, the entire underlying cash balance collateralizing this letter of credit was classified as restricted cash, non-current, on the~~ Company’s ~~condensed consolidated balance sheets.~~

~~On March 16, 2021, the Company entered into an amendment to expand the area under lease (“Expansion Premises”) and extend the term of the~~premises currently under lease (“Original Premises”) to align with the lease end date for the Expansion Premises. The additional rent for the Expansion Premises was determined to be commensurate with the additional right-of-use and is accounted for as a new operating lease that was recognized on the Company’s balance sheet as of June 30, 2021 since the Company was able to access the Expansion Premises. The Company expects to make certain improvements to the Expansion Premises, for which the landlord will provide the Company an allowance of up to $0.2 million. The Company currently expects the rent for the Expansion Space to commence on January 1, 2022, approximately three months after the Company’s work is estimated to be complete. The Company currently expects the lease end date for the Original Premises and the Expansion Premises lease to be April 30, 2027, with no option to extend the lease term. The lease modification for the extension of the Original Premises and the recognition of the Expansion Premises resulted in increases to the Company’s right-of-use asset balance, which was obtained in exchange for operating lease liabilities, of $0.9 million and $1.2 million, respectively.

On June 1, 2021, the Company entered into a lease for a manufacturing facility in Hamilton, Ontario. The Company currently expects the rent for the manufacturing facility, which is under construction, to commence in October 2022, approximately two months after the anticipated delivery date of the premises. The Company currently expects the lease end date for the manufacturing facility to be in ~~September 2037, with a~~ ~~five-year~~ renewal option. Upon execution of the lease in June 2021, the Company paid $2.5 million CAD (equivalent to $2.1 million at the time of payment) which represented an initial direct cost paid prior to the lease commencement date. As of June 30, 2021, the $2.1 million payment was recorded to prepaid rent as a component of other non-current assets. On the lease commencement date, the Company will reclassify the prepayment to the right-of-use asset, thereby increasing its initial value, but it will not be included in the measurement of the lease liability. The lease was not recorded on the condensed consolidated balance sheet as a component of the Company’s right-of-use asset and operating lease liabilities as the facility is under construction at the date of the issuance of these financial statements. The Company is currently evaluating the lease classification as an operating lease or finance lease for accounting purposes.

~~The components of operating lease cost, which are included within operating expenses in the accompanying~~ condensed consolidated statements of operations and comprehensive loss, ~~are~~statements of non-controlling interest, convertible preferred shares and shareholders’ equity (deficit) or statements of cash flows as ~~follows (in thousands)~~of January 1, 2021.

Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its Simplification Initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The ~~following table summarizes supplemental information~~guidance is effective for the ~~Company’s operating leases:~~

Company for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We adopted ASU 2019-12 effective January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on our condensed consolidated financial statements.

In June ~~30,~~2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. This guidance is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements.

In May 2021, the ~~future maturities~~FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of ~~operating lease liabilities are~~Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides clarification and reduces diversity in accounting for modifications or exchanges of freestanding equity-classified written call options (such as ~~follows (in thousands):~~

~~In accordance with ASC 840, rent expense was $0.3 million and $0.4 million~~warrants) that remain equity classified after modification or exchange. This guidance is effective for annual periods beginning after December 15, 2021, including interim periods within that fiscal year. Companies should apply the ~~three and six months ended June 30, 2020, respectively.~~

~~Future minimum lease payments due under operating leases as~~new standard prospectively to modifications or exchanges occurring after the effective date of ~~December 31, 2020 were as follows (in thousands):~~

the new standard. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2021-04 will have on its consolidated financial statements.

In January 2019, and as amended in September 2020, the Company entered into an agreement with CPDC, a related party (see Note 15), to manufacture clinical trial materials. As of June 30, 2021, the Company had non-cancelable minimum purchase commitments under the agreement totaling $0.1 million over the following twelve months.

In May 2019, the Company entered into an agreement with a third-party contract manufacturing organization to manufacture clinical trial materials. As of June 30, 2021, the Company had non-cancelable minimum purchase commitments under the agreement totaling $1.2 million over the following twelve months.

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and certain of its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not currently aware of any indemnification claims and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of June 30, 2021 or December 31, 2020.

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.

~~The Company’s chief executive officer, founder and member of the board of directors, John Valliant, Ph.D., is a member of the board of directors at CPDC.~~

~~The Company has entered into license agreements with CPDC (see Note 10). In addition, the Company has entered into a Master Services Agreement and a Supply~~Strategic Collaboration Agreement with CPDC, under which CPDC provides services to the Company related to preclinical and manufacturing services, administrative support services and access to laboratory facilities. In connection with the Supply Agreement, the Company is obligated to pay CPDC an amount of $0.2 million per quarter, or $0.8 million in the aggregate per year, plus fees for materials, packaging and distribution of products supplied to the Company, unless the agreement is terminated by the Company. The Company recognized expenses in connection with the services performed in the normal course of business under the Master Services Agreement and the Supply Agreement in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):AstraZeneca UK Limited

During the three and six months ended June 30, 2021, the Company made payments to CPDC in connection with the services described above of $0.4 million and $0.9 million, respectively. During the three and six months ended JuneOn October 30, 2020, the Company ~~made payments~~and AstraZeneca entered into the AstraZeneca Agreement pursuant to CPDC in connection with the services described above of $0.4 million and $0.7 million, respectively. Amounts due to CPDC by the Company in connection with the services described above totaled less than $0.1 million and $0.3 million as of June 30, 2021 and December 31, 2020, respectively, which amounts were included in accounts payable and accrued expenses on the condensed consolidated balance sheets.

~~In addition to costs incurred in connection with the services described above, the Company also reimbursed CPDC for purchases on the Company’s behalf from parties with~~ which the Company ~~did not have an account. During the three~~ and six months ended June 30, 2021, the Company made payments to CPDC of $0.1 million, for both periods, for reimbursement of these pass-through costs. During the three and six months ended June 30, 2020, the Company made payments to CPDC of less than $0.1 million and $0.1 million, respectively, for reimbursement of these pass-through costs.

In connection with the Company entering into a lease for a manufacturing facility in Hamilton, Ontario (see Note 13), the Company entered into an agreement with CPDC for services relating to certain aspects of the validation of the manufacturing facility which is currently under construction. During the three and six months ended June 30, 2021, the Company paid $3.0 million CAD (equivalent to $2.5 million at the time of payment) which was recorded as research and development expense.

The Company has operating companies in the United States and Canada and a non-operating company in Ireland. Information about the Company’s long-lived assets, consisting solely of property and equipment, net, by geographic region was as follows (in thousands):

On July 1, 2021, the Company completed its acquisition of vofotamab, an antibody targeted to FGFR3 which Fusion refers to as FPI-1966, from Rainier. Pursuant to the Rainier Agreement, as amended, and a share purchase agreement entered into by the Company and Rainier concurrently with the original Rainier Agreement, the Company issued to certain of Rainier’s shareholders 313,359 of the Company’s common shares at the closing of the Rainer Agreement (see Note 10 for a full description of the Rainier Agreement, as amended).

~~On July 2, 2021, the Company entered into an Open Market Sales Agreement~~^SM (the “Sales Agreement”) with Jefferies LLC to issue and sell shares of the Company’s common shares of up to $100.0 million in gross proceeds, from time to time during the term of the Sales Agreement, through an “at-the-market” equity offering program under which Jefferies LLCAstraZeneca will act as the Company’s agent and/or principal (the “ATM Facility”). The ATM Facility provides that Jefferies LLC will be entitled to compensation for its services in an amount of up to 3.0% of the gross proceeds of any shares sold under the ATM Facility. The Company has no obligation to sell any shares under the ATM Facility and may, at any time, suspend solicitation and offers under the Sales Agreement. The Company has not sold any shares under the Sales Agreement.

~~Item 2. Management’s Discussion and 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 unaudited condensed consolidated financial statements and related notes appearing in Part I, Item I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto for the year ended December 31, 2020, included in our Annual Report on Form 10-K filed on March 25, 2021 with the U.S. Securities and Exchange Commission, or the SEC.

Some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, particularly including those risks identified in Part II, Item 1A “Risk Factors” and our other filings with the SEC.

Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

We are a clinical-stage oncology company focused on developing next-generation radiopharmaceuticals as precision medicines. We have developed our Targeted Alpha Therapies, or TAT, platform together with our proprietary Fast-Clear linker technology to enable us to connect alpha particle emitting isotopes to various targeting molecules in order to selectively deliver the alpha particle payloads to tumors. Our TAT platform is underpinned by our research and insights into the underlying biology of alpha emitting radiopharmaceuticals as well as our differentiated capabilities in target identification, candidate generation, manufacturing and supply chain and development of imaging diagnostics. We believe that our TATs have the potential to build on the successes of currently available radiopharmaceuticals and be broadly applicable across multiple targets and tumor types.

Our lead product candidate, FPI-1434, utilizes our Fast-Clear linker to connect a humanized monoclonal antibody that targets the insulin-like growth factor 1 receptor, or IGF-1R, with the alpha emitting isotope actinium-225, or 225Ac. IGF-1R is a well-established tumor target that is found on numerous types of cancer cells, but historical attempts to suppress tumors by inhibiting the IGF-1R signaling pathway have been unsuccessful in the clinic. For FPI-1434, we have designed the product candidate to rely on the IGF-1R antibody only as a way to identify and deliver our alpha emitting payload to the tumor, and the mechanism of action does not depend on the IGF-1R signaling pathway to kill the tumor. We are currently conducting a Phase 1 clinical trial of FPI-1434 as a monotherapy in patients with solid tumors expressing IGF-1R and convened a Safety Review Committee, or SRC, meeting in the third quarter of 2020 to evaluate the safety and tolerability of the third dose escalation cohort of 40kBq/kg administered as a single dose. The available safety, dosimetry, pharmacokinetic and biodistribution data from the single dose escalation portion of the study provided justification for the initiation of FPI-1434 multi-dosing at 75kBq/kg and the SRC made the recommendation to proceed with dose escalation to 75kBq/kg administered as repeat doses. We dosed the first patient in the multi-dose escalation portion of the study in the fourth quarter of 2020. We anticipate reporting Phase 1 multiple-dose safety and imaging data, and the recommended Phase 2 dose/schedule, in the first half of 2022. In preclinical studies, FPI-1434 has been evaluated in combination with approved checkpoint inhibitors and DNA damage response inhibitors, or DDRis. As such, we believe that the synergies observed with either class of agent could expand the addressable patient populations for FPI-1434 and allow for potential use in earlier lines of treatment. We anticipate initiation of a Phase 1 combination study with FPI-1434and KEYTRUDA® (pembrolizumab) to occur six to nine months following determination of the recommended Phase 2 dose of FPI-1434 monotherapy. In addition, we are progressing our earlier-stage product candidate, FPI-1966, into clinical development. We submitted an investigational new drug application, or IND, for FPI-1966 for the treatment of head and neck and bladder cancers expressing fibroblast growth factor receptor 3, or FGFR3, in the second quarter of 2021 and announced FDA clearance of the IND application in July 2021. We anticipate initiating the Phase 1 clinical trial of FPI-1966 around the end of 2021 and reporting interim data from the first patient cohort around the end of 2022.

~~On October 30, 2020, we entered into a strategic collaboration agreement with AstraZeneca UK Limited, or AstraZeneca,~~work to jointly discover, develop and commercialize next-generation alpha-emitting radiopharmaceuticals and combination therapies for the treatment of ~~cancer. The collaboration leverages our~~cancer globally by leveraging the Company’s Targeted Alpha Therapies, or TATs, platform and expertise in radiopharmaceuticals with AstraZeneca’s leading portfolio of antibodies and cancer therapeutics, including ~~DDRis.~~DNA damage response inhibitors (“DDRis”). Each party retains full ownership over its existing assets.

The AstraZeneca Agreement consists of 2 distinct collaboration programs: novel TATs and combination therapies. Under the ~~terms of~~AstraZeneca Agreement, the ~~collaboration agreement, the companies will jointly discover,~~parties may develop ~~and commercialize~~up to three novel TATs ~~which~~(the “Novel TATs Collaboration”). The parties will ~~utilize our Fast-Clear linker technology platform with antibodies in AstraZeneca’s oncology portfolio. In addition, the companies will exclusively explore certain specified~~also evaluate up to five potential combination strategies ~~between TATs (including our~~involving the Company’s existing assets, including the Company’s lead candidate ~~FPI-1434) and AstraZeneca~~FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various ~~cancers. Both companies will retain full rights to their respective assets.~~cancers (the “Combination Therapies Collaboration”).

~~On April 1, 2021, we entered into an asset purchase agreement with Ipsen Pharma SAS, or Ipsen, to acquire Ipsen's intellectual property~~The AstraZeneca Agreement expires on a TAT-by-TAT and assets related to IPN-1087. IPN-1087 is a small molecule targeting neurotensin receptor 1, or NTSR1, a protein expressed on multiple solid tumor types. We intend to combine our expertise and proprietary TAT platform with IPN-1087 to create an alpha-emitting radiopharmaceutical, FPI-2059, targeting solid tumors expressing NTSR1. We expect to submit an IND for FPI-2059 incombination-by-combination basis upon the ~~first half of 2022.~~

Since our inception in 2014, we have devoted substantially all of our efforts and financial resources to organizing and staffing our Company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights and conducting discovery, research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales. On June 30, 2020, we completed our initial public offering, or IPO, of our common shares and issued and sold 12,500,000 common shares at a public offering price of $17.00 per share, resulting in net proceeds of approximately $193.1 million after deducting underwriting fees and offering costs. Prior to our IPO, we funded our operations primarily with proceeds from sales of equity securities (including borrowings under a convertible promissory note, which converted into preferred shares). Through June 30, 2021, we had received net proceeds of $364.2 million from sales of equity securities (including borrowings under a convertible promissory note, which converted into preferred shares). On July 2, 2021, we entered into an Open Market Sales Agreement^SM ~~(the “Sales Agreement”) with Jeffries LLC to issue and sell our common shares up to $100.0 million in gross proceeds, from time to time during the term~~later of the ~~Sales Agreement, through an “at-the-market” equity offering program under which Jeffries LLC will act~~expiration of development and exclusivity obligations relating to such TAT or combination or, if such TAT or combination is commercialized as ~~our agent. We have not sold any shares~~a product under the ~~Sales Agreement.~~

~~We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on~~AstraZeneca Agreement, the ~~successful development~~expiration of the commercial life of such product. The Company and ~~eventual commercialization of one or more of our current or future product candidates. Our net losses were $26.9 million and $44.4 million~~AstraZeneca can each terminate the AstraZeneca Agreement for the ~~three and six months ended June 30, 2021, respectively, and $44.7 million and $55.0 million for~~other party’s uncured material breach following the three and six months ended June 30, 2020. As of June 30, 2021, we had an accumulated deficit of $157.6 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital expenditure requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capabilities to support product sales, marketing and distribution.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we would have to significantly delay, reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

~~Because~~applicable notice period. Each of the ~~numerous risks~~Company and ~~uncertainties associated~~AstraZeneca may also terminate the AstraZeneca Agreement with respect to any TAT or combination product if such party determines that the continued development ~~we are unable~~of such TAT or combination product is not commercially viable, or for a material safety issue with respect to ~~predict the timing~~such TAT or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.combination product.

As of June 30, 2021, we had cash, cash equivalents and investments of $260.5 million. We believe that our existing cash, cash equivalents and investments will enable us to fund our operating expenses and capital expenditure requirements through the end of 2023.

~~We are closely monitoring how~~The COVID-19 pandemic, which began in December 2019 and has spread worldwide, has caused many governments to implement measures to slow the spread of ~~COVID-19, including new variants thereof, is affecting our employees,~~the outbreak through quarantines, travel restrictions, heightened border security and other measures. The impact of this pandemic has been, and will likely continue to be, extensive in many aspects of society, which has resulted, and will likely continue to result, in significant disruptions to the global economy as well as businesses and capital markets around the world. The future progression of the pandemic and its effects on the Company’s business ~~preclinical studies~~ and ~~clinical trials.~~ operations are uncertain.

In response to public health directives and orders and to help minimize the ~~COVID-19 pandemic, most~~risk of ~~our~~the virus to employees, ~~transitioned~~the Company has taken precautionary measures, including implementing work-from-home policies for certain employees. The impact of the virus and variants thereof, including work-from-home policies, may negatively impact productivity, disrupt the Company’s business, and delay its preclinical research and clinical trial activities and its development program timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to ~~working remotely and continue to do so and travel between the United States and Canada remains limited. While we have commenced dosing~~conduct its business in the ~~multi-dosing portion of~~ordinary course. Specifically, the ~~Phase 1 clinical trial of FPI-1434, we have~~Company has experienced material delays in patient recruitment and enrollment in its ongoing Phase 1 clinical trial of FPI-1434 as a result of continued resourcing issues related to COVID-19 at trial sites and potentially due to concerns among patients about participating in clinical trials during a public health emergency. The ~~COVID-19 pandemic~~Company may not be able to enroll additional patient cohorts on its planned timeline due to disruptions at its clinical trial sites and is ~~also affecting the operations of third parties upon whom we rely. We are~~ unable to predict how the COVID-19 pandemic may affect ~~our~~its ability to successfully progress ~~our Phase 1 clinical trial of FPI-1434 or any other~~its clinical programs in the future. ~~Moreover, there remains uncertainty relating~~Other impacts to the ~~trajectory~~Company’s business may include temporary closures of its suppliers or other third parties upon whom the Company relies and disruptions or restrictions on its employees’ ability to travel. Any prolonged material disruption to the Company’s employees, suppliers or other third parties upon whom the Company relies could adversely impact the Company’s preclinical research and clinical trial activities, financial condition and results of operations, including its ability to obtain financing.

The Company is monitoring the potential impact of the COVID-19 pandemic, including variants thereof, on its business and condensed consolidated financial statements. To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of the pandemic and ~~whether~~ it ~~may cause further delays~~is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in ~~patient study recruitment.~~ these condensed consolidated financial statements.

The ~~impact~~preparation of ~~related responses~~the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and ~~disruptions caused by~~assumptions that affect the ~~COVID-19 pandemic may result in difficulties or delays in initiating, enrolling, conducting or completing our planned~~reported amounts of assets and ~~ongoing trials~~liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the ~~incurrence~~reported amounts of ~~unforeseen~~expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuations of common shares, preferred share tranche rights and preferred share warrants prior to the closing of the IPO, valuations of share-based awards and revenue recognition. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Cash and cash equivalents consist of standard checking accounts, money market accounts, and all highly liquid investments with an original maturity of three months or less at the date of purchase.

In connection with the Company’s lease agreement entered into in October 2019 (see Note 13), the Company maintains a letter of credit of $1.5 million for the benefit of the landlord. As of September 30, 2021, $0.3 million and $1.2 million of the underlying cash balance collateralizing this letter of credit was classified as restricted cash, current and non-current, respectively, on the Company’s condensed consolidated balance sheets based on the release date of the restrictions of this cash. As of December 31, 2020, the entire underlying cash balance collateralizing this letter of credit was classified as restricted cash, non-current, on the Company’s condensed consolidated balance sheets.

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds from the offering, either as a reduction to the carrying value of the preferred exchangeable shares or convertible preferred shares or in shareholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of ~~disruptions~~the offering. Should an in-process equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in ~~clinical supply or preclinical study or clinical trial delays.~~the consolidated statements of operations and comprehensive loss. The ~~continued impact~~Company recorded $0.3 million of ~~COVID-19~~deferred offering costs as of September 30, 2021 in other non-current assets and did 0t record any deferred offering costs as of December 31, 2020.

The Company considers the nature and contractual terms of arrangements and assesses whether an arrangement involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards dependent on ~~results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as~~ the ~~ultimate geographic spread~~commercial success of the ~~disease or variants thereof,~~activity. If the ~~duration~~Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the ~~pandemic, vaccination rates, travel restrictions~~activity, the Company accounts for such arrangement as a collaborative arrangement under ASC 808, Collaborative Arrangements. ASC 808 describes arrangements within its scope and ~~social distancing~~considerations surrounding presentation and disclosure, with recognition matters subjected to other authoritative guidance, in certain cases by analogy.

For arrangements determined to be within the scope of ASC 808 where a collaborative partner is not a customer for certain research and development activities, the Company accounts for payments received for the reimbursement of research and development costs as a contra-expense in the ~~United States, Canada~~period such expenses are incurred. This reflects the joint risk sharing nature of these activities within a collaborative arrangement. The Company classifies payments owed or receivables recorded as other current liabilities or prepaid expenses and other ~~countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken~~current assets, respectively, in the ~~United States, Canada~~Company’s consolidated balance sheets.

If payments from the collaborative partner to the Company represent consideration from a customer in exchange for distinct goods and ~~other countries~~services provided, then the Company accounts for those payments within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). Please refer to ~~contain and treat~~Note 3, “Collaboration Agreement” for additional details regarding the ~~disease.~~

~~Components of Results of Operations~~Company’s Strategic Collaboration Agreement with AstraZeneca UK Limited (“AstraZeneca”) (the “AstraZeneca Agreement”).

The Company’s revenue generating arrangements typically include upfront license fees, milestone payments and/or royalties.

For the three and nine months ended September 30, 2021, the Company recorded $0.3 million and $0.8 million, respectively, of revenue under collaboration agreements. Please refer to Note 3, “Collaboration Agreement” for additional details regarding revenue recognition under the AstraZeneca Agreement.

To date, wethe Company has not recorded any acquisitions as a business combination.

The Class B preferred share tranche right liability (see Note 8) was settled in connection with the achievement of the regulatory milestone associated with the Class B preferred share tranche right. Specifically, the fair value of the Class B preferred share tranche right liability was remeasured for the last time as of the Milestone Financing closing date, resulting in the Company recognizing a loss in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020 of $32.7 million for the change in the fair value of the tranche right liability between December 31, 2019 and June 2, 2020. Immediately thereafter, the balance of the Class B preferred share tranche right liability of $39.6 million was reclassified to Class B convertible preferred shares in an amount of $35.3 million and to non-controlling interest in the Company’s Irish subsidiary in an amount of $4.3 million on the consolidated balance sheet. For the nine months ended September 30, 2020, the Company recognized a loss of $32.7 million in the condensed consolidated statement of operations and comprehensive loss for the change in the fair value of the tranche right liability.

Upon the closing of the IPO, the warrants to purchase its convertible preferred shares and warrants to purchase preferred exchangeable shares of the Company’s Irish subsidiary were converted into warrants to purchase shares of the Company’s common shares. As a result, the warrant liability was remeasured a final time on the closing date of the IPO and reclassified to shareholders’ equity (deficit) as the warrants qualify for equity classification.

The Company has entered into various research, development and manufacturing contracts with research institutions and other companies. These agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research, development and manufacturing costs. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations to those third parties as of period end. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research, development and manufacturing activities, invoicing to date under the contracts, communication from the research institutions and other companies of any actual costs incurred during the period that have not ~~generated~~yet been invoiced and the costs included in the contracts. Significant judgments and estimates may be made in determining the accrued balances at the end of any ~~revenue~~reporting period. Actual results could differ from ~~product sales,~~the estimates made by the Company. The historical accrual estimates made by the Company have not been materially different from the actual costs.

Comprehensive loss includes net loss as well as other changes in shareholders’ equity (deficit) that result from transactions and weeconomic events other than those with shareholders. For the three and nine months ended September 30, 2021 and 2020, unrealized gains and losses on investments are included in other comprehensive income (loss) as a component of shareholders’ equity (deficit) until realized.

The Company’s convertible preferred shares contractually entitle the holders of such shares to participate in dividends but do not ~~expect~~contractually require the holders of such shares to ~~generate any revenue from~~participate in losses of the ~~sale of products~~Company. Accordingly, in periods in which the Company reports a net loss attributable to common shareholders, such losses are not allocated to such participating securities. In periods in which the Company reported a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common shareholders for the ~~foreseeable future. If~~three and nine months ended September 30, 2021 and 2020.

The cumulative effect of the adoption of ASC 842 on the Company’s consolidated balance sheets as of January 1, 2021 was as follows (in thousands):

The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for ~~our current~~public and nonpublic companies, the Company will adopt the new or ~~future product candidates are successful~~revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in ~~regulatory approval, we may generate revenue~~earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. This guidance is effective for the Company for annual periods beginning after December 15, 2022, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its consolidated financial statements.

In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 provides clarification and reduces diversity in accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange. This guidance is effective for annual periods beginning after December 15, 2021, including interim periods within that fiscal year. Companies should apply the ~~future from product sales. We cannot predict if, when~~new standard prospectively to modifications or ~~to what extent we~~exchanges occurring after the effective date of the new standard. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2021-04 will ~~generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.~~have on its consolidated financial statements.

On October 30, 2020, wethe Company and AstraZeneca entered into ~~a strategic collaboration agreement, or~~ the AstraZeneca Agreement pursuant to which wethe Company and AstraZeneca will work to jointly discover, develop and commercialize next-generation alpha-emitting radiopharmaceuticals and combination therapies for the treatment of cancer globally by leveraging ~~our TAT~~the Company’s Targeted Alpha Therapies, or TATs, platform and expertise in radiopharmaceuticals with AstraZeneca’s leading portfolio of antibodies and cancer therapeutics, including ~~DDRis. The AstraZeneca Agreement consists of two distinct collaboration programs: novel TATs and combination therapies.~~DNA damage response inhibitors (“DDRis”). Each party retains full ownership over its existing assets.

WeThe AstraZeneca Agreement consists of 2 distinct collaboration programs: novel TATs and combination therapies. Under the AstraZeneca Agreement, the parties may develop up to three novel TATs (the “Novel TATs Collaboration”). The parties will also evaluate up to five potential combination strategies involving the Company’s existing assets, including the Company’s lead candidate FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers (the “Combination Therapies Collaboration”).

As part of the Novel TATs Collaboration, the parties may develop up to three novel TATs. The Company and AstraZeneca will share development costs equally (with each party responsible for the cost of its own supply in connection with such development). Either party has the right to opt out of the co-development and co-commercialization arrangement at pre-determined timepoints and obtain exclusive rights to a novel TAT in exchange for milestone payments to the other party of up to $145.0 million per novel TAT and a low or high single-digit royalties on future sales (depending on the opt out time point). If neither party opts out, and unless otherwise agreed by the parties, AstraZeneca will lead worldwide commercialization activities for the novel TATs, subject to the Company’s option to co-promote the TATs in the U.S. All profits and losses resulting from such commercialization activities will be shared equally.

The Novel TATs Collaboration is within the scope of ASC 808 as the Company and AstraZeneca are both active participants in the research and development activities and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. The research and development activities are a unit of account under the scope of ASC 808 and are not promises to a customer under the scope of ASC 606.

The Company records its portion of the research and development expenses as the related expenses are incurred. All payments received or amounts due from AstraZeneca for reimbursement of shared costs are accounted for as an offset to research and development expense. For the three and nine months ended September 30, 2021, the Company incurred $1.6 million and $2.0 million, respectively, in gross research and development expenses relating to the Novel TATs Collaboration which was offset by $0.8 million and $1.0 million, respectively, in amounts due from AstraZeneca for reimbursement of shared costs. As of September 30, 2021, the Company recorded $0.9 million due from AstraZeneca for reimbursement of shared costs in prepaid expenses and other current assets.

As part of the Combination Therapies Collaboration, the parties will evaluate up to five potential combination strategies involving the Company’s existing assets, including the Company’s lead candidate FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers. The Company received an upfront payment of $5.0 million from AstraZeneca in December 2020 associated with the ~~combination therapies program.~~Combination Therapies Collaboration. AstraZeneca will fully fund all research and development activities for the combination strategies, until such point as wethe Company may opt-in to the clinical development activities. We

The Company also ~~have~~has the right to opt-out of clinical development activities relating to these combination therapies. In such instance, wethe Company will be responsible for repaying ~~our~~its share of the development costs via a royalty on the additional combination sales only if ~~our~~its drug is approved on the basis of clinical development solely conducted by AstraZeneca, in which case the royalty payments shall also include a variable risk premium based on the number of ~~our~~the Company’s product candidates ~~that~~to have received regulatory approval at that time. ~~We are~~

studies combining the Company’s TAT platform with any compound modulating the activity of such combination target. Following selection of a target under the AstraZeneca Agreement and payment of an exclusivity fee by AstraZeneca, and provided that AstraZeneca enrolls its first patient in a clinical trial as further defined in the AstraZeneca Agreement within a pre-defined period of time of such selection, the Company will not undertake any preclinical or clinical studies combining the Company’s TAT platform with compounds modulating the same combination target for the duration of the evaluation period for such combination target, as further defined in the AstraZeneca Agreement. Within a certain time period following initiation of the evaluation period with respect to a combination target, AstraZeneca has the exclusive right to undertake, alone or in collaboration with the Company, all further clinical or preclinical combination studies with respect to a combination target by paying certain exclusivity fees. The Company is eligible to receive future payments of up to $40.0 million, including those for the achievement of certain clinical milestones and exclusivity fees.

WeThe Company determined the research and development activities associated with the ~~combination therapies, or the~~ Combination Therapies Collaboration are a key component of ~~our~~its central operations and AstraZeneca has contracted with usthe Company to obtain goods and services which are an output of ~~our~~the Company’s ordinary activities in exchange for consideration. Further, ~~we do~~the Company does not share the risks and rewards of the underlying research activities making AstraZeneca a customer for the Combination Therapies Collaboration which falls within the scope of ASC 606.

To determine the appropriate amount of revenue to be recognized under ASC 606, ~~Revenue from Contracts with Customers~~,the Company performed the following steps: (i) identify the promised goods or ~~ASC 606.~~services in the contract, (ii) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract, (iii) measure the transaction price, including the constraint on variable consideration, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

Under ASC 606 ~~we account~~the Company accounts for (i) the license weit conveyed to AstraZeneca with respect to certain intellectual property and (ii) the obligations to perform research and development services as part of the Combination Therapies Collaboration as a single performance obligation under the AstraZeneca Agreement. ~~We recognize~~The Company concluded AstraZeneca’s right to purchase exclusive options to obtain certain development, manufacturing and commercialization rights represent customer options that are not performance obligations as they do not contain any discounts or other rights that would be considered a material right in the arrangement. Such options will be accounted for upon AstraZeneca’s election.

Under ASC 606, the Company recognizes revenue using the cost-to-cost method, which ~~we believe~~it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. ~~We recognize adjustments in revenue for changes~~Under ASC 606, the estimated transaction price includes variable consideration that is not constrained. The Company does not include variable consideration to the extent that it is probable that a significant reversal in the ~~estimated extent~~amount of cumulative revenue recognized will occur when any uncertainty associated with the variable consideration is resolved. The estimate of the Company’s measurement of progress ~~towards completion under~~and estimate of variable consideration to be included in the transaction price will be updated at each reporting date as a change in estimate.

For the clinical milestone payments, the Company utilizes the most likely amount method to determine the amounts recognized and timing of recognition. Once the constraint is removed, the clinical milestone payments will be accounted for with the research and development services for the purposes of revenue recognition which will occur over time as the services are provided. Upon the achievement of any milestone for specified clinical development events, the Company will utilize the same cost-to-cost model with a cumulative catch-up ~~method. Under this method, the impact of this adjustment on revenue recorded to date is~~ recognized in the period in which any such event occurs.

The Company will re-evaluate the ~~adjustment is identified.~~transaction price at the end of each reporting period and as uncertain events are resolved, or other changes in circumstances occur, adjust its estimate of the transaction price if necessary. As of December 31, 2020, the Company recorded the upfront fee as a contract liability for deferred revenue in its condensed consolidated balance sheet as it had yet to provide any services under the AstraZeneca Agreement.

The following table presents changes in the Company’s contract assets and liabilities for the nine months ended September 30, 2021 (in thousands):

During the three and ~~six~~nine months ended ~~June~~September 30, 2021 weand 2020, the Company recognized ~~$0.5~~the following revenue (in thousands):

The current portion of deferred revenue and deferred revenue, net of current portion, are $2.3 million ~~in collaboration~~and $2.2 million as of September 30, 2021, respectively, which reflects the Company’s estimate of the revenue ~~under~~it expects to recognize within the next 12 months and beyond 12 months, respectively. The Company expects to recognize the revenue associated with the AstraZeneca Agreement in subsequent periods through the year ending December 31, 2024.

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values (in thousands):

During the nine months ended September 30, 2021 and the year ended December 31, 2020, there were no transfers between Level 1, Level 2 and Level 3.

As of September 30, 2021, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):

As of December 31, 2020, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):

Prepaid expenses and other current assets consisted of the following (in thousands):

On June 19, 2020, the Company effected a one-for-5.339 reverse share split of its issued and outstanding common shares and a proportional adjustment to the existing conversion ratios for each class of the Company’s Preferred Shares and Preferred Exchangeable Shares. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse share split and adjustment of the preferred share conversion ratios.

On June 30, 2020, the Company closed its IPO of common shares and issued and sold 12,500,000 shares of common shares at a public offering price of $17.00 per share, resulting in net proceeds of approximately $193.1 million after deducting underwriting fees and offering costs.

On July 2, 2021, the Company entered into an Open Market Sales Agreement^SM (the “Sales Agreement”) with Jefferies LLC to issue and sell shares of the Company’s common shares of up to $100.0 million in gross proceeds, from time to time during the term of

the Sales Agreement, through an “at-the-market” equity offering program under which Jefferies LLC will act as the Company’s agent and/or principal (the “ATM Facility”). The ATM Facility provides that Jefferies LLC will be entitled to compensation for its services in an amount of up to 3.0% of the gross proceeds of any shares sold under the ATM Facility. The Company has no obligation to sell any shares under the ATM Facility and may, at any time, suspend solicitation and offers under the Sales Agreement. As of September 30, 2021, the Company has 0t sold any shares under the Sales Agreement.

As of September 30, 2021, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue unlimited common shares, each with no par value per share.

Each common share entitles the holder to one vote on all matters submitted to a vote of the Company’s shareholders. Common shareholders are entitled to receive dividends, if any, as may be declared by the board of directors. Through September 30, 2021, 0 cash dividends had been declared or paid by the Company.

In January 2020, the Company executed the First Amendment to the Class B Subscription Agreement (“Amended Class B Subscription Agreement”) whereby the Canada Pension Plan Investment Board (“CPP”) agreed to purchase an aggregate of $20.0 million of Class B preferred shares, at a price of $1.5154 per share, in two tranches. In January 2020, the Company issued and sold to CPP 6,598,917 Class B preferred shares, resulting in gross proceeds of $10.0 million (the “Additional Class B Closing”). The Company incurred issuance costs of $0.1 million in connection with this transaction.

The rights and preferences of the Class B preferred shares sold under the Additional Class B Closing were the same as the rights and preferences of the Class B preferred shares issued and sold by the Company in March 2019. Accordingly, under the terms of the Amended Class B Subscription Agreement, upon the earlier occurrence of a specified development or specified regulatory milestone, CPP was obligated to purchase an additional 6,598,917 Class B preferred shares at a price of $1.5154 per share. The Company concluded that these rights or obligations of CPP to participate in the Milestone Financing of Class B preferred shares met the definition of a freestanding financial instrument that was required to be recorded as a liability at fair value as (i) the instruments are legally detachable and separately exercisable from the Class B preferred shares and (ii) the rights will require the Company to transfer assets upon future closings of the Class B preferred shares.

Upon the Additional Class B Closing in January 2020, the Company recorded an additional liability for the preferred share tranche right of $1.1 million and a corresponding reduction to the carrying value of the Class B preferred shares.

In May 2020, the Company achieved the specified regulatory milestone associated with the Class B preferred share tranche right, which triggered the requirement of the Class B shareholders to participate in the Milestone Financing. Upon closing of the Milestone Financing on June 2, 2020, the Company issued and sold 36,806,039 Class B preferred shares at a price of $1.5154 per share for aggregate proceeds of $55.8 million.

The Class B preferred share tranche right liability was settled in connection with the achievement of the regulatory milestone associated with the Class B preferred share tranche right. Specifically, the fair value of the Class B preferred share tranche right liability was remeasured for the last time as of the Milestone Financing closing date, resulting in the Company recognizing a loss in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020 of $32.7 million for the change in the fair value of the tranche right liability between December 31, 2019 and June 2, 2020. Immediately thereafter, the balance of the Class B preferred share tranche right liability of $39.6 million was reclassified to Class B convertible preferred shares in an amount of $35.3 million and to non-controlling interest in Fusion Pharmaceuticals (Ireland) Limited in an amount of $4.3 million on the consolidated balance sheet. For the nine months ended September 30, 2020, the Company recognized a loss of $32.7 million in the condensed consolidated statement of operations and comprehensive ~~loss.~~

~~Research and development expenses consist primarily of costs incurred in connection with~~loss for the ~~discovery and development of our product candidates. These expenses include:~~

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense when the goods have been delivered or the services have been performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

arrangement falls within the scope of ASC 808, Collaborative Arrangements, or ASC 808, all payments received or amounts due from AstraZeneca for reimbursement of shared costs are accounted for as an offset to research and development expense. For the three and six months ended June 30, 2021, we incurred $0.2 million and $0.3 million, respectively, in gross research and development expenses relating to the Novel TATs Collaboration which was offset by $0.1 million and $0.2 million, respectively, in amounts due from AstraZeneca for reimbursement of shared costs.

Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under third-party license agreements. We do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and our TAT platform and Fast-Clear linker technology and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and our technology platform and, therefore, we do not track these costs by program.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we complete a Phase 1 clinical trial of FPI-1434 as a monotherapy in patients with solid tumors expressing IGF-1R, complete preclinical development and pursue initial stages of clinical development of our FPI-1434 combination therapies, and develop FPI-1966 and our other early-stage programs.

The successful development and commercialization of our product candidates are highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. This is due to the numerous risks and uncertainties associated with product development, including the following:

A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of these product candidates. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. In addition, we may never succeed in obtaining regulatory approval for any of our product candidates.

General and administrative expenses consist primarily of salaries and related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates and technology platform. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with our continued growth as a public company.

Upon the closing of the IPO, the Company converted the then outstanding Class A and Class B preferred shares into common shares at a ~~component~~conversion ratio of ~~other income (expense) in our consolidated statements~~5.339 Preferred Share to one common share.

In connection with each issuance and sale of ~~operations~~its Class A preferred shares and ~~comprehensive loss. We continued~~Class B preferred shares, the Company’s Irish subsidiary issued and sold Class A and Class B preferred exchangeable shares (together, the “Preferred Exchangeable Shares”) to ~~recognize changes in~~investors. Simultaneously with the ~~fair~~issuance and sale of the Preferred Exchangeable Shares, the Company issued and sold its Class A and Class B special voting shares (together, the “Special Voting Shares”) to the same investors. Prior to the IPO, the Company’s Irish subsidiary’s amended constitution authorized it to issue an aggregate of 28,874,378 Preferred Exchangeable Shares and 29,747,987 Preferred Exchangeable Shares, respectively, with a par value of ~~this preferred share tranche right liability until~~$0.001 per share. Prior to the ~~preferred share tranche right was settled on June 2, 2020~~IPO, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue an aggregate of 28,874,378 Special Voting Shares and 29,747,987 Special Voting Shares, respectively, with a cash redemption value of $0.000001 per share.

In March 2019, in connection with the ~~achievement~~first closing of Class B preferred shares, as described above, the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share and the Company issued and sold 4,437,189 Class B special voting shares at a price of $0.000001 per share for aggregate gross proceeds of $6.7 million (the “2019 Preferred Exchangeable Share Financing”).

In May 2020, the Company achieved the specified regulatory ~~milestone. Upon the settlement of the preferred share tranche right,~~milestone associated with the Class B preferred share tranche right, ~~was remeasured~~which triggered the requirement of the Class B shareholders to ~~fair value for~~participate in the ~~last time and~~Milestone Financing. Upon closing of the ~~change in fair value was recognized as a component of other income (expense) in our consolidated statement of operations and comprehensive loss. As a result, in periods subsequent to~~Milestone Financing on June 2, 2020, ~~we will no longer recognize changes in~~ the ~~preferred~~Company issued and sold 4,437,189 Class B special voting shares at a price of $0.000001 per share ~~tranche right liability in our condensed consolidated statements of operations~~ and ~~comprehensive loss.~~

~~In connection with our~~the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share, ~~financing in~~for aggregate gross proceeds of $6.7 million.

In January 2020, wein conjunction with the Company’s execution of the Amended Class B Subscription Agreement, the Company issued to the existing holders of Class B convertible preferred shares (excluding the investor in the Additional Class B Closing in January ~~2020 financing)~~2020) warrants to purchase 3,126,391 ~~of our~~ Class B convertible preferred shares, at an exercise price of $1.5154 per share, and weFusion Pharmaceuticals (Ireland) Limited issued to the existing holders of Class B preferred exchangeable shares warrants to purchase 873,609 Class B preferred exchangeable ~~shares. We classify these~~shares, at an exercise price of $1.5154 per share (collectively the “Preferred Share Warrants”). If the warrants to purchase Class B preferred exchangeable shares ~~and~~are exercised, at that same time, the shareholder is obligated to purchase from the Company an equal number of Class B ~~preferred exchangeable~~special voting shares at a price of $0.000001 per share. The Preferred Share Warrants were issued for no consideration, and the specified exercise prices of each warrant are subject to adjustment for share dividends, share splits, combination or other similar recapitalization transactions as ~~a liability on our consolidated balance sheets. We remeasure these preferred share warrants to fair value at each reporting date and recognize changes in~~provided under the ~~fair value~~terms of the preferred share warrant liability as a component of other income (expense) in our consolidated statements of operations and comprehensive loss. We will continue to recognize changes in the fair value of this preferred share warrant liability until each respective preferred share warrant is exercised, expires or qualifies for equity classification. warrants.

The ~~preferred share warrants~~Preferred Share Warrants were immediately exercisable and expire two years from the date of issuance or upon the earlier occurrence of specified qualifying events, which include the consummation of a ~~deemed liquidation event~~Deemed Liquidation Event and the closing of a qualifying share ~~sale.~~sale (as defined in the articles of the corporation, as amended and restated). Upon the closing of a qualified public offering, on specified terms, all outstanding warrants to purchase Class B convertible preferred shares of the Company and warrants to purchase Class B preferred exchangeable shares of Fusion Pharmaceutics (Ireland) Limited will become warrants to purchase common shares of the Company.

Upon issuance of the Preferred Share Warrants in January 2020, the Company recorded on its consolidated balance sheet a preferred share warrant liability of $1.4 million, equal to the issuance-date fair value of the Preferred Share Warrants, as well as a corresponding decrease of $1.3 million to additional paid-in capital, reducing that to zero, and an increase of $0.1 million to accumulated deficit for the remainder.

The issuance of the Preferred Share Warrants was treated as a deemed dividend to existing preferred shareholders for purposes of the Company’s calculation of net loss per share attributable to common shareholders, and, as such, the aggregate value of the dividend to existing preferred shareholders was deducted from the Company’s net loss when computing net loss per share attributable to common shareholders (see Note 12). The Company remeasures the fair value of the liability associated with the Preferred Share Warrants at each reporting date and records any adjustments as a component of other income (expense) in the consolidated statements of operations and comprehensive loss. Upon the closing of the IPO, the warrants to purchase ~~our~~3,126,391 of its convertible preferred shares and warrants to purchase 873,609 preferred exchangeable shares of ~~our~~the Company’s Irish subsidiary were converted into warrants to purchase 749,197 shares of ~~our~~the Company’s common ~~shares.~~shares at an exercise price of $8.10 per share. As a result, the warrant liability was remeasured a final time on the closing date of the IPO and reclassified to shareholders’ equity (deficit) as the ~~change in fair value was~~warrants

qualify for equity classification. For the nine months ended September 30, 2020, the Company recognized a loss of $6.4 million as a component of other income (expense) in ~~our~~the condensed consolidated statement of operations and comprehensive loss to reflect an increase in fair value of the Preferred Share Warrant.

On August 17, 2020, a holder of common share warrants exercised 97,381 common share warrants through a cashless exercise and the Company issued 38,340 common shares with the remaining 59,041 warrants being cancelled to settle the exercise price. As of September 30, 2021, 651,816 common share warrants remained outstanding.

As of September 30, 2021, 2,575,208 shares, remained available for future grant under the 2020 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2020 Plan.

As of September 30, 2021 and December 31, 2020, 0 shares remained available for future grant under the 2017 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2020 Plan.

On June 18, 2020, the Company’s board of directors adopted the 2020 Employee Share Purchase Plan (the “ESPP”), which became effective on June 24, 2020. A total of 450,169 common shares were reserved for issuance under this plan. In addition, the number of common shares that may be issued under the ESPP was automatically increased on January 1, 2021 and shall be automatically increased each January 1 thereafter by the lesser of (i) 900,338 common shares, (ii) 1% of the number of the Company’s common shares outstanding on the immediately preceding December 31 and (iii) such lesser number of shares as determined by the Company’s compensation committee of the board of directors. As of September 30, 2021, 15,596 shares were issued under the ESPP. The total number of common shares reserved for issuance under the ESPP was 867,427 shares as of September 30, 2021.

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected share volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employee consultants is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:

The following table summarizes the Company’s stock option activity since December 31, 2020:

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those options that had exercise prices lower than the fair value of the Company’s common shares. The intrinsic value for stock options exercised during the nine months ended September 30, 2021 was $3.3 million. The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2021 and 2020 was $6.17 and $11.54 per share, respectively.

Share-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

As of September 30, 2021, total unrecognized share-based compensation expense related to unvested share-based awards was $25.4 million, which is expected to be recognized over a weighted-average period of 2.8 years. Additionally, as of September 30, 2021, the Company has unrecognized share-based compensation expense related to unvested stock options with performance-based vesting conditions for which performance has not been deemed probable of $1.0 million.

License Agreement with the Centre for Probe Development and ~~reclassified~~Commercialization Inc.

In November 2015, the Company entered into a license agreement with the Centre for Probe Development and Commercialization Inc. (“CPDC”), a related party (see Note 15) (the “CPDC Agreement”). Under the agreement, the Company was granted an exclusive, sublicensable, nontransferable, worldwide license under CPDC’s patent rights related to ~~shareholders’ equity (deficit)~~CPDC’s radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans, whether diagnostic or therapeutic. The Company has the right to grant sublicenses of its rights. The CPDC Agreement was amended in 2017; however, there were no material changes to the terms of the CPDC Agreement. Also in 2017, the Company entered into a second license agreement with CPDC, under which the Company was granted an exclusive, sublicensable, worldwide license under CPDC’s patent rights related to certain CPDC radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans. The Company has the right to grant sublicenses of its rights.

The Company has no obligations under any of the agreements with CPDC to make any milestone payments or to pay any royalties or annual maintenance fees to CPDC.

During the three and nine months ended September 30, 2021 and 2020, the Company did 0t make any payments to CPDC or recognize any research and development expenses under the license agreements with CPDC.

In December 2016, the Company entered into a license agreement with ImmunoGen, Inc. (“ImmunoGen”) (the “ImmunoGen Agreement”). Under the agreement, the Company was granted an exclusive, sublicensable, worldwide license under ImmunoGen’s patent rights to use, develop, manufacture and commercialize any radiopharmaceutical conjugate that includes a certain compound and any resulting commercialized products. The Company has the right to grant sublicenses of its rights.

Under the ImmunoGen Agreement, the Company paid an upfront fee of $0.2 million to ImmunoGen. In addition, the Company is obligated to make aggregate milestone payments to ImmunoGen of up to $15.0 million upon the achievement of specified development and regulatory milestones and of up to $35.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay tiered royalties of a low to mid single-digit percentage based on annual net sales by the Company and any of its affiliates and sublicensees. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country until ten years following the date of the first commercial sale in the United States and five years following the date of the first commercial sale in all non-U.S. countries. In addition, the Company is responsible for all costs and expenses incurred related to the development, manufacture, regulatory approval and commercialization of all licensed products.

Prior to regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 90 days’ prior written notice to ImmunoGen. Upon receipt of its first regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 180 days’ prior written notice to ImmunoGen. If the Company or ImmunoGen fails to comply with any of its obligations or otherwise breaches the agreement, the other party may terminate the agreement. The ImmunoGen Agreement expires upon the expiration date of the last-to-expire royalty term.

During the three and nine months ended September 30, 2021 and 2020, the Company did 0t make any payments to ImmunoGen or recognize any research and development expenses under the ImmunoGen Agreement.

which all issued patents under the agreement have expired or (iii) the date upon which a product highly similar in composition to the licensed product and having no clinically meaningful differences is sold or marketed for sale in such country by a third party.

The Company is not entitled to any payments from MediaPharma for use of the license to the specified compound granted to MediaPharma.

During the three and nine months ended September 30, 2021 and 2020, the Company did 0t make any payments to MediaPharma or recognize any research and development expenses under the MediaPharma Agreement.

Asset Acquisition from Rainier Therapeutics, Inc. and License Agreement with Genentech, Inc.

On March 10, 2020 (the “Closing”), the Company and Rainier Therapeutics, Inc. (“Rainier”) entered into an asset acquisition agreement (the “Rainier Agreement”). Under the agreement, the Company purchased all rights, title and interest to Rainier’s, and any of its affiliates’ and sublicensees’, patents and other tangible and intangible assets to perform research and to develop, manufacture and commercialize a specified compound of antibody molecules that bind to targets for the prevention, treatment and diagnosis of all diseases and conditions only using such compound as an antibody drug conjugate. The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, the license rights.

In connection with the asset acquisition, the Company paid an upfront fee of $1.0 million to Rainier and recognized this amount as research and development expense in the condensed consolidated statement of operations and comprehensive loss during the three months ended March 31, 2020, as the ~~warrants qualify~~IPR&D acquired had no alternative future use as of the acquisition date.

Unless the Rainier Agreement was terminated pursuant to its terms, which termination initially could not have occurred later than eight months following the Closing (the “Outside Date”), the Company was obligated to pay Rainier an additional amount of $3.5 million and to issue 313,359 of the Company’s common shares on the Outside Date. If the Rainier Agreement was not terminated by the Outside Date, the Company is also obligated to make aggregate milestone payments to Rainier of up to $22.5 million and to issue up to 156,679 of the Company’s common shares upon the achievement of specified development and regulatory milestones, of which a $2.0 million milestone payment and the issuance of 156,679 common shares are due upon the first patient dosed in a Phase 1 study of FPI-1966, and of up to $42.0 million upon the achievement of specified sales milestones.

The Rainier Agreement could have been terminated at any time prior to the Outside Date upon 30 days’ notice by the Company to Rainier or upon the mutual written consent of both parties. On October 8, 2020, the Company and Rainier entered into a first amendment to the Rainier Agreement (the “First Amended Rainier Agreement”) to extend certain terms of the Rainier Agreement. Specifically, the Outside Date was amended such that termination may not occur later than eleven months following the Closing, or February 10, 2021 (the “Revised Outside Date”). On February 8, 2021, the Company and Rainier entered into a second amendment to the First Amended Rainier Agreement, as amended (the “Second Amended Rainier Agreement”). Pursuant to the Second Amended Rainier Agreement, the Outside Date was further amended such that termination may not occur later than July 1, 2021, and such amendment was made in consideration for ~~equity classification.~~early payment of the additional $3.5 million owed to Rainier which the Company paid and recorded as research and development expense during the three months ended March 31, 2021. On May 26, 2021, the Company notified Rainier of its intent to continue development of the asset and issued 313,359 of its common shares to Rainier on July 1, 2021.

~~Interest Income (Expense)~~During the three months ended September 30, 2021, the Company did 0t recognize any research and development expense associated with the Second Amended Rainier Agreement. During the nine months ended September 30, 2021, the Company recognized $6.1 million of research and development expense associated with the payment of $3.5 million and the issuance of 313,359 of its common shares as noted above. During the nine months ended September 30, 2020, the Company paid an upfront fee of $1.0 million to Rainier and recognized this as an expense as noted above.

In connection with the Rainier Agreement, in March 2020, the Company was assigned all of Rainier’s rights and obligations under an exclusive license agreement between BioClin Therapeutics, Inc. and Genentech, Inc. (“Genentech”) (the “Genentech License Agreement”). Pursuant to the Genentech License Agreement, the Company has an exclusive, worldwide, sublicensable license to make, use, research, develop, sell and import certain intellectual property and technology of Genentech relating to a specified antibody and any mutant antibody thereof (the “Licensed Antibodies”), ~~Net~~including any products that contain a Licensed Antibody as an active ingredient (the “Products”), for all human uses.

Pursuant to the Genentech License Agreement, the Company is obligated to use commercially reasonable efforts to develop and commercialize at least one Product and the Company is solely responsible for the costs associated with the development, manufacturing, regulatory approval and commercialization of any Products. The manufacture of the antibody by any third-party contract manufacturing organization must be approved in advance by Genentech. Additionally, Genentech retains the right to use the Licensed Antibodies solely to research and develop molecules other than the Licensed Antibodies.

~~Interest income (expense),~~Under Genentech License Agreement, the Company is obligated to make aggregate milestone payments to Genentech of up to $44.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay to Genentech tiered royalties of a mid to high single-digit percentage based on annual net ~~consists primarily~~sales by the Company, and any of ~~interest income earned~~its affiliates and sublicensees, for the specified compound of antibody molecules and of a mid to high single-digit percentage based on ~~our cash, cash equivalents~~annual net sales by the Company, and ~~investment balances~~any of its affiliates and sublicensees, for any other compound containing mutant antibody molecules of the specified compound. In addition, the Company is obligated to pay to Genentech royalties of a low single-digit percentage based on quarterly net sales in any country in which the specified compound is not covered by a valid patent claim, and those sales will not be subject to the tiered royalties described above. All royalties may be reduced if the Company obtains a license under a third-party patent that includes the specified compound. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country until the later of (i) ten years following the date of the first commercial sale of a Product or (ii) the date the specified compound is no longer covered by an enforceable patent. Upon the expiration of the royalty term, the Company will have a fully paid-up license.

During the three and nine months ended September 30, 2021 and 2020, the Company did 0t make any payments to Genentech or recognize any research and development expenses under the Genentech License Agreement.

On May 15, 2020, the Company entered into a master services and license agreement (the “Yumab Agreement”) with Yumab GmbH (“Yumab”). Under the agreement, Yumab will assist the Company in discovering and developing certain antibodies from certain cell lines owned by Yumab. The Company plans to use the discovered antibodies in preclinical and clinical development. Under the Yumab Agreement, the Company is obligated to pay for services performed as defined in work orders under the agreement. In addition, the Company is obligated to make aggregate milestone payments to Yumab of up to $3.9 million upon the achievement of specified development and regulatory milestones.

During the three and nine months ended September 30, 2021, the Company did 0t make any payments to Yumab or recognize any research and development expenses under the Yumab Agreement. During the three and nine months ended September 30, 2020, the Company recognized $0.2 million as research and development expense in the consolidated statements of operations and comprehensive loss under the Yumab Agreement.

On December 10, 2020, the Company entered into a Collaboration Agreement and Supply Agreement with TRIUMF Innovations Inc. and TRIUMF JV (collectively, “the TRIUMF entities”) for the development, production and supply of actinium-225 to the Company. Under the Collaboration Agreementas executed in December 2020, the Company is obligated to pay the TRIUMF entities an aggregate of $5.0 million CAD upon the achievement of certain milestones. The Collaboration Agreement contemplated that the parties would enter into an amendment thereto to expand the scope of the project and provide for additional milestone payments.

As of September 30, 2021, the TRIUMF entities had achieved certain milestones under the Collaboration Agreement totaling $3.0 million CAD (equivalent to $2.3 million at the time of payment) which was paid during the nine months ended September 30, 2021 and are being amortized as research and development expense over the period of performance by the TRIUMF entities. During the three and nine months ended September 30, 2021, the Company recognized the amortization of ~~premiums or accretion~~$0.5 million and $1.4 million, respectively, as research and development expense under the Collaboration Agreement.

As previously contemplated, on August 12, 2021, the parties amended the Collaboration Agreement in order to expand the scope of ~~discounts associated~~the project and the Company agreed to make an additional financial investment of up to $15.0 million CAD in connection with ~~our investments. We expect that our interest income will fluctuate based on the timing and ability to raise additional funds as well as the amount of expenditures for our clinical~~ development of ~~FPI-1434 and ongoing business operations.~~new process technology for the manufacture of actinium-225 upon the achievement of certain milestones under

~~Refundable investment tax credits consist of payments~~an amendment to the Collaboration Agreement (the “Amended Collaboration Agreement”). In connection with the Amended Collaboration Agreement, the parties have formed a company (“NewCo”) to hold certain intellectual property derived from the ~~Canadian government~~collaboration. NewCo is jointly owned and managed by the Company and the TRIUMF entities and its purpose is to manufacture actinium-225 for ~~our scientific~~the research, clinical and ~~experimental development expenditures. We recognize such refundable investment tax credits~~commercial needs of the Company, and in certain circumstances, other third parties. The supply of actinium-225 by NewCo to the ~~year that~~Company shall be done under a commercial supply agreement, to be negotiated by NewCo and the ~~qualifying expenditures are made, provided that there~~Company. The Company is ~~reasonable assurance of recoverability, based on our estimates of amounts~~ expected to ~~be recovered. We do not expect~~purchase at least 50% of its annual actinium-225 requirements from NewCo, unless NewCo is unable to ~~qualify for refundable investment tax credits from~~supply such necessary quantities to the ~~Canadian government for~~Company, in which case the Company may use other actinium-225 suppliers to meet its commercial needs.

As of September 30, 2021, the TRIUMF entities had achieved certain milestones under the Amended Collaboration Agreement totaling $5.0 million CAD (equivalent to $3.9 million at the time of payment) which was paid during the three and ~~six~~nine months ended ~~June~~September 30, 2021 and is being amortized as research and development expense over the period of performance by the TRIUMF entities. During the three and nine months ended September 30, 2021, the Company did 0t recognize any research and development expense under the Amended Collaboration Agreement.

The Company recorded $2.2 million and $2.7 million of milestone payments in prepaid expenses and other current assets and other non-current assets, respectively, as of September 30, 2021 based on its estimate of costs to be incurred over the 12 months following the balance sheet date for both the Collaboration Agreement and the Amended Collaboration Agreement.

Upon closing of the asset acquisition, the Company paid €0.6 million ($0.8 million at the date of payment) and issued an aggregate of 600,000 common shares to Ipsen under a share purchase agreement which was entered into concurrently with the Ipsen Agreement. Such common shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Company is also obligated to pay Ipsen up to an additional €67.5 million upon the achievement of certain development and regulatory milestones; low single digit royalties on potential future ~~periods.~~net sales; and up to €350.0 million in net sales milestones, in each case, relating to products covered by the asset purchase agreement. The Company is responsible for paying to a third-party licensor up to a total of €70.0 million in development milestones for up to three indications and mid to low double-digit royalties on potential future net sales of products covered by the license agreement.

~~Other Income (Expense)~~During the three months ended September 30, 2021, the Company did 0t make any payments to Ipsen or recognize any research and development expenses under the Ipsen Agreement. During the nine months ended September 30, 2021, the Company recognized $6.4 million of research and development expense associated with the issuance of 600,000 of its common shares upon closing pursuant to the Ipsen Agreement. Additionally, during the nine months ended September 30, 2021, the Company paid $0.8 million which was recognized as research and development expense.

The Ipsen Agreement includes a royalty step down whereby royalties owed to Ipsen will be reduced by certain percentages not to exceed 50%, ~~Net~~in the aggregate, of the royalty owed under certain circumstances relating to loss of patent exclusivity, loss of regulatory exclusivity or generics entering a market. Under the asset purchase agreement Ipsen has agreed not to develop a molecule that targets NTSR1 and combines at least one NTSR1 binding moiety and a radionuclide or cytotoxic agent until the earlier of (i) the seventh anniversary of the closing date or (ii) the date of data base lock after completion of the first phase 3 clinical trial for IPN-1087.

On May 5, 2021, the Company entered into an agreement with two subsidiaries of ~~foreign currency transaction gains~~Merck & Co. (“Merck”). Pursuant to the agreement, Merck will provide to the Company, at no cost, its anti-PD-1 (programmed death receptor-1) therapy, KEYTRUDA® (pembrolizumab) to evaluate in combination with the Company’s lead candidate, FPI-1434. The planned Phase 1 combination trial will evaluate safety, tolerability and ~~losses as well as miscellaneous income~~pharmacokinetics of FPI-1434 in combination with pembrolizumab and ~~expense unrelated~~is expected to ~~our core operations.~~initiate

approximately six to nine months after achieving the recommended Phase 2 dose in the ongoing Phase 1 study of FPI-1434 monotherapy. Under the agreement, the Company will sponsor, fund and conduct the combination trial in accordance with an agreed-upon protocol and Merck agreed to manufacture and supply its compound, at its cost and for no charge to the Company, for use in the clinical trial.

11.

~~Income Taxes~~Recently Issued Accounting Pronouncements

~~We are domiciled~~The Company qualifies as “emerging growth company” as defined in ~~Canada~~the Jumpstart Our Business Startups Act of 2012 and ~~are primarily~~has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

3.	Collaboration Agreement

Strategic Collaboration Agreement with AstraZeneca UK Limited

Novel TATs Collaboration

As part of the Novel TATs Collaboration, the parties may develop up to three novel TATs. The Company and AstraZeneca will share development costs equally (with each party responsible for the cost of its own supply in connection with such development). Either party has the right to opt out of the co-development and co-commercialization arrangement at pre-determined timepoints and obtain exclusive rights to a novel TAT in exchange for milestone payments to the other party of up to $145.0 million per novel TAT and a low or high single-digit royalties on future sales (depending on the opt out time point). If neither party opts out, and unless otherwise agreed by the parties, AstraZeneca will lead worldwide commercialization activities for the novel TATs, subject to ~~taxation~~the Company’s option to co-promote the TATs in ~~that country. Since our inception, we have recorded no income tax benefits for~~ the ~~net operating~~U.S. All profits and losses ~~incurred or for~~resulting from such commercialization activities will be shared equally.

The Novel TATs Collaboration is within the scope of ASC 808 as the Company and AstraZeneca are both active participants in the research and development ~~tax credits generated~~activities and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. The research and development activities are a unit of account under the scope of ASC 808 and are not promises to a customer under the scope of ASC 606.

Combination Therapies Collaboration

As part of the Combination Therapies Collaboration, the parties will evaluate up to five potential combination strategies involving the Company’s existing assets, including the Company’s lead candidate FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers. The Company received an upfront payment of $5.0 million from AstraZeneca in December 2020 associated with the Combination Therapies Collaboration. AstraZeneca will fully fund all research and development activities for the combination strategies, until such point as the Company may opt-in to the clinical development activities.

The Company also has the right to opt-out of clinical development activities relating to these combination therapies. In such instance, the Company will be responsible for repaying its share of the development costs via a royalty on the additional combination sales only if its drug is approved on the basis of clinical development solely conducted by AstraZeneca, in which case the royalty payments shall also include a variable risk premium based on the number of the Company’s product candidates to have received regulatory approval at that time.

To determine the appropriate amount of revenue to be recognized under ASC 606, the Company performed the following steps: (i) identify the promised goods or services in the contract, (ii) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract, (iii) measure the transaction price, including the constraint on variable consideration, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when (or as) the Company satisfies each ~~year~~performance obligation.

Under ASC 606 the Company accounts for (i) the license it conveyed to AstraZeneca with respect to certain intellectual property and (ii) the obligations to perform research and development services as part of the Combination Therapies Collaboration as a single performance obligation under the AstraZeneca Agreement. The Company concluded AstraZeneca’s right to purchase exclusive options to obtain certain development, manufacturing and commercialization rights represent customer options that are not performance obligations as they do not contain any discounts or other rights that would be considered a material right in the arrangement. Such options will be accounted for upon AstraZeneca’s election.

The Company determined the transaction price under ASC 606 at the inception of the AstraZeneca Agreement to be the $5.0 million upfront payment. The cost reimbursement payments for all costs incurred by ~~our operations~~the Company under the Combination Therapies Collaboration represent variable consideration that is not constrained. Additionally, the clinical milestone payments represent variable consideration that is constrained. In making this assessment, the Company considered several factors, including the fact that achievement of the milestones are outside its control and contingent upon the future success of clinical trials and AstraZeneca’s actions. The payments related to the achievement of certain clinical milestones do not relate to separate, distinct performance obligations.

Under ASC 606, the Company recognizes revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. Under ASC 606, the estimated transaction price includes variable consideration that is not constrained. The Company does not include variable consideration to the extent that it is probable that a significant reversal in ~~Canada~~the amount of cumulative revenue recognized will occur when any uncertainty associated with the variable consideration is resolved. The estimate of the Company’s measurement of progress and ~~Ireland due~~estimate of variable consideration to ~~our uncertainty~~be included in the transaction price will be updated at each reporting date as a change in estimate.

For the clinical milestone payments, the Company utilizes the most likely amount method to determine the amounts recognized and timing of ~~realizing~~recognition. Once the constraint is removed, the clinical milestone payments will be accounted for with the research and development services for the purposes of revenue recognition which will occur over time as the services are provided. Upon the achievement of any milestone for specified clinical development events, the Company will utilize the same cost-to-cost model with a ~~benefit from those items.~~cumulative catch-up recognized in the period in which any such event occurs.

The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved, or other changes in circumstances occur, adjust its estimate of the transaction price if necessary. As of December 31, 2020, ~~we had $46.2 million of Canadian net operating loss carryforwards that begin to expire~~the Company recorded the upfront fee as a contract liability for deferred revenue in ~~2035. We have recorded a full valuation allowance against our Canadian and Irish net deferred tax assets at each~~its condensed consolidated balance sheet ~~date. As a result of~~as it had yet to provide any services under the ~~decision to liquidate the Irish entity, the Irish deferred tax assets were reduced to zero as of December 31, 2020.~~AstraZeneca Agreement.

We have recorded an insignificant amount of income tax provisions or benefits in each period, which generally relate to income tax obligations of our operating company in Canada and our operating company in the U.S., which typically generates a profit for tax purposes.

~~Results of Operations~~

~~Comparison of the Three Months Ended June 30, 2021 and 2020~~

The following table ~~summarizes our results of operations~~presents changes in the Company’s contract assets and liabilities for the ~~three~~nine months ended ~~June~~September 30, 2021 (in thousands):

	Balance as of							Balance as of
	December 31, 2020		Additions		Deductions			September 30, 2021
Contract assets:
Accounts receivable	$	—	$	300	$	—		$	300
Contract liabilities:
Deferred revenue	$	5,000	$	—	$	(546	)	$	4,454

During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following revenue (in thousands):

Three Months Ended
June 30,

2021

2020

Change

Collaboration revenue

$
521

$
—

$
521

Operating expenses:

Research and development

21,146

3,325

17,821

General and administrative

6,642

3,988

2,654

Total operating expenses

27,788

7,313

20,475

Loss from operations

(27,267
)

(7,313
)

(19,954
)
Other income (expense):

Change in fair value of preferred share tranche right liability

—

(31,604
)

31,604

Change in fair value of preferred share warrant liability

—

(6,065
)

6,065

Interest income (expense), net

97

22

75

Refundable investment tax credits

—

52

(52
)
Other income (expense), net

331

325

6

Total other income (expense), net

428

(37,270
)

37,698

Loss before provision for income taxes

(26,839
)

(44,583
)

17,744

Income tax provision

(14
)

(150
)

136

Net loss

$
(26,853
)

$
(44,733
)

$
17,880

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	146	$	—	$	546	$	—

The current portion of deferred revenue and deferred revenue, net of current portion, are $2.3 million and $2.2 million as of September 30, 2021, respectively, which reflects the Company’s estimate of the revenue it expects to recognize within the next 12 months and beyond 12 months, respectively. The Company expects to recognize the revenue associated with the AstraZeneca Agreement in subsequent periods through the year ending December 31, 2024.

4.	Fair Value Measurements

	Fair Value Measurements as of September 30, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	12,040	$	—	$	—	$	12,040
U.S. Government agencies		—		10,949		—		10,949
Investments:
Commercial paper		—		24,788		—		24,788
Corporate bonds		—		28,365		—		28,365
Municipal bonds		—		17,021		—		17,021
Canadian Government agencies		—		5,682		—		5,682
U.S. Government agencies		—		123,936		—		123,936
	$	12,040	$	210,741	$	—	$	222,781

~~Collaboration Revenue~~

	Fair Value Measurements as of December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	19,277	$	—	$	—	$	19,277
Commercial paper		—		1,000		—		1,000
Corporate bonds		—		950		—		950
Canadian Government agencies		—		2,347		—		2,347
Investments:
Commercial paper		—		34,471		—		34,471
Corporate bonds		—		26,857		—		26,857
Municipal bonds		—		1,090		—		1,090
Canadian Government agencies		—		9,457		—		9,457
U.S. Government agencies		—		137,089		—		137,089
	$	19,277	$	213,261	$	—	$	232,538

~~Collaboration revenue was $0.5 million for~~During the ~~three~~nine months ended ~~June 30, 2021 for services provided under the AstraZeneca Agreement.~~

~~Research and Development Expenses~~

Three Months Ended
June 30,

2021

2020

Change

(in thousands)

Direct research and development expenses by program:

FPI-1434

$
2,434

$
1,405

$
1,029

Platform development and unallocated research and development expenses:

TAT platform and Fast-Clear linker technology

14,925

439

14,486

Personnel related (including share-based compensation)

3,390

1,315

2,075

Other

397

166

231

Total research and development expenses

$
21,146

$
3,325

$
17,821

Research and development expenses were $21.1 million for the three months ended June 30, 2021, compared to $3.3 million for the three months ended June 30, 2020. The increase of $17.8 million was primarily due to an increase of $16.8 million in platform development and unallocated research and development costs, described below, as well as an increase of $1.0 million in direct costs related to our FPI-1434 product candidate due to the continued expenditures related to our Phase 1 clinical trial of FPI-1434 as a monotherapy in patients with solid tumors expressing IGF-1R as well as preclinical research and manufacturing costs.

Platform development and unallocated research and development expenses were $18.7 million for the three months ended June 30, 2021, compared to $1.9 million for the three months ended June 30, 2020. The increase of $16.8 million was due to an increase of $14.5 million in costs related to our TAT platform and Fast-Clear linker technology, an increase of $2.1 million in personnel-related costs, and an increase of $0.2 million in other costs. The increase in TAT platform and Fast-Clear linker technology costs was primarily due to common share issuances pursuant to our asset purchase agreements with Ipsen Pharma SAS, or Ipsen, and Rainier Therapeutics, Inc., or Rainier, which resulted in the recognition of research and development expense during the three months ended June 30, 2021 of $6.4 million and $2.6 million, respectively. Additionally, pursuant to the asset purchase agreement with Ipsen, we paid $0.8 million which was recognized as research and development expense during the three months ended June 30, 2021. The $2.5 million payment made during the three months ended June 30, 2021 under our agreement with CPDC for services relating to certain aspects the validation of our manufacturing facility currently under construction in Hamilton, Ontario also contributed to the increase. The remaining increase is related increased ~~external costs for preclinical studies and activities associated with our advancement of our TAT platform and Fast-Clear linker technology~~. The increase in personnel-related costs was primarily due to the hiring of additional personnel in our research and development functions, particularly those responsible for managing our Phase 1 clinical trial of FPI-1434 and for conducting preclinical research. Personnel-related costs for the three months ended JuneSeptember 30, 2021 and the year ended December 31, 2020, ~~included share-based compensation~~there were no transfers between Level 1, Level 2 and Level 3.

5.	Investments

Investments consisted of ~~$0.6 million and $0.1 million, respectively. The increase in other costs was primarily due to an increase in depreciation expense and facilities-related costs.~~the following (in thousands):

	September 30, 2021
	Amortized Cost		Fair Value
Due within one year or less	$	154,155	$	154,238
Due after one year through three years		45,574		45,554
	$	199,729	$	199,792

~~General and Administrative Expenses~~

	December 31, 2020
	Amortized Cost		Fair Value
Due within one year or less	$	131,857	$	131,882
Due after one year through three years		77,063		77,082
	$	208,920	$	208,964

~~General and administrative expenses were $6.6 million for the three months ended June~~As of September 30, 2021, ~~compared to $4.0 million for~~ the ~~three months ended~~amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Current		Non-Current
Commercial paper	$	24,787	$	1	$	—		$	24,788	$	24,788	$	—
Corporate bonds		28,327		43		(5	)		28,365		23,856		4,509
Municipal bonds		17,023		2		(4	)		17,021		14,766		2,255
Canadian Government agencies		5,637		45		—			5,682		4,578		1,104
U.S. Government agencies		123,955		10		(29	)		123,936		86,250		37,686
	$	199,729	$	101	$	(38	)	$	199,792	$	154,238	$	45,554

As of December 31, 2020, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Current		Non-Current
Commercial paper	$	34,474	$	1	$	(4	)	$	34,471	$	34,471	$	—
Corporate bonds		26,855		22		(20	)		26,857		9,446		17,411
Municipal bonds		1,090		—		—			1,090		1,090		—
Canadian Government agencies		9,405		52		—			9,457		6,154		3,303
U.S. Government agencies		137,096		8		(15	)		137,089		80,721		56,368
	$	208,920	$	83	$	(39	)	$	208,964	$	131,882	$	77,082

6.	Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Prepaid external research and development expenses	$	3,446	$	1,606
Prepaid insurance		3,247		2,067
Prepaid software subscriptions		434		146
Income tax receivable		232		—
Interest receivable		461		504
Other receivable due from AstraZeneca		932		—
Canadian harmonized sales tax receivable		360		290
Other		311		727
	$	9,423	$	5,340

7.	Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Accrued employee compensation and benefits	$	2,787	$	2,551
Accrued external research and development expenses		2,239		1,037
Accrued professional and consulting fees		1,108		1,023
Other		12		48
	$	6,146	$	4,659

Equity

Common Shares

On June ~~30, 2020. The increase~~19, 2020, the Company effected a one-for-5.339 reverse share split of ~~$2.7 million was primarily due to a $1.8 million increase in personnel-related costs~~its issued and outstanding common shares and a ~~$1.1 million increase in corporate and other costs, partially offset by a decrease of $0.2 million in professional fees. The increase in personnel-related costs was primarily due~~proportional adjustment to the ~~hiring~~existing conversion ratios for each class of ~~additional personnel~~the Company’s Preferred Shares and Preferred Exchangeable Shares. Accordingly, all share and per share amounts for all periods presented in ~~our general~~the accompanying condensed consolidated financial statements and ~~administrative functions, including in finance, legal, human resources~~notes thereto have been adjusted retroactively, where applicable, to reflect this reverse share split and business development. Personnel-related costs for the three months ended June 30, 2021 and 2020 included share-based compensation of $1.5 million and $0.3 million, respectively. The increase in corporate and other costs was primarily due to increased expenses for general corporate, director and officer insurance.

~~Other Income (Expense)~~

~~Change in Fair Value of Preferred Share Tranche Right Liability.~~ ~~There was no preferred share tranche right liability recorded as of June 30, 2021. The change in fair value~~adjustment of the preferred share tranche right liability was a loss of $31.6 million for the three months ended June 30, 2020. The loss of $31.6 million for the three months ended June 30, 2020 was primarily due to an increase in the fair value of the underlying preferred shares and an increase in the probability of achieving the specified milestones underlying the preferred share tranche rights which occurred in May 2020, partially offset by a reduction in the remaining estimated time period of achievement of the specified milestones underlying the preferred share tranche rights.

~~Change in Fair Value of Preferred Share Warrant Liability~~. There was no preferred share warrant liability recorded as of June 30, 2021. The change in fair value of the preferred share warrant liability was a loss of $6.1 million for the three months ended June 30, 2020, which was primarily due to an increase in the fair value of the underlying Class B preferred shares as a result of the fair value increase from the IPO.conversion ratios.

~~Interest Income (Expense), Net.~~ ~~Interest income (expense), net was $0.1 million for the three months ended June 30, 2021, compared to less than $0.1 million for the three months ended June 30, 2020.~~

~~Refundable Investment Tax Credits.~~ We did not recognize any refundable investment tax credits for the three months ended June 30, 2021. Refundable investment tax credits recognized as other income for the three months ended June 30, 2020 were $0.1 million.

~~Other Income (Expense), Net.~~ ~~Other income (expense), net for the three months ended June 30, 2021 and 2020 was $0.3 million for each of the periods.~~

~~Provision for Income Taxes~~

The income tax provision was less than $0.1 million for the three months ended June 30, 2021, compared to $0.2 million for the three months ended June 30, 2020. During the three months ended June 30, 2021 and 2020, our tax provision was related to the income tax obligations of its operating company in the U.S., which typically generates a profit for tax purposes. For the three months ended June 30, 2021, the provision was reduced by discrete stock compensation items arising in the quarter.

~~Comparison of the Six Months Ended June 30, 2021 and 2020~~

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

Six Months Ended
June 30,

2021

2020

Change

Collaboration revenue

$
521

$
—

$
521

Operating expenses:

Research and development

31,862

7,702

24,160

General and administrative

13,606

8,315

5,291

Total operating expenses

45,468

16,017

29,451

Loss from operations

(44,947
)

(16,017
)

(28,930
)
Other income (expense):

Change in fair value of preferred share tranche right liability

—

(32,722
)

32,722

Change in fair value of preferred share warrant liability

—

(6,399
)

6,399

Interest income (expense), net

193

169

24

Refundable investment tax credits

—

98

(98
)
Other income (expense), net

379

128

251

Total other income (expense), net

572

(38,726
)

39,298

Loss before provision for income taxes

(44,375
)

(54,743
)

10,368

Income tax provision

(7
)

(212
)

205

Net loss

$
(44,382
)

$
(54,955
)

$
10,573

~~Collaboration Revenue~~

~~Collaboration revenue was $0.5 million for the six months ended June 30, 2021 for services provided under the AstraZeneca Agreement.~~

~~Research and Development Expenses~~

Six Months Ended
June 30,

2021

2020

Change

(in thousands)

Direct research and development expenses by program:

FPI-1434

$
4,967

$
3,097

$
1,870

Platform development and unallocated research and development expenses:

TAT platform and Fast-Clear linker technology

20,344

2,006

18,338

Personnel related (including share-based compensation)

5,867

2,260

3,607

Other

684

339

345

Total research and development expenses

$
31,862

$
7,702

$
24,160

Research and development expenses were $31.9 million for the six months ended June 30, 2021, compared to $7.7 million for the six months ended June 30, 2020. The increase of $24.2 million was primarily due to an increase of $22.3 million in platform development and unallocated research and development costs, described below, as well as an increase of $1.9 million in direct costs related to our FPI-1434 product candidate due to the continued expenditures related to our Phase 1 clinical trial of FPI-1434 as a monotherapy in patients with solid tumors expressing IGF-1R as well as preclinical research and manufacturing costs.

Platform development and unallocated research and development expenses were $26.9 million for the six months ended June 30, 2021, compared to $4.6 million for the six months ended June 30, 2020. The increase of $22.3 million was due to an increase of $18.3 million in costs related to our TAT platform and Fast-Clear linker technology, an increase of $3.6 million in personnel-related costs, and an increase of $0.3 million in other costs. The increase in TAT platform and Fast-Clear linker technology costs was primarily due to activity related to our asset purchase agreements with Ipsen and Rainier. During the six months ended June 30, 2021, we issued common shares pursuant to the asset purchase agreements with Ipsen and Rainier which resulted in the recognition of research and development expense of $6.4 million and $2.6 million, respectively. Additionally, pursuant to the asset purchase agreement with Ipsen, we paid $0.8 million which was recognized as research and development expense during the six months ended June 30, 2021. Further, there was a net increase in payments of $2.5 million to Rainier which were recorded as research and development expense. The $2.5 million payment made during the six months ended June 30, 2021 under our agreement with CPDC for services relating to certain aspects the validation of our manufacturing facility currently under construction in Hamilton, Ontario also contributed to the increase. The remaining increase is related to increased ~~external costs for preclinical studies and activities associated with the advancement of our TAT platform and Fast-Clear linker technology~~. The increase in personnel-related costs was primarily due to the hiring of additional personnel in our research and development functions, particularly those responsible for managing our Phase 1 clinical trial of FPI-1434 and for conducting preclinical research. Personnel-related costs for the six months ended June 30, 2021 and 2020 included share-based compensation of $1.2 million and $0.2 million, respectively. The increase in other costs was primarily due to an increase in depreciation expense and facilities-related costs.

~~General and Administrative Expenses~~

General and administrative expenses were $13.6 million for the six months ended June 30, 2021, compared to $8.3 million for the six months ended June 30, 2020. The increase of $5.3 million was primarily due to a $3.3 million increase in personnel-related costs and a $2.3 million increase in corporate and other costs, partially offset by a decrease of $0.3 million in professional fees. The increase in personnel-related costs was primarily due to the hiring of additional personnel in our general and administrative functions, including in finance, legal, human resources and business development. Personnel-related costs for the six months ended June 30, 2021 and 2020 included share-based compensation of $2.7 million and $0.6 million, respectively. The increase in corporate and other costs was primarily due to increased expenses for general corporate, director and officer insurance.

~~Other Income (Expense)~~

~~Change in Fair Value of Preferred Share Tranche Right Liability.~~ There was no preferred share tranche right liability recorded as of June 30, 2021. The change in fair value of the preferred share tranche right liability was a loss of $32.7 million for the six months ended June 30, 2021. The loss of $32.7 million for the six months ended June 30, 2020 was primarily due to an increase in the fair value of the underlying preferred shares and an increase in the probability of achieving the specified milestones underlying the

preferred share tranche rights which occurred in May 2020, partially offset by a reduction in the remaining estimated time period of achievement of the specified milestones underlying the preferred share tranche rights.

~~Change in Fair Value of Preferred Share Warrant Liability.~~There was no preferred share warrant liability recorded as of June 30, 2021. The change in fair value of the preferred share warrant liability was a loss of $6.4 million for the six months ended June 30, 2020, which was primarily due to an increase in the fair value of the underlying Class B preferred shares as a result of the fair value increase from the IPO.

~~Interest Income (Expense), Net.~~ ~~Interest income (expense), net for the six months ended June 30, 2021 and 2020 was $0.2 million for each of the periods.~~

~~Refundable Investment Tax Credits.~~ We did not recognize any refundable investment tax credits for the six months ended June 30, 2021. Refundable investment tax credits recognized as other income for the six months ended June 30, 2020 were $0.1 million.

~~Other Income (Expense), Net.~~ Other income (expense), net was $0.4 million for the six months ended June 30, 2021, compared to $0.1 million for the six months ended June 30, 2020. The net increase of $0.3 million was primarily related to a net increase in realized and unrealized foreign exchange gains.

~~Provision for Income Taxes~~

The income tax provision was less than $0.1 million for the six months ended June 30, 2021, compared to $0.2 million for the six months ended June 30, 2020. During the six months ended June 30, 2021 and 2020, our tax provision was related to the income tax obligations of its operating company in the U.S., which typically generates a profit for tax purposes. For the six months ended June 30, 2021, the provision was reduced by discrete stock compensation items arising in the period.

~~Liquidity and Capital Resources~~

~~Since our inception in 2014, we have not generated any revenue from product sales, and have incurred significant operating losses and negative cash flows from our operations.~~ On June 30, 2020, ~~we completed our~~the Company closed its IPO of ~~our~~ common shares and issued and sold 12,500,000 shares of ~~our~~ common shares at a public offering price of $17.00 per share, resulting in net proceeds of approximately $193.1 million after deducting underwriting fees and offering costs. ~~Prior~~

Upon the closing of the IPO, all outstanding voting and non-voting common shares were converted to ~~our IPO, we funded our operations primarily with proceeds from sales~~a single class of ~~equity securities (including borrowings under a convertible promissory note, which converted into preferred shares). From our inception through June 30, 2021, we had received net proceeds~~common shares authorized by the Company’s articles of ~~$364.2 million from sales of equity securities (including borrowings under a convertible promissory note, which converted into preferred shares).~~ the corporation, as amended and restated.

On July 2, 2021, wethe Company entered into ~~the~~an Open Market Sales Agreement^SM (the “Sales Agreement”) with ~~Jeffries~~Jefferies LLC to issue and sell ~~our~~shares of the Company’s common shares of up to $100.0 million in gross proceeds, from time to time during the term of

the Sales Agreement, through an “at-the-market” equity offering program under which ~~Jeffries~~Jefferies LLC will act as ~~our agent. We have not~~the Company’s agent and/or principal (the “ATM Facility”). The ATM Facility provides that Jefferies LLC will be entitled to compensation for its services in an amount of up to 3.0% of the gross proceeds of any shares sold under the ATM Facility. The Company has no obligation to sell any shares under the ATM Facility and may, at any time, suspend solicitation and offers under the Sales Agreement. As of September 30, 2021, the Company has 0t sold any shares under the Sales Agreement.

~~Cash Flows~~

~~The following table summarizes our sources and uses~~As of ~~cash for each~~September 30, 2021, the Company’s articles of the ~~periods presented:~~

Six Months Ended
June 30,

2021

2020

Net cash used in operating activities

$
(37,903
)

$
(13,817
)
Net cash used in investing activities

(25,339
)

(382
)
Net cash provided by financing activities

340

267,747

Net (decrease) increase in cash, cash equivalents and restricted cash

$
(62,902
)

$
253,548

~~Operating Activities~~corporation, as amended and restated, authorized the Company to issue unlimited common shares, each with no par value per share.

~~During~~Each common share entitles the ~~six months ended June~~holder to one vote on all matters submitted to a vote of the Company’s shareholders. Common shareholders are entitled to receive dividends, if any, as may be declared by the board of directors. Through September 30, 2021, ~~operating activities used $37.9 million~~0 cash dividends had been declared or paid by the Company.

Convertible Preferred Shares

Prior to the IPO, the Company issued Class A convertible preferred shares (the “Class A preferred shares”) and Class B convertible preferred shares (the “Class B preferred shares” and, together with the Class A preferred shares, the “Preferred Shares”). As of cash, primarily resulting from our net loss of $44.4 million and net cash used by changes in our operating assets and liabilities of $7.6 million, partially offset by non-cash charges of $14.1 million. Net cash used by changes in our operating assets and liabilities forDecember 31, 2020, the six months ended June 30, 2021 consisted of a $2.8 million decrease in income tax payable, a $2.7 million decrease in accounts payable, a $1.5 million increase in other non-current assets, a $0.4 million decrease in operating lease liabilities, a $0.4 million decrease in deferred revenue and a $0.4 million increase in prepaid expenses and other current assets, partially offset by a $0.7 million increase in accrued expenses. The decrease in income taxes payable is primarily a resultCompany’s articles of the ~~payment~~corporation, as amended and restated, authorized the Company to issue an aggregate of ~~$2.6~~132,207,290 Preferred Shares, respectively, each with no par value per share.

In January 2020, the ~~transfer of~~

~~intellectual property and cash to Canada from Ireland in connection with~~Company executed the ~~planned liquidation of our Irish subsidiary. The decrease in accounts payable and increase in accrued expenses is due~~First Amendment to the ~~timing~~Class B Subscription Agreement (“Amended Class B Subscription Agreement”) whereby the Canada Pension Plan Investment Board (“CPP”) agreed to purchase an aggregate of ~~vendor invoicing and payments. The increase in other non-current assets primarily relates to the $2.1~~$20.0 million payment made to the lessor and recorded as prepaid rent for our manufacturing facility currently under construction in Hamilton, Ontario, offset by a reclassification of $0.8 million from other non-current assets to prepaid expenses and other current assets for the estimate of costs to be incurred over the next 12 months under our collaboration agreement with TRIUMF. The decrease in operating lease liabilities was primarily due to payment of rent for our leased property. The decrease in deferred revenue relates to services performed by us under the combination therapies collaboration with AstraZeneca. The increase in prepaid expenses and other current assets is due to prepayments made during the period.

~~During the~~ ~~six months ended June 30, 2020~~, operating activities used $13.8 million of cash, primarily resulting from our net loss of $55.0 million, partially offset by non-cash charges of $40.2 million and net cash provided by changes in our operating assets and liabilities of $0.9 million. Net cash provided by changes in our operating assets and liabilities for the six months ended June 30, 2020 consisted of a $1.2 million increase in accrued expenses and a $0.2 million increase in income taxes payable, partially offset by a $0.3 million decrease in accounts payable and a $0.1 million increase in prepaid expenses and other current assets. The increase in accrued expenses was primarily due to increases in our research and development expenses and general and administrative expenses due to the growth in our business as well as the timing of vendor invoicing and payments.

~~Investing Activities~~

During the six months ended June 30, 2021, net cash used in investing activities was $25.3 million, consisting of purchases of investments of $132.1 million and purchases of property and equipment of $0.8 million, offset by maturities of investments of $107.6 million.

~~During the six months ended June 30, 2020, net cash used in investing activities was $0.4 million, consisting of purchases of property and equipment.~~

~~Financing Activities~~

~~During the six months ended June 30, 2021, net cash provided by financing activities was $0.3 million, consisting of proceeds from issuance of common shares upon exercise of stock options.~~

During the six months ended June 30, 2020, net cash provided by financing activities was $267.7 million, consisting of net proceeds of $197.6 million from our issuance of common shares upon the closing of our initial public offering, net of underwriter fees before deducting for offering costs, $65.7 million from our issuance of Class B preferred shares, at a price of $1.5154 per share, in two tranches. In January 2020, the Company issued and sold to CPP 6,598,917 Class B preferred shares, resulting in gross proceeds of $10.0 million (the “Additional Class B Closing”). The Company incurred issuance costs of $0.1 million in connection with this transaction.

In May 2020, the Company achieved the specified regulatory milestone associated with the Class B preferred share tranche right, which triggered the requirement of the Class B shareholders to participate in the Milestone Financing. Upon closing of the Milestone Financing on June 2, 2020, the Company issued and ~~$6.7 million from the issuance of~~sold 36,806,039 Class B preferred ~~exchangeable~~ shares at a price of $1.5154 per share for aggregate proceeds of $55.8 million.

The Class B preferred share tranche right liability was settled in connection with the achievement of the regulatory milestone associated with the Class B preferred share tranche right. Specifically, the fair value of the Class B preferred share tranche right liability was remeasured for the last time as of the Milestone Financing closing date, resulting in the Company recognizing a loss in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020 of $32.7 million for the change in the fair value of the tranche right liability between December 31, 2019 and June 2, 2020. Immediately thereafter, the balance of the Class B preferred share tranche right liability of $39.6 million was reclassified to Class B convertible preferred shares in an amount of $35.3 million and to non-controlling interest in Fusion Pharmaceuticals (Ireland) Limited ~~partially offset by $2.3 million in payments of offering costs associated with our initial public offering.~~

~~Funding Requirements~~

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates in development. In addition, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:

•

~~the scope, progress, results and costs of researching and developing FPI-1434 and our other product candidates;~~

•

~~the timing of, and the costs involved in, obtaining marketing approvals for our current and future product candidates;~~

•

~~the number of future product candidates and potential additional indications that we may pursue and their development requirements;~~

•

~~the cost of manufacturing our product candidates for clinical trials in preparation for regulatory approval and in preparation for commercialization;~~

•

~~the cost of strategic investments in manufacturing and supply chain, in particular for the production and supply of actinium-225;~~

•

~~the cost and availability of actinium-225 or any other medical isotope we may incorporate into our product candidates;~~

•

if approved, the costs of commercialization activities for any approved product candidate to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

•

~~subject to receipt of regulatory approval and revenue, if any, received from commercial sales for any approved indications for any of our product candidates;~~

•

~~the extent to which we enter into collaborations with third parties, in-license or acquire rights to other products, product candidates or technologies;~~

•

~~our headcount growth and associated costs as we expand our research and development capabilities and establish a commercial infrastructure;~~

•

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

•

~~the costs of operating as a public company.~~

We believe that our existing cash, cash equivalents and investments as of June 30, 2021 will be sufficient to fund our operating expenses and capital expenditure requirements through the end of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

~~On July 2, 2021, we entered into an Open Market Sales Agreement~~^SM (the “Sales Agreement”) to issue and sell our common shares up to $100.0 million in gross proceeds, from time to time during the term of the Sales Agreement, through an “at-the-market” equity offering program. We have not sold any shares under the Sales Agreement.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common shareholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares or declaring dividends. If we raise funds through collaborations, strategic alliances, distribution 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 or other arrangements when needed, we would 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.

~~Critical Accounting Policies and Significant Judgments and Estimates~~

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our condensed consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements.

~~Collaborative Arrangements~~

We consider the nature and contractual terms of arrangements and assess whether an arrangement involves a joint operating activity pursuant to which we are an active participant and are exposed to significant risks and rewards dependent on the commercial success of the activity. If we are an active participant and are exposed to significant risks and rewards dependent on the commercial success of the activity, we account for such arrangement as a collaborative arrangement under ASC 808. ASC 808 describes arrangements within its scope and considerations surrounding presentation and disclosure, with recognition matters subjected to other authoritative guidance, in certain cases by analogy.

contra-expense in the period such expenses are incurred. This reflects the joint risk sharing nature of these activities within a collaborative arrangement. We classify payments owed or receivables recorded as other current liabilities or prepaid expenses and other current assets, respectively, in our consolidated balance sheets.

If payments from the collaborative partner to us represent consideration from a customer in exchange for distinct goods and services provided, then we account for those payments within the scope of ASC 606.

~~Revenue Recognition~~

~~In accordance with ASC 606, we recognize revenue when a customer obtains control of promised goods or services,~~ in an amount ~~that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope~~ of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations within the contract and (v) recognize revenue when (or as) we satisfy a performance obligation.

We only apply the five-step model to contracts when we determine that it is probable we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in our arrangements typically consist of a license to our intellectual property and/or research and development services. We may provide customers with options to additional items in such arrangements, which are accounted for separately when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

~~We determine transaction price based~~$4.3 million on the ~~amount of consideration we expect to receive for transferring~~consolidated balance sheet. For the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, we estimate the probability and extent of consideration we expect to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. We then consider any constraints on the variable consideration and include in the transaction price variable consideration to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

We then allocate the transaction price to each performance obligation based on the relative standalone selling price and recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

We record amounts as accounts receivable when the right to consideration is deemed unconditional. Amounts received, or that are unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract are recognized as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as the current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.

~~Our revenue generating arrangements typically include upfront license fees, milestone payments and/or royalties.~~

If a license is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

At the inception of an agreement that includes research and development milestone payments, we evaluate each milestone to determine when and how much of the milestone to include in the transaction price. We first estimate the amount of the milestone payment that we could receive using either the expected value or the most likely amount approach. We primarily use the most likely amount approach as this approach is generally most predictive for milestone payments with a binary outcome. Then, we consider whether any portion of the estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty). We update the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

~~During the three and six~~nine months ended ~~June~~September 30, ~~2021, we~~2020, the Company recognized ~~$0.5~~a loss of $32.7 million ~~in collaboration revenue under the AstraZeneca Agreement~~ in the condensed consolidated statement of operations and comprehensive ~~loss.~~

~~Accrued Research and Development Expenses~~

~~As part~~loss for the change in the fair value of the ~~process~~tranche right liability.

Upon the closing of ~~preparing our condensed consolidated financial statements, we are required~~the IPO, the Company converted the then outstanding Class A and Class B preferred shares into common shares at a conversion ratio of 5.339 Preferred Share to ~~estimate our accrued research~~one common share.

Preferred Exchangeable Shares and ~~development expenses. This process involves estimating~~Special Voting Shares

In connection with each issuance and sale of its Class A preferred shares and Class B preferred shares, the ~~level~~Company’s Irish subsidiary issued and sold Class A and Class B preferred exchangeable shares (together, the “Preferred Exchangeable Shares”) to investors. Simultaneously with the issuance and sale of ~~service performed~~the Preferred Exchangeable Shares, the Company issued and sold its Class A and Class B special voting shares (together, the “Special Voting Shares”) to the same investors. Prior to the IPO, the Company’s Irish subsidiary’s amended constitution authorized it to issue an aggregate of 28,874,378 Preferred Exchangeable Shares and 29,747,987 Preferred Exchangeable Shares, respectively, with a par value of $0.001 per share. Prior to the IPO, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue an aggregate of 28,874,378 Special Voting Shares and 29,747,987 Special Voting Shares, respectively, with a cash redemption value of $0.000001 per share.

In May 2020, the Company achieved the specified regulatory milestone associated ~~cost incurred~~with the Class B preferred share tranche right, which triggered the requirement of the Class B shareholders to participate in the Milestone Financing. Upon closing of the Milestone Financing on June 2, 2020, the Company issued and sold 4,437,189 Class B special voting shares at a price of $0.000001 per share and the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share, for aggregate gross proceeds of $6.7 million.

Warrants

The Preferred Share Warrants were immediately exercisable and expire two years from the date of issuance or upon the earlier occurrence of specified qualifying events, which include the consummation of a Deemed Liquidation Event and the closing of a qualifying share sale (as defined in the articles of the corporation, as amended and restated). Upon the closing of a qualified public offering, on specified terms, all outstanding warrants to purchase Class B convertible preferred shares of the Company and warrants to purchase Class B preferred exchangeable shares of Fusion Pharmaceutics (Ireland) Limited will become warrants to purchase common shares of the Company.

The issuance of the Preferred Share Warrants was treated as a deemed dividend to existing preferred shareholders for purposes of the Company’s calculation of net loss per share attributable to common shareholders, and, as such, the aggregate value of the dividend to existing preferred shareholders was deducted from the Company’s net loss when ~~we have not yet been invoiced or otherwise notified~~computing net loss per share attributable to common shareholders (see Note 12). The Company remeasures the fair value of ~~actual costs. The majority~~the liability associated with the Preferred Share Warrants at each reporting date and records any adjustments as a component of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet dateother income (expense) in the consolidated ~~financial~~ statements ~~based~~of operations and comprehensive loss. Upon the closing of the IPO, the warrants to purchase 3,126,391 of its convertible preferred shares and warrants to purchase 873,609 preferred exchangeable shares of the Company’s Irish subsidiary were converted into warrants to purchase 749,197 shares of the Company’s common shares at an exercise price of $8.10 per share. As a result, the warrant liability was remeasured a final time on ~~facts~~the closing date of the IPO and ~~circumstances known~~reclassified to ~~us at that time. At each end period, we confirm~~shareholders’ equity (deficit) as the ~~accuracy~~warrants

qualify for equity classification. For the nine months ended September 30, 2020, the Company recognized a loss of ~~these estimates~~$6.4 million as a component of other income (expense) in the condensed consolidated statement of operations and comprehensive loss to reflect an increase in fair value of the Preferred Share Warrant.

On August 17, 2020, a holder of common share warrants exercised 97,381 common share warrants through a cashless exercise and the Company issued 38,340 common shares with the ~~service providers and make adjustments, if necessary. Examples~~remaining 59,041 warrants being cancelled to settle the exercise price. As of ~~estimated accrued research and development expenses include those related to fees paid to:~~September 30, 2021, 651,816 common share warrants remained outstanding.

•9.

~~vendors in connection with preclinical development activities;~~

•

~~CROs in connection with preclinical studies and clinical trials; and~~

•

~~CMOs in connection with the production of preclinical and clinical trial materials.~~Share-based Compensation

~~We record~~2020 Stock Option and Incentive Plan

On June 18, 2020, the ~~expense~~Company’s board of directors adopted the 2020 Stock Option and ~~accrual related~~Incentive Plan (the “2020 Plan”), which became effective on June 24, 2020. The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to ~~contract research~~the Company’s officers, employees, non-employee directors and ~~manufacturing based~~consultants. The number of shares initially reserved for issuance under the 2020 Plan was 4,273,350, which was cumulatively increased on ~~our estimates~~January 1, 2021 and shall be cumulatively increased each January 1 thereafter by 4% of the ~~services received and efforts expended considering a~~ number of ~~factors, including our knowledge~~the Company’s common shares outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s compensation committee of the ~~progress towards completion~~board of directors. The common shares underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the ~~research, development and manufacturing activities, invoicing~~exercise price or tax withholding, reacquired by the Company prior to ~~date~~vesting, satisfied without the issuance of shares, expire or are otherwise terminated (other than by exercise) under the ~~contracts, communication from the CROs, CMOs and other companies of any actual costs incurred during the period that have not yet been invoiced~~2020 Plan and the costs included in the contracts and purchase orders. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services2017 Plan will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relativeadded back to the ~~actual status and timing~~common shares available for issuance under the 2020 Plan. The total number of ~~services performed may vary and may result in reporting amounts~~common shares reserved for issuance under the 2020 Plan was 6,151,833 shares as of September 30, 2021.

As of September 30, 2021, 2,575,208 shares, remained available for future grant under the 2020 Plan. Shares that are ~~too high~~expired, forfeited, canceled or ~~too low in any particular period. To date, there have not~~otherwise terminated without having been ~~any material adjustments~~fully exercised will be available for future grant under the 2020 Plan.

2017 Equity Incentive Plan

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) provides for the Company to ~~our prior estimates of accrued research~~grant incentive stock options or nonqualified stock options, restricted share awards and ~~development expenses.~~

~~Share-Based Compensation~~

~~We measure all share-based awards granted~~restricted share units to employees, officers, directors and non-employee consultants ~~based~~of the Company.

2020 Employee Share Purchase Plan

On June 18, 2020, the Company’s board of directors adopted the 2020 Employee Share Purchase Plan (the “ESPP”), which became effective on ~~their~~June 24, 2020. A total of 450,169 common shares were reserved for issuance under this plan. In addition, the number of common shares that may be issued under the ESPP was automatically increased on January 1, 2021 and shall be automatically increased each January 1 thereafter by the lesser of (i) 900,338 common shares, (ii) 1% of the number of the Company’s common shares outstanding on the immediately preceding December 31 and (iii) such lesser number of shares as determined by the Company’s compensation committee of the board of directors. As of September 30, 2021, 15,596 shares were issued under the ESPP. The total number of common shares reserved for issuance under the ESPP was 867,427 shares as of September 30, 2021.

Stock Option Valuation

The fair value ~~on the date~~ of ~~the grant~~stock option grants is estimated using the Black-Scholes option-pricing model and recognize compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. We issue share-based awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. We have not issued any share-based awards with performance-based vesting conditions that are within our control and that may be considered probable prior to occurrence or with market-based vesting conditions.

model. The Black-Scholes option-pricing model uses as inputs the fair value of our common shares and assumptions we make for the volatility of our common shares, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield. We haveCompany historically has been a private company and ~~continues to lack sufficient~~lacks company-specific historical and implied volatility information. Therefore, ~~we estimate our~~it estimates its expected share volatility

based on the historical volatility of a publicly traded set of peer companies and ~~expect~~expects to continue to do so until such time as ~~we have~~it has adequate historical data regarding the volatility of ~~our~~its own traded share price.

~~Emerging Growth~~ For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employee consultants is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company ~~Status~~has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Risk-free interest rate		1.02	%		0.33	%		0.85	%		0.70	%
Expected term (in years)		6.1			6.0			6.1			6.0
Expected volatility		66.9	%		67.0	%		66.9	%		65.5	%
Expected dividend yield		0	%		0	%		0	%		0	%

Stock Options

The ~~Jumpstart Our Business Startups Act~~following table summarizes the Company’s stock option activity since December 31, 2020:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2020		5,607,244		$	6.45		8.2	$	36,628
Granted		2,750,600			10.29
Exercised		(411,467	)		1.19
Forfeited/cancelled		(297,089	)		11.36
Outstanding as of September 30, 2021		7,649,288		$	7.92		8.3	$	18,916
Vested and expected to vest as of September 30, 2021		7,512,688		$	7.85		8.3	$	18,916
Options exercisable as of September 30, 2021		2,814,127		$	4.37		7.1	$	13,773

The aggregate intrinsic value of ~~2012,~~options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those options that had exercise prices lower than the fair value of the Company’s common shares. The intrinsic value for stock options exercised during the nine months ended September 30, 2021 was $3.3 million. The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2021 and 2020 was $6.17 and $11.54 per share, respectively.

Share-based Compensation

Share-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development expenses	$	728	$	288	$	1,913	$	506
General and administrative expenses		1,646		953		4,324		1,519
	$	2,374	$	1,241	$	6,237	$	2,025

10.	License Agreements and Asset Acquisitions

License Agreement with the Centre for Probe Development and Commercialization Inc.

In November 2015, the Company entered into a license agreement with the Centre for Probe Development and Commercialization Inc. (“CPDC”), a related party (see Note 15) (the “CPDC Agreement”). Under the agreement, the Company was granted an exclusive, sublicensable, nontransferable, worldwide license under CPDC’s patent rights related to CPDC’s radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans, whether diagnostic or therapeutic. The Company has the ~~JOBS Act, permits~~right to grant sublicenses of its rights. The CPDC Agreement was amended in 2017; however, there were no material changes to the terms of the CPDC Agreement. Also in 2017, the Company entered into a second license agreement with CPDC, under which the Company was granted an ~~“emerging growth company”~~exclusive, sublicensable, worldwide license under CPDC’s patent rights related to certain CPDC radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans. The Company has the right to grant sublicenses of its rights.

The Company has no obligations under any of the agreements with CPDC to make any milestone payments or to pay any royalties or annual maintenance fees to CPDC.

License Agreement with ImmunoGen, Inc.

Under the ImmunoGen Agreement, the Company paid an upfront fee of $0.2 million to ImmunoGen. In addition, the Company is obligated to make aggregate milestone payments to ImmunoGen of up to $15.0 million upon the achievement of specified development and regulatory milestones and of up to $35.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay tiered royalties of a low to mid single-digit percentage based on annual net sales by the Company and any of its affiliates and sublicensees. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such ~~as us~~country until ten years following the date of the first commercial sale in the United States and five years following the date of the first commercial sale in all non-U.S. countries. In addition, the Company is responsible for all costs and expenses incurred related to ~~take advantage~~the development, manufacture, regulatory approval and commercialization of ~~an extended transition period~~all licensed products.

Prior to regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 90 days’ prior written notice to ImmunoGen. Upon receipt of its first regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 180 days’ prior written notice to ImmunoGen. If the Company or ImmunoGen fails to comply with ~~new~~any of its obligations or ~~revised accounting standards applicable~~otherwise breaches the agreement, the other party may terminate the agreement. The ImmunoGen Agreement expires upon the expiration date of the last-to-expire royalty term.

During the three and nine months ended September 30, 2021 and 2020, the Company did 0t make any payments to ~~public companies until those standards would otherwise apply~~ImmunoGen or recognize any research and development expenses under the ImmunoGen Agreement.

Asset Acquisition from and License Agreement with MediaPharma S.r.l.

In May 2019, the Company and MediaPharma S.r.l. (“MediaPharma”) entered into an asset acquisition and license agreement. Under the agreement, the Company purchased all right, title and interest to ~~private companies. We have elected~~MediaPharma’s, and any of its affiliates’ and sublicensees’, patents to perform research and to develop, manufacture and commercialize a specified antibody that binds to targets for the prevention, treatment and diagnosis of all diseases and conditions. The Company accounted for this purchase as an asset acquisition. At the same time, the Company granted MediaPharma an exclusive, fully paid, worldwide, sublicensable license to use ~~this extended transition period~~the specified compound for ~~complying~~research, development, manufacturing and commercialization of a bispecific antibody drug conjugate, but not for use as a radiopharmaceutical.

In connection with ~~new or revised accounting standards that have different effective dates for public~~the asset acquisition, the Company paid an upfront fee of $0.2 million to MediaPharma. In addition, the Company is obligated to make aggregate milestone payments to MediaPharma of up to $1.5 million upon the achievement of specified development milestones and ~~private companies until~~of up to $23.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay royalties of a low single-digit percentage based on annual net sales by the Company. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country and will expire, on a country-by-country basis, upon the earlier of (i) eight years from the first commercial sale of a licensed product in such country, (ii) the date ~~we (i) are~~upon

which all issued patents under the agreement have expired or (iii) the date upon which a product highly similar in composition to the licensed product and having no ~~longer an emerging growth company~~clinically meaningful differences is sold or ~~(ii) affirmatively and irrevocably opt out~~marketed for sale in such country by a third party.

The Company is not entitled to any payments from MediaPharma for use of the ~~extended transition period provided~~license to the specified compound granted to MediaPharma.

Asset Acquisition from Rainier Therapeutics, Inc. and License Agreement with Genentech, Inc.

On March 10, 2020 (the “Closing”), the Company and Rainier Therapeutics, Inc. (“Rainier”) entered into an asset acquisition agreement (the “Rainier Agreement”). Under the agreement, the Company purchased all rights, title and interest to Rainier’s, and any of its affiliates’ and sublicensees’, patents and other tangible and intangible assets to perform research and to develop, manufacture and commercialize a specified compound of antibody molecules that bind to targets for the prevention, treatment and diagnosis of all diseases and conditions only using such compound as an antibody drug conjugate. The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, the license rights.

In connection with the asset acquisition, the Company paid an upfront fee of $1.0 million to Rainier and recognized this amount as research and development expense in the ~~JOBS Act. As~~condensed consolidated statement of operations and comprehensive loss during the three months ended March 31, 2020, as the IPR&D acquired had no alternative future use as of the acquisition date.

Unless the Rainier Agreement was terminated pursuant to its terms, which termination initially could not have occurred later than eight months following the Closing (the “Outside Date”), the Company was obligated to pay Rainier an additional amount of $3.5 million and to issue 313,359 of the Company’s common shares on the Outside Date. If the Rainier Agreement was not terminated by the Outside Date, the Company is also obligated to make aggregate milestone payments to Rainier of up to $22.5 million and to issue up to 156,679 of the Company’s common shares upon the achievement of specified development and regulatory milestones, of which a ~~result, we~~$2.0 million milestone payment and the issuance of 156,679 common shares are due upon the first patient dosed in a Phase 1 study of FPI-1966, and of up to $42.0 million upon the achievement of specified sales milestones.

The Rainier Agreement could have been terminated at any time prior to the Outside Date upon 30 days’ notice by the Company to Rainier or upon the mutual written consent of both parties. On October 8, 2020, the Company and Rainier entered into a first amendment to the Rainier Agreement (the “First Amended Rainier Agreement”) to extend certain terms of the Rainier Agreement. Specifically, the Outside Date was amended such that termination may not occur later than eleven months following the Closing, or February 10, 2021 (the “Revised Outside Date”). On February 8, 2021, the Company and Rainier entered into a second amendment to the First Amended Rainier Agreement, as amended (the “Second Amended Rainier Agreement”). Pursuant to the Second Amended Rainier Agreement, the Outside Date was further amended such that termination may not occur later than July 1, 2021, and such amendment was made in consideration for early payment of the additional $3.5 million owed to Rainier which the Company paid and recorded as research and development expense during the three months ended March 31, 2021. On May 26, 2021, the Company notified Rainier of its intent to continue development of the asset and issued 313,359 of its common shares to Rainier on July 1, 2021.

During the three months ended September 30, 2021, the Company did 0t recognize any research and development expense associated with the Second Amended Rainier Agreement. During the nine months ended September 30, 2021, the Company recognized $6.1 million of research and development expense associated with the payment of $3.5 million and the issuance of 313,359 of its common shares as noted above. During the nine months ended September 30, 2020, the Company paid an upfront fee of $1.0 million to Rainier and recognized this as an expense as noted above.

Under Genentech License Agreement, the Company is obligated to make aggregate milestone payments to Genentech of up to $44.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay to Genentech tiered royalties of a mid to high single-digit percentage based on annual net sales by the Company, and any of its affiliates and sublicensees, for the specified compound of antibody molecules and of a mid to high single-digit percentage based on annual net sales by the Company, and any of its affiliates and sublicensees, for any other compound containing mutant antibody molecules of the specified compound. In addition, the Company is obligated to pay to Genentech royalties of a low single-digit percentage based on quarterly net sales in any country in which the specified compound is not covered by a valid patent claim, and those sales will not be subject to the ~~same new or revised accounting standards as other public companies~~tiered royalties described above. All royalties may be reduced if the Company obtains a license under a third-party patent that ~~are not emerging growth companies and our financial statements may not~~includes the specified compound. Royalties will be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards wheneverpaid by the Company on a country-by-country basis beginning upon the first commercial sale in such ~~early adoption is permitted for private companies.~~

~~We will cease to be an emerging growth company on~~country until the ~~date that is the earliest~~later of (i) ~~the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more, (ii) the last day of our fiscal year~~ten years following ~~the fifth anniversary of~~ the date of the ~~closing~~first commercial sale of ~~our IPO, (iii)~~a Product or (ii) the date the specified compound is no longer covered by an enforceable patent. Upon the expiration of the royalty term, the Company will have a fully paid-up license.

The Company has the right to terminate the Genentech License Agreement upon written notice to Genentech if the Company determines in its sole discretion that development or commercialization of Products is not economically or scientifically feasible or appropriate. In addition, if the Company or Genentech fails to comply with any of its obligations or otherwise breaches the agreement, the other party may terminate the agreement. The Genentech License Agreement expires on the date on which weall obligations under the agreement related to milestone payments or royalties have ~~issued more than $1.0 billion~~passed or expired.

Master Services and License Agreement with Yumab GmbH

On May 15, 2020, the Company entered into a master services and license agreement (the “Yumab Agreement”) with Yumab GmbH (“Yumab”). Under the agreement, Yumab will assist the Company in ~~nonconvertible debt~~discovering and developing certain antibodies from certain cell lines owned by Yumab. The Company plans to use the discovered antibodies in preclinical and clinical development. Under the Yumab Agreement, the Company is obligated to pay for services performed as defined in work orders under the agreement. In addition, the Company is obligated to make aggregate milestone payments to Yumab of up to $3.9 million upon the achievement of specified development and regulatory milestones.

Collaboration Agreement and Supply Agreement with TRIUMF Innovations, Inc.

On December 10, 2020, the Company entered into a Collaboration Agreement and Supply Agreement with TRIUMF Innovations Inc. and TRIUMF JV (collectively, “the TRIUMF entities”) for the development, production and supply of actinium-225 to the Company. Under the Collaboration Agreementas executed in December 2020, the Company is obligated to pay the TRIUMF entities an aggregate of $5.0 million CAD upon the achievement of certain milestones. The Collaboration Agreement contemplated that the parties would enter into an amendment thereto to expand the scope of the project and provide for additional milestone payments.

As of September 30, 2021, the TRIUMF entities had achieved certain milestones under the Collaboration Agreement totaling $3.0 million CAD (equivalent to $2.3 million at the time of payment) which was paid during the ~~previous~~nine months ended September 30, 2021 and are being amortized as research and development expense over the period of performance by the TRIUMF entities. During the three ~~years or (iv)~~and nine months ended September 30, 2021, the Company recognized the amortization of $0.5 million and $1.4 million, respectively, as research and development expense under the Collaboration Agreement.

As previously contemplated, on August 12, 2021, the parties amended the Collaboration Agreement in order to expand the scope of the project and the Company agreed to make an additional financial investment of up to $15.0 million CAD in connection with development of new process technology for the manufacture of actinium-225 upon the achievement of certain milestones under

an amendment to the Collaboration Agreement (the “Amended Collaboration Agreement”). In connection with the Amended Collaboration Agreement, the parties have formed a company (“NewCo”) to hold certain intellectual property derived from the collaboration. NewCo is jointly owned and managed by the Company and the TRIUMF entities and its purpose is to manufacture actinium-225 for the research, clinical and commercial needs of the Company, and in certain circumstances, other third parties. The supply of actinium-225 by NewCo to the Company shall be done under a commercial supply agreement, to be negotiated by NewCo and the Company. The Company is expected to purchase at least 50% of its annual actinium-225 requirements from NewCo, unless NewCo is unable to supply such necessary quantities to the Company, in which case the Company may use other actinium-225 suppliers to meet its commercial needs.

As of September 30, 2021, the TRIUMF entities had achieved certain milestones under the Amended Collaboration Agreement totaling $5.0 million CAD (equivalent to $3.9 million at the time of payment) which was paid during the three and nine months ended September 30, 2021 and is being amortized as research and development expense over the period of performance by the TRIUMF entities. During the three and nine months ended September 30, 2021, the Company did 0t recognize any research and development expense under the Amended Collaboration Agreement.

Asset Acquisition from Ipsen Pharma SAS

Upon closing of the asset acquisition, the Company paid €0.6 million ($0.8 million at the date onof payment) and issued an aggregate of 600,000 common shares to Ipsen under a share purchase agreement which ~~we are deemed~~was entered into concurrently with the Ipsen Agreement. Such common shares were issued pursuant to ~~be a large accelerated filer under~~an exemption from the ~~rules~~registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Company is also obligated to pay Ipsen up to an additional €67.5 million upon the achievement of certain development and ~~Exchange Commission.~~regulatory milestones; low single digit royalties on potential future net sales; and up to €350.0 million in net sales milestones, in each case, relating to products covered by the asset purchase agreement. The Company is responsible for paying to a third-party licensor up to a total of €70.0 million in development milestones for up to three indications and mid to low double-digit royalties on potential future net sales of products covered by the license agreement.

~~Further, even after we no longer qualify~~During the three months ended September 30, 2021, the Company did 0t make any payments to Ipsen or recognize any research and development expenses under the Ipsen Agreement. During the nine months ended September 30, 2021, the Company recognized $6.4 million of research and development expense associated with the issuance of 600,000 of its common shares upon closing pursuant to the Ipsen Agreement. Additionally, during the nine months ended September 30, 2021, the Company paid $0.8 million which was recognized as ~~an emerging growth company, we may still qualify as~~research and development expense.

The Ipsen Agreement includes a ~~“smaller reporting company,” which would allow us~~royalty step down whereby royalties owed to ~~take advantage of many~~Ipsen will be reduced by certain percentages not to exceed 50%, in the aggregate, of the ~~same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation~~royalty owed under certain circumstances relating to loss of patent exclusivity, loss of regulatory exclusivity or generics entering a market. Under the asset purchase agreement Ipsen has agreed not to develop a molecule that targets NTSR1 and combines at least one NTSR1 binding moiety and a radionuclide or cytotoxic agent until the earlier of (i) the seventh anniversary of the closing date or (ii) the date of data base lock after completion of the first phase 3 clinical trial for IPN-1087.

Agreement with Merck & Co.

On May 5, 2021, the Company entered into an agreement with two subsidiaries of Merck & Co. (“Merck”). Pursuant to the agreement, Merck will provide to the Company, at no cost, its anti-PD-1 (programmed death receptor-1) therapy, KEYTRUDA® (pembrolizumab) to evaluate in ~~our periodic reports~~combination with the Company’s lead candidate, FPI-1434. The planned Phase 1 combination trial will evaluate safety, tolerability and proxy statements. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common sharespharmacokinetics of FPI-1434 in combination with pembrolizumab and ~~our share price may be more volatile.~~is expected to initiate

~~Off-Balance Sheet Arrangements~~

~~We did not have during~~approximately six to nine months after achieving the ~~periods presented, and we do not currently have, any off-balance sheet arrangements, as defined~~recommended Phase 2 dose in the ~~rules~~ongoing Phase 1 study of FPI-1434 monotherapy. Under the agreement, the Company will sponsor, fund and ~~regulations of~~conduct the ~~SEC.~~combination trial in accordance with an agreed-upon protocol and Merck agreed to manufacture and supply its compound, at its cost and for no charge to the Company, for use in the clinical trial.

11.

Recently Issued Accounting Pronouncements

3.	Collaboration Agreement

Strategic Collaboration Agreement with AstraZeneca UK Limited

Novel TATs Collaboration

Combination Therapies Collaboration

As part of the Combination Therapies Collaboration, the parties will evaluate up to five potential combination strategies involving the Company’s existing assets, including the Company’s lead candidate FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers. The Company received an upfront payment of $5.0 million from AstraZeneca in December 2020 associated with the Combination Therapies Collaboration. AstraZeneca will fully fund all research and development activities for the combination strategies, until such point as the Company may opt-in to the clinical development activities.

Under ASC 606, the Company recognizes revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. Under ASC 606, the estimated transaction price includes variable consideration that is not constrained. The Company does not include variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will occur when any uncertainty associated with the variable consideration is resolved. The estimate of the Company’s measurement of progress and estimate of variable consideration to be included in the transaction price will be updated at each reporting date as a change in estimate.

For the clinical milestone payments, the Company utilizes the most likely amount method to determine the amounts recognized and timing of recognition. Once the constraint is removed, the clinical milestone payments will be accounted for with the research and development services for the purposes of revenue recognition which will occur over time as the services are provided. Upon the achievement of any milestone for specified clinical development events, the Company will utilize the same cost-to-cost model with a cumulative catch-up recognized in the period in which any such event occurs.

The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved, or other changes in circumstances occur, adjust its estimate of the transaction price if necessary. As of December 31, 2020, the Company recorded the upfront fee as a contract liability for deferred revenue in its condensed consolidated balance sheet as it had yet to provide any services under the AstraZeneca Agreement.

The following table presents changes in the Company’s contract assets and liabilities for the nine months ended September 30, 2021 (in thousands):

	Balance as of							Balance as of
	December 31, 2020		Additions		Deductions			September 30, 2021
Contract assets:
Accounts receivable	$	—	$	300	$	—		$	300
Contract liabilities:
Deferred revenue	$	5,000	$	—	$	(546	)	$	4,454

During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following revenue (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue recognized in the period from:
Amounts included in deferred revenue at the beginning of the period	$	146	$	—	$	546	$	—

4.	Fair Value Measurements

	Fair Value Measurements as of September 30, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	12,040	$	—	$	—	$	12,040
U.S. Government agencies		—		10,949		—		10,949
Investments:
Commercial paper		—		24,788		—		24,788
Corporate bonds		—		28,365		—		28,365
Municipal bonds		—		17,021		—		17,021
Canadian Government agencies		—		5,682		—		5,682
U.S. Government agencies		—		123,936		—		123,936
	$	12,040	$	210,741	$	—	$	222,781

	Fair Value Measurements as of December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	19,277	$	—	$	—	$	19,277
Commercial paper		—		1,000		—		1,000
Corporate bonds		—		950		—		950
Canadian Government agencies		—		2,347		—		2,347
Investments:
Commercial paper		—		34,471		—		34,471
Corporate bonds		—		26,857		—		26,857
Municipal bonds		—		1,090		—		1,090
Canadian Government agencies		—		9,457		—		9,457
U.S. Government agencies		—		137,089		—		137,089
	$	19,277	$	213,261	$	—	$	232,538

During the nine months ended September 30, 2021 and the year ended December 31, 2020, there were no transfers between Level 1, Level 2 and Level 3.

5.	Investments

Investments consisted of the following (in thousands):

	September 30, 2021
	Amortized Cost		Fair Value
Due within one year or less	$	154,155	$	154,238
Due after one year through three years		45,574		45,554
	$	199,729	$	199,792

	December 31, 2020
	Amortized Cost		Fair Value
Due within one year or less	$	131,857	$	131,882
Due after one year through three years		77,063		77,082
	$	208,920	$	208,964

As of September 30, 2021, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Current		Non-Current
Commercial paper	$	24,787	$	1	$	—		$	24,788	$	24,788	$	—
Corporate bonds		28,327		43		(5	)		28,365		23,856		4,509
Municipal bonds		17,023		2		(4	)		17,021		14,766		2,255
Canadian Government agencies		5,637		45		—			5,682		4,578		1,104
U.S. Government agencies		123,955		10		(29	)		123,936		86,250		37,686
	$	199,729	$	101	$	(38	)	$	199,792	$	154,238	$	45,554

As of December 31, 2020, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Current		Non-Current
Commercial paper	$	34,474	$	1	$	(4	)	$	34,471	$	34,471	$	—
Corporate bonds		26,855		22		(20	)		26,857		9,446		17,411
Municipal bonds		1,090		—		—			1,090		1,090		—
Canadian Government agencies		9,405		52		—			9,457		6,154		3,303
U.S. Government agencies		137,096		8		(15	)		137,089		80,721		56,368
	$	208,920	$	83	$	(39	)	$	208,964	$	131,882	$	77,082

6.	Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Prepaid external research and development expenses	$	3,446	$	1,606
Prepaid insurance		3,247		2,067
Prepaid software subscriptions		434		146
Income tax receivable		232		—
Interest receivable		461		504
Other receivable due from AstraZeneca		932		—
Canadian harmonized sales tax receivable		360		290
Other		311		727
	$	9,423	$	5,340

7.	Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	September 30, 2021		December 31, 2020
Accrued employee compensation and benefits	$	2,787	$	2,551
Accrued external research and development expenses		2,239		1,037
Accrued professional and consulting fees		1,108		1,023
Other		12		48
	$	6,146	$	4,659

Equity

Common Shares

On June 19, 2020, the Company effected a one-for-5.339 reverse share split of its issued and outstanding common shares and a proportional adjustment to the existing conversion ratios for each class of the Company’s Preferred Shares and Preferred Exchangeable Shares. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse share split and adjustment of the preferred share conversion ratios.

As of September 30, 2021, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue unlimited common shares, each with no par value per share.

Convertible Preferred Shares

In January 2020, the Company executed the First Amendment to the Class B Subscription Agreement (“Amended Class B Subscription Agreement”) whereby the Canada Pension Plan Investment Board (“CPP”) agreed to purchase an aggregate of $20.0 million of Class B preferred shares, at a price of $1.5154 per share, in two tranches. In January 2020, the Company issued and sold to CPP 6,598,917 Class B preferred shares, resulting in gross proceeds of $10.0 million (the “Additional Class B Closing”). The Company incurred issuance costs of $0.1 million in connection with this transaction.

Upon the closing of the IPO, the Company converted the then outstanding Class A and Class B preferred shares into common shares at a conversion ratio of 5.339 Preferred Share to one common share.

Preferred Exchangeable Shares and Special Voting Shares

In connection with each issuance and sale of its Class A preferred shares and Class B preferred shares, the Company’s Irish subsidiary issued and sold Class A and Class B preferred exchangeable shares (together, the “Preferred Exchangeable Shares”) to investors. Simultaneously with the issuance and sale of the Preferred Exchangeable Shares, the Company issued and sold its Class A and Class B special voting shares (together, the “Special Voting Shares”) to the same investors. Prior to the IPO, the Company’s Irish subsidiary’s amended constitution authorized it to issue an aggregate of 28,874,378 Preferred Exchangeable Shares and 29,747,987 Preferred Exchangeable Shares, respectively, with a par value of $0.001 per share. Prior to the IPO, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue an aggregate of 28,874,378 Special Voting Shares and 29,747,987 Special Voting Shares, respectively, with a cash redemption value of $0.000001 per share.

In May 2020, the Company achieved the specified regulatory milestone associated with the Class B preferred share tranche right, which triggered the requirement of the Class B shareholders to participate in the Milestone Financing. Upon closing of the Milestone Financing on June 2, 2020, the Company issued and sold 4,437,189 Class B special voting shares at a price of $0.000001 per share and the Company’s Irish subsidiary issued and sold 4,437,189 Class B preferred exchangeable shares at a price of $1.5154 per share, for aggregate gross proceeds of $6.7 million.

Warrants

The Preferred Share Warrants were immediately exercisable and expire two years from the date of issuance or upon the earlier occurrence of specified qualifying events, which include the consummation of a Deemed Liquidation Event and the closing of a qualifying share sale (as defined in the articles of the corporation, as amended and restated). Upon the closing of a qualified public offering, on specified terms, all outstanding warrants to purchase Class B convertible preferred shares of the Company and warrants to purchase Class B preferred exchangeable shares of Fusion Pharmaceutics (Ireland) Limited will become warrants to purchase common shares of the Company.

The issuance of the Preferred Share Warrants was treated as a deemed dividend to existing preferred shareholders for purposes of the Company’s calculation of net loss per share attributable to common shareholders, and, as such, the aggregate value of the dividend to existing preferred shareholders was deducted from the Company’s net loss when computing net loss per share attributable to common shareholders (see Note 12). The Company remeasures the fair value of the liability associated with the Preferred Share Warrants at each reporting date and records any adjustments as a component of other income (expense) in the consolidated statements of operations and comprehensive loss. Upon the closing of the IPO, the warrants to purchase 3,126,391 of its convertible preferred shares and warrants to purchase 873,609 preferred exchangeable shares of the Company’s Irish subsidiary were converted into warrants to purchase 749,197 shares of the Company’s common shares at an exercise price of $8.10 per share. As a result, the warrant liability was remeasured a final time on the closing date of the IPO and reclassified to shareholders’ equity (deficit) as the warrants

qualify for equity classification. For the nine months ended September 30, 2020, the Company recognized a loss of $6.4 million as a component of other income (expense) in the condensed consolidated statement of operations and comprehensive loss to reflect an increase in fair value of the Preferred Share Warrant.

9.	Share-based Compensation

2020 Stock Option and Incentive Plan

2017 Equity Incentive Plan

2020 Employee Share Purchase Plan

On June 18, 2020, the Company’s board of directors adopted the 2020 Employee Share Purchase Plan (the “ESPP”), which became effective on June 24, 2020. A total of 450,169 common shares were reserved for issuance under this plan. In addition, the number of common shares that may be issued under the ESPP was automatically increased on January 1, 2021 and shall be automatically increased each January 1 thereafter by the lesser of (i) 900,338 common shares, (ii) 1% of the number of the Company’s common shares outstanding on the immediately preceding December 31 and (iii) such lesser number of shares as determined by the Company’s compensation committee of the board of directors. As of September 30, 2021, 15,596 shares were issued under the ESPP. The total number of common shares reserved for issuance under the ESPP was 867,427 shares as of September 30, 2021.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected share volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employee consultants is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Risk-free interest rate		1.02	%		0.33	%		0.85	%		0.70	%
Expected term (in years)		6.1			6.0			6.1			6.0
Expected volatility		66.9	%		67.0	%		66.9	%		65.5	%
Expected dividend yield		0	%		0	%		0	%		0	%

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2020:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2020		5,607,244		$	6.45		8.2	$	36,628
Granted		2,750,600			10.29
Exercised		(411,467	)		1.19
Forfeited/cancelled		(297,089	)		11.36
Outstanding as of September 30, 2021		7,649,288		$	7.92		8.3	$	18,916
Vested and expected to vest as of September 30, 2021		7,512,688		$	7.85		8.3	$	18,916
Options exercisable as of September 30, 2021		2,814,127		$	4.37		7.1	$	13,773

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those options that had exercise prices lower than the fair value of the Company’s common shares. The intrinsic value for stock options exercised during the nine months ended September 30, 2021 was $3.3 million. The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2021 and 2020 was $6.17 and $11.54 per share, respectively.

Share-based Compensation

Share-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development expenses	$	728	$	288	$	1,913	$	506
General and administrative expenses		1,646		953		4,324		1,519
	$	2,374	$	1,241	$	6,237	$	2,025

10.	License Agreements and Asset Acquisitions

License Agreement with the Centre for Probe Development and Commercialization Inc.

In November 2015, the Company entered into a license agreement with the Centre for Probe Development and Commercialization Inc. (“CPDC”), a related party (see Note 15) (the “CPDC Agreement”). Under the agreement, the Company was granted an exclusive, sublicensable, nontransferable, worldwide license under CPDC’s patent rights related to CPDC’s radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans, whether diagnostic or therapeutic. The Company has the right to grant sublicenses of its rights. The CPDC Agreement was amended in 2017; however, there were no material changes to the terms of the CPDC Agreement. Also in 2017, the Company entered into a second license agreement with CPDC, under which the Company was granted an exclusive, sublicensable, worldwide license under CPDC’s patent rights related to certain CPDC radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans. The Company has the right to grant sublicenses of its rights.