SEC Filing - Kronos Bio

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kron-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

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

For the transition period from _______to _______

Commission file number: 001-39592

Kronos Bio, Inc.

(Exact name of registrant as specified in its charter)


Delaware			82-1895605
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

1300 So. El Camino Real, Suite 300

San Mateo, California 94402

(650) 781-5200

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	KRON	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes or ☐ 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 or ☐ 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 definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

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

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

As of May 10, 2021 the registrant had 56,069,854 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Condensed Balance Sheets as of March 31, 2021 and December 31, 2020	3
	Condensed Statements of Operations and Comprehensive Loss for the Three Months E nded M arch 31, 2021 and 2020	4
	Condensed Statements of Convertible Preferred Stock and Stockholders’ (Equity) Deficit for the Three Months Ended March 31, 2021 and 2 02 0	5
	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	6
	Notes to Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	96
Item 6.	Exhibits	97
	Signatures	98

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KRONOS BIO, INC.

Condensed Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)


	March 31, 2021		December 31, 2020
Assets			(1)
Current assets:
Cash and cash equivalents	$	141,448	$	248,009
Short-term investments	257,476		165,052
Prepaid expenses and other current assets	6,347		6,741
Total current assets	405,271		419,802
Long-term investments	41,684		49,001
Property and equipment, net	14,021		13,646
Operating lease right-of-use assets	24,845		27,322
Restricted cash	2,026		2,027
Other noncurrent assets	114		166
Total assets	$	487,961	$	511,964
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	3,586	$	4,550
Accrued expenses	4,275		4,974
Current portion of operating lease liabilities	822		937
Current portion of other liabilities	2,602		2,395
Total current liabilities	11,285		12,856
Noncurrent operating lease liabilities	29,394		31,120
Other noncurrent liabilities	2,025		2,469
Total liabilities	42,704		46,445
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.001 par value, 200,000,000 and 200,000,000 shares authorized as of March 31, 2021 and December 31, 2020 respectively; 54,385,963 and 54,073,901 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.	54		54
Preferred stock, $0.001 par value; 10,000,000 authorized; no shares issued and outstanding.	—		—
Additional paid-in capital	583,218		577,390
Accumulated deficit	(137,992)		(111,906)
Accumulated other comprehensive loss	(23)		(19)
Total stockholders' equity	445,257		465,519
Total liabilities, convertible preferred stock and stockholders’ equity	$	487,961	$	511,964

(1) The balance sheet as of December 31, 2020 is derived from the audited financial statements as of that date.

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

KRONOS BIO, INC.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended March 31,
	2021		2020
Operating expenses:
Research and development	$	17,594	$	6,195
General and administrative	8,584		1,154
Total operating expenses	26,178		7,349
Loss from operations	(26,178)		(7,349)
Other income (expense), net:
Interest expense	—		(1)
Interest and other income, net	92		355
Total other income (expense), net	92		354
Net loss	(26,086)		(6,995)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities	(4)		158
Net comprehensive loss	$	(26,090)	$	(6,837)
Net loss per share, basic and diluted	$	(0.48)	$	(1.23)
Weighted-average shares of common stock, basic and diluted	54,152,656		5,694,832

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

KRONOS BIO, INC.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share and per share data)


	Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	—	$	—	54,073,901	$	54	$	577,390	$	(19)	$	(111,906)	$	465,519
Issuance of common stock upon vesting and exercise of options and vesting of restricted stock	—	—		312,062	—		590		—		—		590
Stock-based compensation expense	—	—		—	—		5,238		—		—		5,238
Net unrealized loss on available-for-sale securities	—	—		—	—		—		(4)		—		(4)
Net loss	—	—		—	—		—		—		(26,086)		(26,086)
Balance at March 31, 2021	—	$	—	54,385,963	$	54	$	583,218	$	(23)	$	(137,992)	$	445,257

Balance at December 31, 2019	21,504,893	$	122,907	5,660,391	$	6	$	271	$	(18)	$	(23,462)	$	(23,203)
Issuance of common stock upon vesting and exercise of options and vesting of restricted stock	—	—		119,939	—		20		—		—		20
Stock-based compensation expense	—	—		—	—		188		—		—		188
Net unrealized gain on available-for-sale securities	—	—		—	—		—		158		—		158
Net loss	—	—		—	—		—		—		(6,995)		(6,995)
Balance at March 31, 2020	21,504,893	$	122,907	5,780,330	$	6	$	479	$	140	$	(30,457)	$	(29,832)

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

KRONOS BIO, INC.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)


	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net loss	$	(26,086)	$	(6,995)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	444		160
Net amortization/accretion on available-for-sale securities	943		17
Change in accrued interest on available-for-sale securities	16		(68)
Stock-based compensation expense	5,238		188
Noncash lease expense	461		68
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	971		(150)
Other long-term assets	52		—
Accounts payable	(1,199)		(244)
Accrued expenses	228		(286)
Right-of-use operating assets and liabilities, net	175		271
Other liabilities	(241)		(27)
Net cash used in operating activities	(18,998)		(7,066)

Cash flows from investing activities:
Purchase of property and equipment	(1,505)		(626)
Purchase of available-for-sale securities	(126,060)		(2,309)
Maturities of available-for-sale securities	39,416		8,245
Net cash provided by (used in) investing activities	(88,149)		5,310

Cash flows from financing activities:
Principal payments on finance lease	(5)		(8)
Proceeds from issuance of common stock	590		20
Net cash provided by financing activities	585		12

Net decrease in cash and cash equivalents	(106,562)		(1,744)
Cash, cash equivalents and restricted cash at beginning of period	250,036		32,570
Cash, cash equivalents and restricted cash at end of period	$	143,474	$	30,826

Supplemental disclosures of non-cash activities:
Property and equipment additions included in accounts payable and accrued expenses	$	588	$	686
Reduction of right-of-use asset due to modification	$	(1,741)	$	—

Cash and cash equivalents at end of period	$	141,448	$	28,800
Restricted cash at end of period	2,026		2,026
Cash, cash equivalents and restricted cash at end of period	$	143,474	$	30,826

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

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

1.NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Kronos Bio, Inc. (Kronos or the Company), a Delaware corporation, was incorporated on June 2, 2017. The Company is a clinical-stage biopharmaceutical company dedicated to the discovery and development of novel cancer therapeutics designed to transform patient outcomes through a precision medicine strategy by targeting dysregulated transcription.

The Company operates in one business segment: the development of biopharmaceutical products.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

Initial Public Offering

In October 2020, the Company completed an initial public offering (IPO) of its common stock. In connection with its IPO, the Company issued and sold 15,131,579 shares of its common stock, which included 1,973,684 shares of its common stock issued and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $19.00 per share. As a result of the IPO, the Company received approximately $263.7 million in net proceeds, after deducting underwriting discounts and commissions of $20.1 million and offering expenses of approximately $3.7 million payable by the Company. At the closing of the IPO, all then outstanding convertible preferred stock were automatically converted into 22,687,625 shares of common stock and the then outstanding 2020 Notes were automatically converted into 9,610,713 shares of common stock. At the closing of the IPO, the then outstanding Gilead Note (See Note 11) was also converted into 188,567 shares of common stock. Following the IPO, there were no shares of convertible preferred stock outstanding.

Forward Stock Split

On October 2, 2020, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a forward split of shares of the Company’s common stock on a 1.055-for-1 basis (the Forward Stock Split). In connection with the Forward Stock Split, the conversion ratio for the Company’s outstanding convertible preferred stock was proportionally adjusted such that the common stock issuable upon conversion of such preferred stock was increased in proportion to the Forward Stock Split. The par value of the common stock was not adjusted as the result of the Forward Stock Split. All references to common stock, options to purchase common stock, early exercised options, share data, per share data, convertible preferred stock (to the extent presented on an as-converted to common stock basis) and related information contained in these condensed financial statements have been retrospectively adjusted to reflect the effect of the Forward Stock Split for all periods presented.

Need for Additional Capital

The Company has incurred net operating losses since its inception of $138.0 million as of March 31, 2021. The Company expects that its cash, cash equivalents and investments as of March 31, 2021, in addition to its approximate net cash proceeds of $263.7 million from the Company’s IPO, which closed on October 14, 2020, will enable it to fund its planned operating expenses and capital expenditure requirements for at least one year from the date of issuance of these condensed financial statements. Management expects to incur additional losses in the future to fund its operations and conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

The Company intends to raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates. The Company expects that its cash and cash equivalents and investments will be sufficient to fund its operations for a period of at least one year from the date the accompanying financial statements are filed with the Securities and Exchange Commission (SEC).

The Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on its financial condition and operations, including ongoing and planned clinical trials. The impact of the COVID-19 pandemic on the financial performance of the Company will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be adversely affected.

The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company’s failure to raise capital as and when needed could have a material adverse effect on its financial condition and ability to pursue business strategies. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaboration arrangements or obtain government grants. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce, or eliminate its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. In the event that the Company requires additional funding, there can be no assurance that it will be successful in obtaining sufficient funding on terms acceptable to the Company to fund its continuing operations, if at all.

2.SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

Basis of Presentation

Unaudited Interim Financial Information

The accompanying balance sheet as of March 31, 2021, the statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, the statements of convertible preferred stock and stockholders’ equity (deficit) as of March 31, 2021 and 2020, the statements of cash flows for the three months ended March 31, 2021 and 2020, and the financial data and other financial information disclosed to in the notes to the condensed financial statements are unaudited. The unaudited interim financial statements have been prepared on a basis consistent with the Company’s audited annual financial statements and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2021 and the results of its operations the three months ended March 31, 2021 and 2020. The results for the three months ended March 31, 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. These financial statements should be read in conjunction with the Company's audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 23, 2021.

Use of Estimates

The preparation of 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 assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

Significant estimates and assumptions reflected in these condensed financial statements include, but are not limited to, the accrual of research and development expenses, the fair value of convertible notes and investments, income tax uncertainties, the valuation of equity instruments and the incremental borrowing rate for determining the operating lease assets and liabilities. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets.

Significant Accounting Policies

There have been no significant changes to the accounting policies during the three months ended March 31, 2021, as compared to the significant accounting policies described in Note 2 of the “Notes to Financial Statements” of the Company’s audited financial statements included in its Annual Report.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11. The standard requires measurement and recognition of expected credit losses for financial assets by requiring an allowance to be recorded as an offset to the amortized cost of such assets. For available-for-sale debt securities, expected credit losses should be estimated when the fair value of the debt securities is below their associated amortized costs. The standard will become effective for the Company in the first quarter of 2020, with early adoption permitted beginning the first quarter of 2019. The modified retrospective approach should be applied upon adoption of this new guidance. The Company’s financial instruments that are in the scope of ASU 2016-13 include available-for-sale debt securities. The Company adopted this standard on January 1, 2020 and this amendment did not have a material impact on its financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. This guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted. The Company has adopted this standard as of January 1, 2020, which did not have a material impact on its financial statements.

3.FAIR VALUE MEASUREMENTS

The Company follows authoritative accounting guidance, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The Company measures and reports its cash equivalents, investments, and convertible notes at fair value.

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1. Investments measured at fair value based on inputs other than quoted prices that are derived from observable market data are classified as Level 2.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2021 and December 31, 2020 were as follows:


	March 31, 2021
	Level 1		Level 2		Level 3		Fair Value
			(in thousands)
Financial Assets:
Money market funds	$	125,053	$	—	$	—	$	125,053
Certificates of deposit	491		—		—		491
Corporate bonds	—		97,500		—		97,500
U.S. agency securities	—		10,001		—		10,001
U.S. treasury securities	202,266		—		—		202,266
Total financial assets	$	327,810	$	107,501	$	—	$	435,311


	December 31, 2020
	Level 1		Level 2		Level 3		Fair Value
	(in thousands)
Financial Assets:
Money market funds	$	114,184	$	—	$	—	$	114,184
Certificates of deposit	1,229		—		—		1,229
Corporate bonds	—		40,736		—		40,736
U.S. agency securities	—		10,001		—		10,001
U.S. treasury securities	284,721		—		—		284,721
Total financial assets	$	400,134	$	50,737	$	—	$	450,871

The carrying amounts of accounts payable and accrued expenses approximate their fair values due to their short-term maturities. The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly.

The Company did not have any financial assets or liabilities as of March 31, 2021 and December 31, 2020 that required Level 3 inputs. There were no transfers of assets between the fair value measurement levels during any of the periods presented in the accompanying financial statements.

4.INVESTMENTS

The fair value and amortized cost of available-for-sale securities by major security type as of March 31, 2021 and December 31, 2020 were as follows:


	March 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
			(in thousands)
Money market funds	$	125,053	$	—	$	—	$	125,053
Certificates of deposit	491		1		—		492
Corporate bonds	97,541		3		(44)		97,500
U.S. agency securities	9,999		1		—		10,000
U.S. treasury securities	202,250		22		(6)		202,266
Total cash equivalents and investments	$	435,334	$	27	$	(50)	$	435,311

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)


	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(in thousands)
Money market funds	$	114,184	$	—	$	—	$	114,184
Certificates of deposit	1,225		4		—		1,229
Corporate bonds	40,743		9		(16)		40,736
U.S. agency securities	9,999		2		—		10,001
U.S. treasury securities	284,739		3		(21)		284,721
Total cash equivalents and investments	$	450,890	$	18	$	(37)	$	450,871

These available-for-sale securities were classified on the Company’s balance sheets as of March 31, 2021 and December 31, 2020 as:


	Fair Value
	March 31, 2021		December 31, 2020
	(in thousands)
Cash equivalents	$	136,151	$	236,818
Short-term investments	257,476		165,052
Long-term investments	41,684		49,001
Total cash equivalents and investments	$	435,311	$	450,871

The fair values of available-for-sale securities by contractual maturity as of March 31, 2021 and December 31, 2020 were as follows:


	March 31, 2021		December 31, 2020
	(in thousands)
Due in 1 year or less	$	268,574	$	287,686
Due in 1 to 2 years	41,684		49,001
Instruments not due at a single maturity date	125,053		114,184
Total cash equivalents and investments	$	435,311	$	450,871

As of March 31, 2021 and December 31, 2020, the remaining contractual maturities of available-for-sale securities were less than two years, respectively. There have been no significant realized losses on available-for-sale securities for any of the periods presented in the accompanying financial statements. Based on the Company’s review of its available-for-sale securities, the Company believes that it had no other-than-temporary impairments on these securities as of March 31, 2021 and December 31, 2020 because the Company does not intend to sell these securities nor does it believe that it will be required to sell these securities before the recovery of their amortized cost basis. Gross realized gains and gross realized losses were immaterial for any of the periods presented in the accompanying financial statements.

As of March 31, 2021 and December 31, 2020, unrealized losses on available-for-sale investments are not attributed to credit risk. The Company believes that an allowance for credit losses is unnecessary because the unrealized losses on certain of the Company’s marketable securities are due to market factors.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

5.PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following as of March 31, 2021 and December 31, 2020:


	March 31, 2021		December 31, 2020
	(in thousands)
Accrued interest on short-term available-for-sale securities	$	1,274	$	612
Prepaid equipment service contracts	343		383
Prepaid external research and development and outside services	1,287		1,889
Prepaid software	742		736
Prepaid insurance	1,958		2,881
Prepaid rent and other	743		240
Total prepaid expenses and other current assets	$	6,347	$	6,741

6.PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of March 31, 2021 and December 31, 2020:


	March 31, 2021		December 31, 2020
	(in thousands)
Property and equipment:
Lab equipment	$	6,497	$	5,619
Leasehold improvements	9,033		8,957
Furniture and fixtures	217		216
Finance lease on R&D equipment	—		139
Total property and equipment	15,747		14,931
Less: Accumulated depreciation and amortization	(1,726)		(1,285)
Total property and equipment, net	$	14,021	$	13,646

Depreciation and amortization expense was $0.4 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively.

7.ACCRUED EXPENSES AND CURRENT PORTION OF OTHER LIABILITIES

Accrued expenses consisted of the following as of March 31, 2021 and December 31, 2020:


	March 31, 2021		December 31, 2020
	(in thousands)
Accrued compensation	$	841	$	2,274
Accrued taxes	4		558
External research and development	2,530		1,017
Accrued outside services	714		—
Accrued leasehold improvements	—		927
Other accrued expenses	186		198
Total accrued expenses	$	4,275	$	4,974

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

Current portion of other liabilities consist of the following as of March 31, 2021 and December 31, 2020:


	March 31, 2021		December 31, 2020
	(in thousands)
Current portion of finance lease liability	$	—	$	5
Current portion of unvested early exercised share liability	2,063		2,174
ESPP withholdings	539		216
Total current portion of other current liabilities	$	2,602	$	2,395

8.STOCK-BASED COMPENSATION

2020 Equity Incentive Plan

In October 2020, the Company adopted its 2020 Equity Incentive Plan (the 2020 Plan) which replaced the 2017 Equity Incentive Plan (Prior Plan) upon completion of the IPO. The 2020 Plan provides for the grant of incentive stock options or nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards and other forms of awards to employees, directors, and consultants of the Company. The number of shares of common stock reserved for issuance under the 2020 Plan will automatically increase each year for a period of ten years, beginning in 2021 and continuing through 2030, in an amount equal to (1) 5.0% of the total numbers of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Board of Directors no later than December 31 of the immediately preceding year. As of March 31, 2021, the maximum number of shares of common stock that may be issued increased to 14,739,827 shares.

The Company recognizes the impact of forfeitures on stock-based compensation expense as forfeitures occur. The Company applies the straight-line method of expense recognition to all awards with only service-based vesting conditions. Vesting periods are determined at the discretion of the Board of Directors. Stock options typically vest over four years. The maximum contractual term is 10 years.

As of March 31, 2021, there were 5,373,328 shares reserved by the Company under the 2020 Plan for the future issuance of equity awards.

Stock Options

Stock option activity under the 2020 Plan as of March 31, 2021 is summarized as follows:


	Number of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
				(in years)	(in thousands)
Balance, December 31, 2020	6,251,159	$	8.95
Granted	785,287	29.38
Forfeited	—	—
Exercised	(285,160)	2.07
Balance, March 31, 2021	6,751,286	$	11.62	9.15	$	121,472

The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on March 31, 2021. The intrinsic value of options exercised for the three months ended March 31, 2021 and 2020 was $7.6 million and $0.2 million, respectively, determined as of the applicable date of exercise. There was no future tax benefit related to options exercised, as the Company had accumulated net operating losses as of March 31, 2021 and December 31, 2020.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

The weighted-average grant-date fair value per share of stock options granted, using the Black-Scholes option pricing model, was $21.11 and $1.59 during the three months ended March 31, 2021 and 2020, respectively. The weighted-average grant-date fair value per share of stock options vested was $3.37 and $0.33 during the three months ended March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2021 and 2020, total stock-based compensation related to options was classified in the Company’s statements of operations and comprehensive loss as follows:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Research and development expenses	$	1,425	$	130
General and administrative expenses	1,612		57
Total stock-based compensation expense	$	3,037	$	187

As of March 31, 2021 and December 31, 2020, there was $49.9 million and $36.3 million of unrecognized stock-based compensation related to stock options, respectively, which is expected to be recognized over a weighted-average period of 3.53 and 3.70 years, respectively.

2020 Employee Stock Purchase Plan

In October 2020, the Company adopted its 2020 Employee Stock Purchase Plan (ESPP), which initially reserved 688,000 shares of the Company’s common stock for employee purchase under terms and provisions established by the Board of Directors. The number of shares of our common stock reserved for issuance under the ESPP automatically increases in 2021 and continuing through 2030, by the lesser of (i) 1.0% of the total number of shares of common stock outstanding on December 31 of the immediately preceding year, and (ii) 1,376,000 shares, except before the date of any increase, the Board of Directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). The Company has 1,248,335 shares reserved for future issuance as of March 31, 2021.

For the three months ended March 31, 2021, total stock-based compensation related to the ESPP was $0.3 million, with $0.1 million recorded in general and administrative expenses and $0.2 million recorded in research and development expenses in the statements of operations and comprehensive loss.

Restricted Stock

Restricted stock awards and units as of March 31, 2021 are summarized as follows:


	Number of Restricted Stock	Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Vesting Life	Aggregate Intrinsic Value
				(in years)	(in thousands)
Unvested, December 31, 2020	810,197	$	22.26
Granted - restricted stock awards and units	339,430	29.32
Vested and converted to shares	(26,902)	0.05
Unvested, March 31, 2021	1,122,725	$	24.93	2.69	$	32,862

In February 2021, the Company issued 339,430 restricted stock units (RSUs) to certain employees pursuant to the 2020 Plan. These RSUs have a three year vest period and in order to vest, the holder is required to provide service to the Company.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

The Company recognized $1.8 million of stock-based compensation expense related to the RSUs for the three months ended March 31, 2021, of which $0.9 million and $0.9 million are recorded in research and development and general and administrative expenses, respectively, in the current year statement of operations and comprehensive loss. As of March 31, 2021 and December 31, 2020, there was $25.2 million and $17.1 million, respectively, of unrecognized stock-based compensation related to RSUs, which is expected to be recognized over a weighted average period of 2.76 and 2.94 years, respectively. No RSUs have vested as of March 31, 2021.

The Company recorded stock-based compensation expense for its restricted stock awards (RSAs) of $35,000 in general and administrative expenses in the statements of operations and comprehensive loss for the three months ended March 31, 2021 for RSAs granted to a certain executive officer in July 2020. The stock-based compensation recorded for RSAs in the three months ended March 31, 2020 was not material. As of March 31, 2021 and December 31, 2020, there was $0.5 million and $0.5 million, respectively, of unrecognized stock-based compensation related to RSAs, which is expected to be recognized over a weighted average period of 3.33 and 3.58 years, respectively. The RSAs are subject to lapsing repurchase rights and in order to vest, are subject to the holder’s service to the Company. There were no RSAs granted during the three months ended March 31, 2021.

Stock-Based Compensation Summary

Stock-based compensation expense was classified in the Company’s statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020 as follows:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Research and development expenses	$	2,554	$	131
General and administrative expenses	2,684		57
Total stock-based compensation expense	$	5,238	$	188

Early Exercised Options

The Company allows certain of its employees and its consultants to exercise options granted under the Prior Plan prior to vesting. The shares related to early exercised stock options are subject to the Company’s lapsing repurchase right upon termination of employment or service on the Board of Directors at the lesser of the original purchase price or fair market value at the time of repurchase. In order to vest, the holders are required to provide continued service to the Company. The early exercise by an employee or consultant of a stock option is not considered to be a substantive exercise for accounting purposes, and therefore the payment received by the employer for the exercise price is recognized as a liability. For accounting purposes, unvested early exercised shares are not considered issued and outstanding and therefore not reflected as issued and outstanding in the accompanying statements of convertible preferred stock and stockholders' equity (deficit) until the awards vest.

The deposits received are initially recorded in current portion of other liabilities and other noncurrent liabilities for the noncurrent portion. The liabilities are reclassified to common stock and paid-in capital as the repurchase right lapses. At March 31, 2021 and December 31, 2020, there was $2.1 million and $2.2 million recorded in current portion of other liabilities, and $2.0 million and $2.5 million recorded in other noncurrent liabilities, respectively, related to shares held by employees and nonemployees that were subject to repurchase.

9.INCOME TAXES

The Company did not record any income tax expense for the three months ended March 31, 2021 and 2020. The Company has incurred net operating losses for all the periods presented and has not reflected any benefit of such net operating loss carryforwards in the accompanying financial statements. The Company has recorded a full valuation allowance against all of its deferred tax assets as it is not more likely than not that such assets will be realized in the near future.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

It is the Company’s policy to record penalties and interest related to income taxes as a component of income tax expense. The Company has not recorded any interest or penalties related to income taxes during the three months ended March 31, 2021 and 2020. The Company has not identified any new uncertain tax positions as of March 31, 2021. Unrecognized tax benefits are not expected to change during the next 12 months. The reversal of the unrecognized tax benefits would not affect the effective tax rate. The Company is subject to examination by U.S. federal and state tax authorities for all years since its inception.

10.NET LOSS PER SHARE

The following table summarizes the computation of basic and diluted net loss per share of the Company for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020
	(in thousands, except share and per share amounts)
Net loss	$	(26,086)	$	(6,995)
Weighted-average common stock outstanding, basic and diluted	54,152,656		5,694,832
Net loss per share, basic and diluted	$	(0.48)	$	(1.23)

The Company’s potentially dilutive securities, which include options to purchase shares of the Company's common stock and restricted stock subject to future vesting, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential shares of common stock, presented based on amounts outstanding at each stated period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	March 31, 2021	March 31, 2020
Stock options to purchase common stock	5,307,444	2,642,509
Early exercised stock options subject to future vesting	1,443,842	681,894
Restricted stock awards subject to future vesting	217,877	188,318
Restricted stock units subject to future vesting	904,847	—
Total	7,874,010	3,512,721

11.COMMITMENTS AND CONTINGENCIES

Asset Purchase Agreement

In July 2020, the Company entered into an asset purchase agreement (Gilead Asset Purchase Agreement) with Gilead Sciences, Inc. (Gilead), pursuant to which the Company acquired certain assets from Gilead related to entospletinib (ENTO) and lanraplenib (LANRA), and patents and other intellectual property covering or related to the development, manufacture and commercialization of ENTO and LANRA.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

In consideration for such assets, on the date of the Gilead Asset Purchase Agreement, the Company made a $3.0 million upfront cash payment and issued a $3.0 million principal amount convertible promissory note to Gilead (Gilead Note)The Company also made a $0.7 million payment to reimburse Gilead for certain liabilities assumed by the Company pursuant to the Gilead Asset Purchase Agreement. In addition, the Company is required to make milestone payments upon successful achievement of certain regulatory and sales milestones for ENTO, LANRA and other selective spleen tyrosine kinase inhibitor compounds covered by the patent rights acquired pursuant to the Gilead Asset Purchase Agreement and developed by the Company as a back-up to ENTO or LANRA (Other Compounds). Upon initiation of the Company’s planned registrational Phase 3 clinical trial of ENTO in combination with induction chemotherapy in acute myeloid leukemia patients with NPM1 mutations, the Company will be required to pay a milestone to Gilead of $29.0 million, and upon successful completion of certain other regulatory milestones in the United States, European Union and United Kingdom for ENTO, LANRA and any Other Compounds, across up to two distinct indications, the Company will be required to pay to Gilead an aggregate total of $51.3 million. Upon achieving certain thresholds for the aggregate annual net sales of ENTO, LANRA and any Other Compounds combined, the Company would owe to Gilead potential milestone payments totaling $115.0 million.

Gilead is also eligible to receive (i) tiered marginal royalties ranging from the very low-teens to high-teens on annual worldwide net sales of ENTO, (ii) tiered marginal royalties ranging from high-single digits to the mid-teens on annual worldwide net sales of LANRA and (iii) tiered marginal royalties ranging from low single digits to mid-single digits on annual worldwide net sales of any Other Compounds. The royalties in the foregoing clauses are subject to reduction, on a country-by-country basis, for products not covered by certain claims within the assigned patents, for generic entry and, in the case of ENTO and LANRA, for any royalties paid for future licenses of third party intellectual property required to develop or commercialize ENTO or LANRA. The Company’s royalty obligation with respect to a given product in a given country begins upon the first commercial sale of such product in such country and ends on the latest of (i) expiration of the last claim of a defined set of the assigned patent rights covering such product in such country; (ii) loss of exclusive data or marketing rights to such product in such country; or (iii) 10 years from the first commercial sale of such product in such country.

Under the Gilead Asset Purchase Agreement, the Company is required to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize either ENTO or LANRA.

The Gilead Note settled upon the completion of the Company’s IPO in October 2020.

Purchase Commitments

In the normal course of business, the Company enters into contracts with CROs for preclinical studies and other vendors for other services and products for operating purposes. These agreements generally provide for termination or cancellation, other than for costs already incurred.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown, because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Indemnification

In accordance with the Company’s amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. There have been no claims to date, and the Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for future claims.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

12.LEASES

In November 2020, the Company entered into a lease termination for its lab space in Cambridge, Massachusetts to terminate the lease as of January 31, 2021, rather than May 31, 2021. The cost for early termination was a payment of $0.1 million. The Company accounted for this change in lease term as a modification of the originally amended lease. As a result of the modification, the operating right-of-use asset and lease liability were remeasured as of the modification date. As of March 31, 2021, there was no remaining lease liability or right-of-use asset related to this lease.

In March 2020, the Company entered into an 11-year lease agreement to move its research and development operations from 21 Erie Street, Cambridge, Massachusetts, to a 40,514 square-feet facility at 301 Binney Street, Cambridge, Massachusetts (new Cambridge facility). The new lease commenced on February 28, 2020 with an initial annual base rent of $4.1 million. The initial rent payment was paid as of September 30, 2020, with rent payments escalating 3.0% annually after the initial 12 payments. As discussed in Note 2, the Company executed a letter of credit for $2.0 million in connection with the lease. The lease includes $3.7 million in certain tenant improvement allowances, which the Company included in its calculation of the right-of-use asset in the lease at commencement. As of March 31, 2021, $3.3 million in improvement costs incurred by the Company were reimbursed by the lessor and are now included within the total lease liability. In connection with the lease, the Company recognized an operating lease right-of-use asset of $24.7 million and $25.1 million and an aggregate lease liability of $30.1 million and $30.1 million on the March 31, 2021 and December 31, 2020 balance sheets, respectively. The remaining lease term is 9 years and 11 months, and the estimated incremental borrowing rate is 8.50%.

In July 2018, the Company entered into a lease agreement for a 4,661 square-foot office space to be used for general and administrative activities in San Mateo, California. The lease commenced on August 1, 2018 and had a 37-month initial term expiring on August 31, 2021. The lease also contained an option for the Company to extend the lease upon its initial expiration. In connection with the lease, the Company made a one-time cash security deposit in the amount of $28,000. In May 2020, the Company amended its agreement to extend the lease for its office in San Mateo, California through April 2025. The initial annual base rent was $0.3 million, and such amount was to increase by 3% annually on each anniversary of the commencement date. The Company expanded to an adjacent suite in July 2020, which was treated as a separate lease for accounting purposes. The additional space was approximately 3,414 square feet and was similarly be used for general and administrative activities. The lease commenced on July 1, 2020 and with an initial expiration date of April 30, 2025. In connection with the additional space leased, the Company made a one-time additional cash security deposit in the amount of $25,000. The initial annual base rent for the expansion was $0.2 million, and such amount will increase by 3% annually on each anniversary of the commencement date.

In February 2021, the Company entered into a new lease agreement for its office space in San Mateo, California to move from its current suites, totaling 8,075 square-feet, to a larger suite totaling 17,340 square-feet, with a target move date of July 1, 2021. The Company accounted for this change in lease term of the original suites as a modification of the originally amended lease. As a result of the modification, the operating right-of-use asset and lease liability were remeasured as of the modification date. In connection with the lease of the 4,661 square foot suite, the Company recognized an operating lease right-of-use asset of $59,000 and an aggregate lease liability of $53,000 on the March 31, 2021 balance sheet, after the modification adjustment. The operating lease right-of-use asset and aggregate lease liability for this suite were $1.1 million and $1.1 million, respectively, as of December 31, 2020. In connection with the lease of the 3,414 square foot suite, the Company recognized an operating lease right-of-use asset of $43,000 and an aggregate lease liability of $38,000 on the March 31, 2021 balance sheet, after the modification adjustment. The operating lease right-of-use asset and aggregate lease liability for this suite were $0.8 million and $0.8 million, respectively, as of December 31, 2020. The remaining lease term for both spaces is 3 months and the estimated incremental borrowing rate is 12.07%.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

The new 17,340 square foot suite will be treated as a separate lease for accounting purposes. The initial annual base rent for the new space will be $1.2 million, and such amount will increase by 3% annually on each anniversary of the new premises commencement date. In connection with the larger space leased, the Company has also made an additional one-time cash security deposit in the amount of $59,000. The new lease commenced in April 2021 while tenant improvements are being made and the new lease agreement extends the termination date from April 30, 2025 to April 30, 2026.

The following table summarizes the presentation of the Company’s operating leases in its balance sheets as of March 31, 2021 and December 31, 2020:


Balance Sheet Caption	March 31, 2021		December 31, 2020
	(in thousands)
Assets:
Operating lease assets	$	24,845	$	27,322
Liabilities:
Current portion of operating lease liabilities	$	822	$	937
Noncurrent operating lease liabilities	29,394		31,120
Total operating lease liabilities	$	30,216	$	32,057

The following table summarizes the effect of finance lease costs in the Company’s statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020:


Statement of Operations and Comprehensive Loss Caption	Three Months Ended March 31,
	2021		2020
	(in thousands)
Research and development	$	3	$	5
Interest income (expense), net	—		1
Total finance lease cost	$	3	$	6

The following table summarizes the effect of operating lease costs in the Company’s statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020:


Statement of Operations and Comprehensive Loss Caption	Three Months Ended March 31,
	2021		2020
	(in thousands)
Research and development	$	1,008	$	256
General and administrative	376		163
Total operating lease cost	$	1,384	$	419

The Company made cash payments of $1.2 million and $0.1 million under the lease agreements during the three months ended March 31, 2021 and 2020, respectively.

KRONOS BIO, INC.

Notes to Condensed Financial Statements

(Unaudited)

The undiscounted future non-cancellable lease payments under the Company's operating leases as of March 31, 2021 for the next five years and thereafter is expected to be as follows:


Period Ending December 31,	Amount
	(in thousands)
Remaining nine months of 2021	$	3,207
2022	4,204
2023	4,330
2024	4,460
2025 and thereafter	30,624
Total undiscounted lease payments	46,825
Less: Present value adjustment	(16,241)
Less: Tenant improvement allowance	(368)
Present value of operating lease liabilities	$	30,216

13.RELATED PARTIES

On December 1, 2017, the Company entered into a three-year services agreement with Two River Consulting, LLC (Two River) to provide various clinical development, operational, managerial, accounting and financial, and administrative services to the Company. Arie Belldegrun, M.D., FACS, the Chairman of the Board of Directors, is the Chairman of Two River. Mr. Joshua Kazam and Mr. David Tanen, each a director of the Company, are each partners of Two River. Mr. Tanen additionally serves as our Corporate Secretary. Mr. Christopher Wilfong, a strategic advisor to the Company, is an Operating Partner of Two River and Mr. Sean Algeo, serving as the Company’s Financial Consultant, is the Chief Financial Officer of Two River. During the three months ended March 31, 2021 and 2020, the Company incurred expense of $0.2 million and $0.2 million respectively, for these services.

Some of the Company’s expenses are periodically paid by Two River. The Company reimburses Two River for these expenses and no interest is charged on the outstanding balance. These reimbursable expenses were not material for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, the Company had payables to Two River of $63,000 and $182,000, respectively.

In 2019, the Company entered into a consulting agreement with Bellco Capital, LLC (Bellco) to provide various executive services to the Company. Arie Belldegrun, M.D., FACS, the Chairman of the Board of Directors, is the Chairman of Bellco. Rebecka Belldegrun, M.D., who served as a director of the Company through January 25, 2021, is the President and Chief Executive Officer of Bellco. During the three months ended March 31, 2021 and 2020, the Company incurred expense of $6,300 and $6,300, respectively, for these services.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with the condensed financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and related notes as of and for the fiscal year ended December 31, 2020 included in our Annual Report on Form 10-K, as filed with the SEC on March 23, 2021.

Forward Looking Statements

This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. In some cases, you could identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will,” or the negative of these terms or similar expressions. As a result of many factors, including those factors set forth under “Risk Factors” included in Item 1A of Part II of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Overview

We are a clinical-stage biopharmaceutical company dedicated to the discovery and development of novel cancer therapeutics designed to transform patient outcomes through a precision medicine strategy by targeting dysregulated transcription. Our proprietary product engine focuses on dysregulated transcription factors and the transcriptional regulatory networks (TRNs) that drive their oncogenic activity.

Our lead product candidate, entospletinib (ENTO), which we acquired from Gilead Sciences in July 2020, is an orally administered, selective SYK inhibitor that has been tested in more than 200 AML patients. Our expertise in TRN biology allowed us to recognize SYK as a critical node in the HOX/MEIS TRN, and this acquisition accelerated our pipeline to late clinical stage. Based on clinical results in a biomarker-defined subset of patients and based on the discussion and guidance from our recent End-of-Phase 2 meeting with the FDA, we intend to proceed as planned with our registrational Phase 3 clinical trial of ENTO using measurable residual disease (MRD) negative complete response (CR) as the primary endpoint. We plan to initiate such Phase 3 clinical trial in mid-2021, with MRD negative CR data expected in the second half of 2023. We plan to have similar discussions regarding use of this surrogate primary endpoint with the European Medicines Agency later in 2021. In addition, we are developing KB-0742, which is designed to be an orally bioavailable inhibitor of CDK9 with a differentiated selectivity profile, for the treatment of MYC-amplified solid tumors. The FDA cleared our IND for KB-0742 in December 2020. In February 2021, the first patient was dosed in our Phase 1/2 clinical trial of KB-0742 in patients with advanced solid tumors. We plan to report initial data from this trial in the fourth quarter of 2021, with a data read-out from the expansion cohorts of the trial anticipated in 2022. In addition, we are leveraging our product engine to drive multiple oncology discovery programs targeting dysregulated transcription factors and their associated TRNs.

The following chart summarizes the current stages of our development programs including our lead product candidate, ENTO, as well as KB-0742, and our next anticipated milestones.

We also are executing on robust discovery programs across multiple TRNs, which focus on four cancer types where dysregulated transcription plays a central role: hematologic malignancies, prostate cancer, MYC-driven cancers, and small cell/neuroendocrine cancers. We anticipate submitting an IND for a drug candidate arising from one of these programs in 2022, although we may not be successful in identifying product candidates that can selectively modulate the specific oncogenic TRNs associated with such programs.

The current COVID-19 pandemic has presented substantial public health and economic challenges around the world. We cannot at this time predict the specific extent, duration or impact that COVID-19 will have on our financial condition and operations, including ongoing research activities, ongoing and planned clinical trials and our financial results. While we are currently continuing to prepare to initiate clinical trials in 2021, COVID-19 precautions may directly or indirectly impact their timelines and interrupt clinical enrollment.

Since inception, we have had significant operating losses, primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. Our net loss was $26.1 million and $7.0 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $138.0 million. As of March 31, 2021, we had $440.6 million of cash, cash equivalents and investments. In October 2020, we completed an initial public offering (IPO) of our common stock. As a result of the IPO, we received approximately $263.7 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures and, to a lesser extent, general and administrative expenditures. We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase.

Strategic Agreements

Gilead Asset Purchase Agreement

In July 2020, we entered into the Gilead Asset Purchase Agreement, pursuant to which we acquired certain assets from Gilead related to ENTO and LANRA, and patents and other intellectual property covering or related to the development, manufacture and commercialization of ENTO and LANRA.

In consideration for such assets, on the date of the Gilead Asset Purchase Agreement, we made a $3.0 million upfront cash payment and issued a $3.0 million principal amount convertible promissory note to Gilead (Gilead Note). We also made a $0.7 million payment to reimburse Gilead for certain liabilities we assumed pursuant to the Gilead Asset Purchase Agreement. In addition, we are required to make milestone payments upon successful achievement of certain regulatory and sales milestones for ENTO, LANRA and other SYK inhibitor compounds covered by the patent rights acquired pursuant to the Gilead Asset Purchase Agreement and developed by us as a back-up to ENTO or LANRA (Other Compounds). Upon initiation of our planned registrational Phase 3 clinical trial of ENTO in combination with IC in AML patients with NPM1 mutations, we will be required to pay a milestone to Gilead of $29.0 million, and upon successful completion of certain other regulatory milestones in the United States, European Union and United Kingdom for ENTO, LANRA and any Other Compounds, across up to two distinct indications, we will be required to pay to Gilead an aggregate total of $51.3 million. Upon achieving certain thresholds for the aggregate annual net sales of ENTO, LANRA and any Other Compounds combined, we would owe to Gilead potential milestone payments totaling $115.0 million.

Gilead is also eligible to receive (i) tiered marginal royalties ranging from the very low-teens to high-teens on annual worldwide net sales of ENTO, (ii) tiered marginal royalties ranging from high-single digits to the mid-teens on annual worldwide net sales of LANRA and (iii) tiered marginal royalties ranging from the low single digits to mid-single digits on annual worldwide net sales of any Other Compounds. The royalties in the foregoing clauses are subject to reduction, on a country-by-country basis, for products not covered by certain claims within the assigned patents, for generic entry and, in the case of ENTO and LANRA, for any royalties paid for future licenses of third party intellectual property required to develop or commercialize ENTO or LANRA. Our royalty obligation with respect to a given product in a given country begins upon the first commercial sale of such product in such country and ends on the latest of (i) expiration of the last claim of a defined set of the assigned patent rights covering such product in such country; (ii) loss of exclusive data or marketing rights to such product in such country; or (iii) 10 years from the first commercial sale of such product in such country.

Under the Gilead Asset Purchase Agreement, we are required to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize either ENTO or LANRA.

Harvard License Agreement

In January 2018, we entered into a license agreement with President and Fellows of Harvard College (Harvard), pursuant to which Harvard granted us a non-exclusive, worldwide, royalty-free license to certain intellectual property for the purpose of commercializing products relating to our SMM platform. We paid a one-time license fee in the amount of $10,000 on the date of the agreement and an annual license maintenance fee of $20,000 on each of the first two anniversaries. We are required to pay $25,000 on each subsequent anniversary until the last to expire of any valid claim included in the licensed patents.

Components of Our Results of Operations

Operating Expenses

Our operating expenses consisted of research and development expenses and general and administrative expenses.

Research and Development Expenses

Our research and development expenses consist primarily of direct and indirect costs incurred in connection with our therapeutic discovery efforts and the preclinical and clinical development of our product candidates, as well as the development of our product engine.

Direct costs include:

•expenses incurred under agreements with contract research organizations (CROs) and other vendors that conduct our clinical trials and preclinical activities;

•costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

•costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies; and

•payments made under third-party strategic agreements.

Indirect costs include:

•personnel costs, which include salaries, benefits, and other employee related costs, including stock-based compensation, for personnel engaged in research and development functions;

•costs related to compliance with regulatory requirements; and

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

We expense research and development costs as the services are performed or the goods are received. We recognize costs for certain development activities based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our internal management. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

Because we are working on multiple research and development programs at any one time, we intend to track our direct costs by the stage of program, clinical or preclinical. However, our internal costs, employees and infrastructure are not directly tied to any one program and are deployed across multiple programs. As such, we do not track indirect costs on a specific program basis.

Our research and development expenses may vary significantly based on a variety of factors, such as:

•the scope, rate of progress, expense and results of our preclinical development activities;

•per patient trial costs;

•the number of trials required for approval; the number of sites included in the trials;

•the number of patients that participate in the trials;

•the countries in which the trials are conducted;

•uncertainties in clinical trial design and patient enrollment or drop out or discontinuation rates, particularly in light of the current COVID-19 pandemic environment;

•potential additional safety monitoring requested by regulatory agencies;

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

•the safety and efficacy of our product candidates;

•the timing, receipt, and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S. regulators;

•significant and changing government regulation and regulatory guidance;

•potential additional trials requested by regulatory agencies;

•establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully;

•the extent to which we establish additional strategic collaborations or other arrangements;

•the impact of any business interruptions to our operations or to those of the third parties with whom we work, particularly in light of the current COVID-19 pandemic environment;

•the expense of filing, prosecuting, defending, and enforcing any patent claims and other intellectual property rights; and

•maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we continue to identify and develop additional product candidates and as more of our product candidates move into later stages of clinical development, which typically have higher development costs than those in earlier stages of clinical development due to the increased size and duration of later-stage clinical trials.

The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors. We may never succeed in achieving regulatory approval for any of our product candidates. Further, a number of factors, including those outside of our control, could adversely impact the timing and duration of our product candidates’ development, which could increase our research and development expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, which include salaries, benefits and other employee related costs, such as stock-based compensation, for personnel in our executive, finance, corporate and business development, and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; recruiting costs; travel expenses; and facilities-related costs.

We expect that our general and administrative expenses will continue to increase substantially for the foreseeable future as we continue to increase our general and administrative personnel headcount to support personnel in research and development, and to support our operations generally as we increase our research and development activities and activities related to the potential commercialization of our product candidates. We also expect to incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Interest and Other Income, Net

Interest and other income, net primarily consists of interest earned on our cash, cash equivalents and investments.

Results of Operations

Comparison of Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020		Change
	(in thousands)
Operating expenses:
Research and development	$	17,594	$	6,195	$	11,399
General and administrative	8,584		1,154		7,430
Total operating expenses	26,178		7,349		18,829
Loss from operations	(26,178)		(7,349)		(18,829)
Other income (expense), net:
Interest expense	—		(1)		1
Interest and other income, net	92		355		(263)
Total other income (expense), net	92		354		(262)
Net loss	$	(26,086)	$	(6,995)	$	(19,091)

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2021 and 2020:


	Three Months Ended March 31,
	2021		2020		Change
	(in thousands)
Direct Costs	$	9,763	$	3,143	$	6,620
Indirect Costs:
Personnel	6,071		1,836		4,235
Facilities, depreciation and other expenses	1,760		1,216		544
Total research and development expenses	$	17,594	$	6,195	$	11,399

Research and development expenses were $17.6 million for the three months ended March 31, 2021, compared to $6.2 million for the three months ended March 31, 2020. The increase of $11.4 million was primarily due to an increase of $6.4 million in outside and consulting research expenses and an increase of $4.2 million in personnel costs primarily attributable to increased research and development personnel headcount, including an increase in stock-based compensation of $2.4 million. Also contributing to this increase in research and development expenses is an increase of $0.5 million in facilities, depreciation and other expenses primarily attributable to the commencement of the lease for our new Cambridge facility in March 2020, and an increase of $0.3 million in lab supplies related to increased development activity in connection with our preclinical product candidates.

General and Administrative Expenses

General and administrative expenses were $8.6 million for the three months ended March 31, 2021 compared to $1.2 million for the three months ended March 31, 2020. The increase of $7.4 million was primarily due to $2.6 million in professional fees primarily attributable to legal and outside consultant costs and an increase in stock-based compensation of $2.6 million attributable to both the increases in personnel costs and outside consulting services. Also contributing to this increase in general and administrative expenses is an increase of $1.3 million in personnel costs, primarily attributable to increased general and administrative personnel headcount to support the growth of our research and development organization and an increase of $0.8 million in other expenses primarily attributable to increases in taxes and filing fees, facility costs, and information technology related services.

Interest and Other Income, Net

Interest and other income, net primarily consists of interest earned on our cash, cash equivalents, and investments.

Liquidity, Capital Resources and Plan of Operations

Sources of Liquidity

To date, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever. Prior to our IPO, our operations were financed primarily by net proceeds from the sale and issuance of our convertible preferred stock and the 2020 Notes, totaling aggregate gross proceeds of $278.2 million. As of March 31, 2021, we had cash, cash equivalents and investments of $440.6 million.

Upon completion of our IPO on October 14, 2020, we sold an aggregate of 15,131,579 shares of our common stock including 1,973,684 shares of common stock sold pursuant to the full exercise of the underwriters’ option to purchase additional shares at a price of $19.00 per share and received approximately $263.7 million in net proceeds after deducting underwriting discounts and commissions and offering expenses.

Future Funding Requirements

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures related to ENTO, LANRA and KB-0742, and our other research efforts, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Our product candidates are still in the early stages of clinical and preclinical development, and the outcomes of these efforts are uncertain. Accordingly, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration agreements. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise capital when needed, we will need to delay, reduce or terminate planned activities to reduce costs. Doing so will likely harm our ability to execute our business plans.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:


	Three Months Ended March 31,
	2021		2020
	(unaudited)
	(in thousands)
Cash used in operating activities	$	(18,998)	$	(7,066)
Cash used in (provided by) investing activities	(88,149)		5,310
Cash provided by financing activities	585		12
Net decrease in cash and cash equivalents	$	(106,562)	$	(1,744)

Operating Activities

During the three months ended March 31, 2021, cash used in operating activities was $19.0 million, which was primarily attributable to our net loss of $26.1 million, primarily offset by non-cash charges of $7.1 million. The non-cash charges primarily consisted of $5.2 million in stock-based compensation, net amortization and accretion of investment securities of $0.9 million, noncash lease expense of $0.5 million, and depreciation and amortization of $0.4 million.

During the three months ended March 31, 2020, cash used in operating activities was $7.0 million, which was primarily attributable to our net loss of $7.0 million, as well as changes in our operating assets and liabilities of $0.4 million, and partially offset by non-cash charges of $0.4 million. Changes in our operating assets and liabilities of $0.4 million during the three months ended March 31, 2020 primarily consisted of a decrease of $0.5 in accounts payable and accrued expenses and a $0.2 million increase in prepaid expenses and other current assets, partially offset by an increase in net operating lease liabilities of $0.3 million.

During the three months ended March 31, 2021, cash used in investing activities was $88.1 million, consisting of $126.0 million of net investment purchases and $1.5 million for the purchase of property and equipment, partially offset by $39.4 million in investment maturities.

During the three months ended March 31, 2020, cash provided by investing activities was $5.3 million, consisting of $8.2 million in investment maturities, partially offset by $2.3 million of net investment purchases and $0.6 million for the purchase of property and equipment.

Financing Activities

During the three months ended March 31, 2021, net cash provided by financing activities was $0.6 million, consisting primarily of proceeds from the exercise of stock options of $0.6 million. Net cash provided by financing activities during the three months ended March 31, 2020 was also primarily attributable to the proceeds from the exercise of stock options.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2020:


	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
Operating lease obligations(1)	$	50,401	$	4,764	$	9,722	$	9,885	$	26,030
Finance lease obligations	6		6		—		—		—
Total	$	50,407	$	4,770	$	9,722	$	9,885	$	26,030

____________

(1)Represents payments due for our lease of office space in San Mateo, California and Cambridge, Massachusetts, as of December 31, 2020.

In February 2021, we entered into a new lease agreement for our office space in San Mateo, California to move from our current suites, totaling 8,075 square-feet, to a larger suite totaling 17,340 square-feet, with a target move date of July 1, 2021. We accounted for this change in lease term of the original suites as a modification of the originally amended lease. Refer to Note 12 for further discussion on the accounting implications of the lease substitution.

The initial annual base rent for the new space will be $1.2 million, and such amount will increase by 3% annually on each anniversary of the new premises commencement date. In connection with the larger space leased, we have also made an additional one-time cash security deposit in the amount of $59,000. The new lease commenced in April 2021 while tenant improvements are being made and the new lease agreement extends the termination date from April 30, 2025 to April 30, 2026.

Pursuant to the Gilead Asset Purchase Agreement we entered into in July 2020, we are obligated to make milestone payments upon the achievement of specified regulatory and clinical milestones as well as royalty payments. We have not included future payments under this agreement in the table above since the payment obligations under this agreement are contingent upon future events, such as our achievement of specified milestones or generating product sales. We are currently unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. See the subsection titled “—Strategic Agreements—Gilead Asset Purchase Agreement” above.

We enter into contracts in the ordinary course of business with CROs for clinical trials, preclinical and clinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and are generally terminable by us upon prior notice and, as a result, are not included in the table of contractual obligations above. Payments due upon termination generally consist only of payments for services provided and expenses incurred up to the date of termination.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our unaudited condensed financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our 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.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods. Actual results could differ from our estimates.

We believe that there have been no significant changes in our critical accounting policies and estimates from those described under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Prospectus.

JOBS Act Accounting Election

We are an “emerging growth company” as defined in the JOBS Act, and we may remain an emerging growth company for up to five years following our IPO.

Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and therefore we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.

Off-Balance Sheet Arrangements

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

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is provided in Note 2 to our condensed financial statements included elsewhere in Item 1 of Part I of this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to market risk related to changes in interest rates of our investment portfolio of cash equivalents, short-term investments, and long-term investments. As of March 31, 2021, our cash equivalents and short-term investments consisted of money market funds, certificates of deposit, corporate bonds, U.S. Treasury securities, and U.S. Agency securities.. As of December 31, 2020, our cash equivalents and short-term investments consisted of money market funds, certificates of deposit, corporate bonds, U.S. Treasury securities, and U.S. Agency securities that have contractual maturities of less than one year. As of March 31, 2021, our long-term investments consisted of investments in U.S. Treasury securities and corporate bonds that have contractual maturities of greater than on year. As of December 31, 2020, our long-term investments consisted of investments in U.S. Treasury securities, U.S. agency securities, and corporate bonds that have contractual maturities of greater than one year. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. The fair value of our marketable securities is subject to change as a result of potential changes in market interest rates, including changes resulting from the impact of the COVID-19 pandemic. The potential change in fair value for interest rate sensitive instruments has been assessed on a hypothetical 100 basis point adverse movement across all maturities. If a 100 basis point increase or decrease in interest rates were to have occurred on March 31, 2021, this change would not have had a material impact on our condensed financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Foreign Currency Exchange Risk

All of our employees and our operations are currently located in the United States and our expenses are generally denominated in U.S. dollars. However, we have entered into a limited number of contracts with vendors for research and development services that permit us to satisfy our payment obligations in U.S. dollars (at prevailing exchange rates) but have underlying payment obligations denominated in foreign currencies, primarily including the Euro. We are subject to foreign currency transaction gains or losses on our contracts denominated in foreign currencies. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not had a formal hedging program with respect to foreign currency. We believe a hypothetical 100 basis point increase or decrease in exchange rates at March 31, 2021 would not have had a material effect on our condensed financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We believe that inflation has not had a material effect on our condensed financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in litigation or other legal proceedings. While the outcome of any such proceedings cannot be predicted with certainty, as of March 31, 2021, we were not a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material effect on our business.

ITEM 1A. RISK FACTORS

RISK FACTOR SUMMARY

Below is a summary of material factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our common stock.

•We have incurred significant net losses since inception, we expect to incur additional losses over the next several years, and we will need substantial additional funding, before we achieve profitability, if at all.

•We have a limited operating history and face significant challenges and will incur substantial expenses as we build our capabilities.

•Our discovery and development activities are focused on novel cancer therapeutics for patients with genetically-defined cancers and it is difficult to predict the time and cost of developing our product candidates and obtaining regulatory approval.

•Drug development involves a lengthy and expensive process with uncertain outcomes, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results.

•We may be required by the FDA or corresponding foreign regulatory authorities to conduct additional clinical trials or other studies beyond those planned to support the potential approval and commercialization of our product candidates or of any future product candidates.

•We may attempt to secure approval from FDA or comparable regulatory authorities through the use of accelerated approval pathways, which is uncertain, and which, if granted, could require us to conduct additional, potentially lengthy and expensive, clinical trials, which, if not successful, could potentially result in our loss of marketing approval.

•The COVID-19 pandemic could adversely impact our business, including our ongoing and planned clinical trials.

•Our approach to the discovery and development of product candidates is unproven, and we may not be successful in our efforts to use and further improve upon our product engine to expand our pipeline of product candidates with commercial value.

•If the market opportunities for our product candidates are smaller than we estimate or if any regulatory approval we obtain is based on a narrower definition of the patient population than what we had sought to treat, or if patient access to the approved therapy is limited, our revenue potential and ability to achieve profitability will be adversely affected.

•Our success depends in part on our ability to protect our intellectual property and our proprietary products and technologies and obtain, maintain and enforce our intellectual property, as well as our ability to operate without infringing the patents and other proprietary rights of third parties.

•We rely, and expect to rely in the future, on third parties, including independent clinical investigators and contract research organizations to conduct certain aspects of our preclinical studies and ongoing and planned clinical trials.

•Our success is highly dependent on our ability to attract and retain highly-skilled executive officers and employees.

RISK FACTORS

We have identified the following material factors that make an investment in our common stock speculative or risky. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making investment decisions regarding our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. The risks described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. We have marked with an asterisk (*) those risk factors that reflect changes from the similarly titled risk factors included in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the Commission on March 23, 2021.

Risks Related to Our Financial Condition and Capital Requirements

We have incurred significant net losses since inception, and we expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in the future.*

Investment in biopharmaceutical product development is a highly speculative undertaking and entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and