Odonate Therapeutics, Inc. - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30, 2021

OR

For the transition period from                         to                        

Commission File Number: 001-38318

Odonate Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

3 East 28th Street, 10th Floor

New York, New York 10016

(332) 206-0935

(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 Exchange Act:

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 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

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

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

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

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

As of July 22, 2021, there were 38,499,534 shares of common stock outstanding.

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ODONATE THERAPEUTICS, INC.

Condensed Balance Sheets

(in thousands, except par value and share amounts)

See accompanying notes.

3

ODONATE THERAPEUTICS, INC.

Condensed Statements of Operations

(Unaudited)

(in thousands, except share and per share amounts)

See accompanying notes.

4

ODONATE THERAPEUTICS, INC.

Condensed Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

See accompanying notes.

5

ODONATE THERAPEUTICS, INC.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

See accompanying notes.

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ODONATE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

1. Business

Odonate Therapeutics, Inc. (“Odonate” or the “Company”) is a pharmaceutical company formerly focused on the development of tesetaxel, an investigational, orally administered chemotherapy agent that belongs to a class of drugs known as taxanes, which are widely used in the treatment of cancer. In March 2021, the Company announced the discontinuation of development of tesetaxel and its intent to wind down tesetaxel-related operations. As of June 30, 2021, the Company has transitioned all patients in tesetaxel studies to appropriate alternative therapies or facilitated continuation of treatment with tesetaxel under compassionate use programs where appropriate.

As of June 30, 2021, the Company had $110.1 million in cash. The Company has incurred operating losses and negative cash flows from operations since inception. Management believes that the Company’s existing cash will be sufficient to meet the Company’s anticipated cash requirements through at least one year from the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (the “SEC”).

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The Company’s condensed financial statements contained in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Interim financial results are not necessarily indicative of results anticipated for the full year. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The preparation of the Company’s condensed financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s condensed financial statements and accompanying notes. The most significant estimates and assumptions in the Company’s condensed financial statements relate to accrued expenses and equity-based compensation expense. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Summary of Significant Accounting Policies

During the six months ended June 30, 2021, other than the policy described below, there were no changes to the Company’s significant accounting policies as described in Note 2 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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ODONATE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Restructuring Expense

For one-time employee termination benefits for which no future service is required, the Company recognizes and measures a liability once the plan of termination meets all of the following criteria for an established communication date: (i) management commits to a plan of termination; (ii) the plan identifies the number of employees to be terminated and their job classifications or functions, locations and the expected completion date; (iii) the plan establishes the terms of the benefit arrangement; and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. For one-time employee termination benefits for which future service is required, a liability is recognized and measured at the communication date based on its fair value as of the termination date and recognized ratably over the future service period. The Company recognizes and measures a liability for other related costs in the period in which the liability is incurred.

Recent Accounting Pronouncements

The Company has considered all recently issued accounting pronouncements and has concluded that there are no recently issued accounting pronouncements that may have a material impact on its results of operations, financial condition or cash flows based on current information.

3. Net Loss per Share

Basic net loss per share is calculated by dividing net loss by the weighted-average common shares outstanding during the period, without consideration of common stock equivalents. The basic net loss per share calculation excludes 576,940 and 1,400,231 outstanding shares of common stock held by Odonate Holdings, LLC (“Odonate Holdings”) as of June 30, 2021 and 2020, respectively, to be used to settle incentive units previously issued under the Odonate Management Holdings Equity Incentive Plan (the “Management Plan”). These shares of common stock are subject to transfer to the Company and cancellation until such incentive units are vested and exercised and, as such, are considered common stock equivalents. Therefore, the shares of common stock held by Odonate Holdings are excluded from the basic net loss per share calculation until the incentive units are exercised.

Diluted net loss per share is calculated by adjusting the weighted-average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the period. Common stock equivalents, which consist of shares of common stock underlying incentive units and vested stock options, were excluded from the calculation of diluted net loss per share because they were anti-dilutive.

4. Balance Sheet Details

Property and equipment consisted of the following (in thousands):

Depreciation and amortization expense was $0.1 million and $0.2 million for the three and six months ended June 30, 2021, respectively, and for the same periods in 2020.

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ODONATE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Accrued expenses consisted of the following (in thousands):

5. Commitments and Contingencies

Lease Commitments

In February 2018, the Company entered into an agreement to lease office space in New York, New York (the “New York Lease”) with aggregate payments of approximately $2.8 million over the 7-year term of the lease. The New York Lease commenced in October 2018. The Company has an option to extend the New York Lease for an additional three years at the end of the initial term. The Company can assign or sublease the premises with prior written consent from the landlord. If the Company proposes to assign or sublease all or substantially all of the premises for all or substantially all of the remaining term, the landlord has an option to terminate the lease. Further, the Company provided a standby letter of credit of $0.3 million in lieu of a security deposit during the term of the lease, subject to a reduction in December 2021. As of June 30, 2021, $0.3 million was pledged as collateral for the letter of credit and recorded as restricted cash. The New York lease is classified as an operating lease.

In March 2018, the Company entered into an agreement, which was amended in August 2019, to lease office space in San Diego, California (the “Old San Diego Lease”) with aggregate payments of approximately $1.0 million over the 2.3-year term of the lease. The Old San Diego Lease commenced in March 2018. The Old San Diego Lease is classified as an operating lease.

In October 2019, the Company entered into an agreement to lease office space in San Diego, California (the “New San Diego Lease”) with aggregate payments of approximately $4.1 million over the 7.5-year term of the lease. The New San Diego Lease commenced in July 2020. The Company has an option to extend the New San Diego Lease for an additional 5 years at the end of the initial term. The Company can assign or sublease the premises with prior written consent from the landlord. If the Company proposes to assign or sublease greater than 70% of the premises, the landlord has an option to terminate the lease. Further, the Company provided a standby letter of credit of $0.5 million in lieu of a security deposit during the term of the lease, subject to certain reductions beginning in July 2024. As of June 30, 2021, $0.5 million was pledged as collateral for the letter of credit and recorded as restricted cash. The New San Diego Lease is classified as an operating lease.

The Company recorded lease liabilities and right-of-use lease assets for the operating leases based on the present value of lease payments over the expected lease term, discounted using the Company’s incremental borrowing rate. The options to extend the operating leases were not recognized as part of the Company’s lease liabilities and right-of-use lease assets. As of June 30, 2021, the weighted-average remaining lease term and the weighted-average discount rate for the operating leases was 5.9 years and 4.0%, respectively. Rent expense under leases was $0.2 million and $0.3 million for the three and six months ended June 30, 2021, respectively, and $0.2 million and $0.4 million, respectively, for the same periods in 2020. Cash paid for amounts included in the measurement of lease liabilities was $0.2 million and $0.4 million for the three and six months ended June 30, 2021, respectively, and $0.1 million and $0.2 million, respectively, for the same periods in 2020.

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ODONATE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Future minimum lease payments under operating leases as of June 30, 2021 are as follows (in thousands):

Other Commitments

The Company enters into contracts in the normal course of business with contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.

Contingencies

From time to time, the Company may become subject to claims and litigation arising in the ordinary course of business. Other than as described below, the Company is not a party to any material legal proceedings, nor is it aware of any material pending or threatened litigation.

On September 16, 2020, a putative class action lawsuit was filed on behalf of stockholders of the Company against the Company, the Company’s Chief Executive Officer and the Company’s current and former Chief Financial Officers. The complaint was last amended on April 13, 2021. The complaint was filed in the United States District Court for the Southern District of California and alleges that the Company made material misrepresentations and omissions regarding the safety and tolerability of tesetaxel in the Company’s public statements in violation of federal securities laws. The lawsuit seeks damages allegedly sustained by the class and an award of plaintiffs’ costs and attorney fees. The Company believes that the complaint is without merit and that it has substantive defenses to the claims of liability and damages. The Company filed a motion to dismiss the complaint on May 13, 2021, and on June 26, 2021, plaintiffs filed their opposition to the motion to dismiss. Due to the early stage of this matter, the Company is unable to estimate the possible loss or range of loss, if any, that may result from this matter.

6. Stockholders’ Equity

On September 1, 2020, the Company closed an underwritten public offering of 5,614,036 shares of common stock at a public offering price of $14.25 per share (collectively with the underwriters’ option, the “September 2020 Offering”). The underwriters exercised in full their option to purchase 842,105 additional shares of common stock. The aggregate gross proceeds from the September 2020 Offering were $92.0 million, and the net proceeds were $87.4 million after deducting underwriting discounts and commissions and offering costs.

On February 23, 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”), pursuant to which the Company may offer and sell shares of the Company’s common stock having an aggregate offering price of up to $100 million, from time to time, in “at the market” offerings. As of June 30, 2021, the Company has not sold any shares of common stock under the Sale Agreement.

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ODONATE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

7. Equity Incentive Plans

2017 Stock Option Plan

A total of 6,300,000 shares of common stock have been reserved for issuance under the Odonate Therapeutics, Inc. 2017 Stock Option Plan (the “2017 Plan”). As of June 30, 2021, 3,371,290 shares of common stock remained available for future grants under the 2017 Plan.

2017 Employee Stock Purchase Plan

In March 2021, with the announcement of the discontinuation of development of tesetaxel, the Compensation Committee of the Board of Directors of the Company approved suspending the Odonate Therapeutics, Inc. 2018 Employee Stock Purchase Plan (the “ESPP”). A total of 500,000 shares of common stock have been reserved for issuance under the ESPP. As of June 30, 2021, 403,856 shares of common stock remained available for future grants under the ESPP.

Management Plan

The Company no longer grants incentive units under the Management Plan. As of June 30, 2021, 576,940 outstanding shares of common stock were held by Odonate Holdings to be used to settle incentive units previously issued under the Management Plan.

Equity Awards

The activity related to equity awards, which are comprised of stock options and incentive units, during the six months ended June 30, 2021 is summarized as follows:

⁽¹⁾     Represents the weighted-average remaining contractual term of stock options. The incentive units do not expire.

⁽²⁾     Aggregate intrinsic value represents the product of the number of equity awards outstanding or equity awards exercisable multiplied by the difference between the Company’s closing stock price per share on the last trading day of the period, which was $3.49 as of June 30, 2021, and the exercise price.

The total intrinsic value of equity awards exercised during the six months ended June 30, 2021 and 2020 was $2.5 million and $1.6 million, respectively. The total fair value of equity awards vested during the six months ended June 30, 2021 and 2020 was $2.7 million and $6.9 million, respectively.

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ODONATE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Equity-based Compensation Expense

For the six months ended June 30, 2021 and 2020, the weighted-average grant-date fair value per share was $11.26 and $25.71, respectively. The Company estimated the fair value of each stock option on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Under the ESPP, eligible employees may purchase shares of the Company’s common stock twice per month at a price equal to 85% of the closing price of shares of the Company’s common stock on the date of each purchase. The benefit received by the employees, which is equal to a 15% discount on the shares of the Company’s common stock purchased, is recognized as equity-based compensation expense on the date of each purchase.

The classification of equity-based compensation expense is summarized as follows (in thousands):

As of June 30, 2021, total unrecognized compensation cost related to unvested equity awards was $25.2 million. Unrecognized compensation cost related to unvested equity awards that include a performance condition related to the Company's development program was $22.0 million. Unrecognized compensation cost related to unvested equity awards that do not include a performance condition related to the Company's development program was $3.2 million, which is estimated to be recognized over a weighted-average period of 0.7 years. As of June 30, 2021, there was no unrecognized compensation cost related to shares of common stock issued under the ESPP.

8. Income Taxes

For the three and six months ended June 30, 2021 and 2020, the Company did not recognize a provision for income taxes due to having recorded a full valuation allowance against its deferred tax assets. As of June 30, 2021 and December 31, 2020, the Company established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. As of June 30, 2021 and December 31, 2020, the Company had no unrecognized tax benefits. The Company does not anticipate there will be a significant change in unrecognized tax benefits within the next 12 months.

9. License Agreement

In 2013, the Company licensed rights to tesetaxel in all major markets from Daiichi Sankyo Company, Limited (“Daiichi Sankyo”), the original inventor of the product. Under the Daiichi Sankyo license agreement, the Company is obligated to use commercially reasonable efforts to develop and commercialize tesetaxel in the following countries: France, Germany, Italy, Spain, the United Kingdom and the U.S. The Company is required to make aggregate future milestone payments of up to

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ODONATE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

$31.0 million, contingent on attainment of certain regulatory milestones. Additionally, the Company is obligated to pay Daiichi Sankyo a tiered royalty that ranges from the low to high single digits, depending on annual net sales of tesetaxel. To date, no payments have been made to Daiichi Sankyo under the license agreement. The license agreement and accompanying royalty obligation terminate on a country-by-country basis on the last-to-expire patent in each such country, which the Company expects will be between 2026 and 2031 in the U.S., 2025 and 2030 in European countries and 2025 and 2030 in Japan, depending on the availability and application of patent term extensions.

10. Restructuring

In March 2021, the Company announced the discontinuation of development of tesetaxel and its intent to wind down tesetaxel-related operations. Additionally, the Company committed to a plan of termination involving the termination of certain employees previously supporting the development of tesetaxel (the “Restructuring”). The Company estimates it will incur aggregate expense related to the Restructuring of $12.0 million. The Company recorded restructuring expense of $6.2 million and $11.7 million for the three and six months ended June 30, 2021, respectively, consisting of one-time employee termination benefits to the affected employees, including severance and healthcare benefits.

The classification of restructuring expense is summarized as follows (in thousands):

The activity related to accrued restructuring expense during the six months ended June 30, 2021 is summarized as follows (in thousands):

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and our audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Forward-looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws, and such statements may involve substantial risks and uncertainties. All statements, other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, but not limited to, statements concerning: expectations regarding our future expenses, potential liabilities relating to litigation and financing needs; and other information referred to under this section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan,” “anticipate,” “target,” “forecast” or the negative of these terms and similar expressions intended to identify forward-looking statements. Forward-looking statements are not historical facts and reflect our current views with respect to future events. Forward-looking statements are also based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other factors are described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 and under “Risk Factors” in Item 1A of this Quarterly Report on Form 10-Q. We caution you that these risks, uncertainties and other factors may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. All forward-looking statements in this Quarterly Report on Form 10-Q apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

Company Overview

We are a pharmaceutical company formerly focused on the development of tesetaxel, an investigational, orally administered chemotherapy agent that belongs to a class of drugs known as taxanes, which are widely used in the treatment of cancer. In March 2021, we announced the discontinuation of development of tesetaxel and our intent to wind down tesetaxel-related operations. As of June 30, 2021, we have transitioned all patients in tesetaxel studies to appropriate alternative therapies or facilitated continuation of treatment with tesetaxel under compassionate use programs where appropriate.

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Results of Operations

The following table summarizes our results of operations for each of the periods below (in thousands):

Research and Development Expense

All of our research and development expense incurred through March 22, 2021 had been incurred in connection with the development of tesetaxel and since then includes the wind-down of tesetaxel-related operations. Research and development expense includes non-personnel-related and personnel-related expense. Non-personnel-related expense primarily consists of expense incurred prior to the discontinuation of development of tesetaxel and includes expense related to: (i) clinical study site payments; (ii) manufacturing development, including manufacturing registration and validation batches of tesetaxel; (iii) acquiring clinical study materials and the clinical study supply chain; (iv) clinical and quality systems; and (v) pharmacokinetic studies. Personnel-related expense includes expense related to restructuring expense, salaries, bonuses and benefits and equity-based compensation for personnel engaged in research and development functions. We expect our research and development expense to decrease significantly due to the discontinuation of development of tesetaxel and wind-down of tesetaxel-related operations.

The following table summarizes our research and development expense for each of the periods below (in thousands):

Research and development expense was $18.6 million and $49.6 million for the three and six months ended June 30, 2021 respectively, compared to $30.8 million and $58.7 million, respectively, for the same periods in 2020. The decrease in research and development expense was due primarily to a decrease in activities and headcount in connection with our tesetaxel clinical development program, partially offset by restructuring expense recorded in 2021 related to one-time employee termination benefits in connection with the discontinuation of development of tesetaxel.

General and Administrative Expense

General and administrative expense includes non-personnel and personnel-related expense. Non‑personnel-related expense includes expense related to: (i) professional fees for legal, patent, consulting, accounting and audit services; (ii) insurance; and (iii) facilities and information technology. Personnel‑related expense includes expense related to salaries, bonuses and benefits, restructuring expense and equity-based compensation for personnel engaged in finance and administrative functions. We expect our general and administrative expense to decrease significantly due to the discontinuation of development of tesetaxel and wind‑down of tesetaxel-related operations.

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The following table summarizes our general and administrative expense for each of the periods below (in thousands):

General and administrative expense was $3.4 million and $6.3 million for the three and six months ended June 30, 2021, respectively, compared to $2.8 million and $5.6 million, respectively, for the same periods in 2020. The increase in general and administrative expense was due primarily to the restructuring expense recorded in 2021 related to one-time employee termination benefits in connection with the discontinuation of development of tesetaxel.

Other Income, Net

Other income, net consists primarily of interest income generated from cash held in savings accounts. Other income, net also includes losses on disposal of property and equipment and gains and losses on foreign currency transactions.

Other income, net was $39,000 and $0.1 million for the three and six months ended June 30, 2021 and 2020, respectively, compared to $0.1 million and $0.8 million, respectively, for the same periods in 2020. The decrease in other income, net was due primarily to decreased interest income.

Liquidity and Capital Resources

As of June 30, 2021 and December 31, 2020, we had cash in the amount of $110.1 million and $157.3 million, respectively. We believe that our existing cash will be sufficient to meet our anticipated cash requirements through at least one year from the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (the “SEC”).

Net cash used in operating activities was $47.9 million and $56.5 million for the six months ended June 30, 2021 and 2020, respectively. Net cash used in operating activities was primarily the result of our net loss and change in working capital, partially offset by equity-based compensation expense, depreciation and amortization expense and non-cash lease expense.

In February 2021, we entered into an Open Market Sale Agreement; see Note 6 to our condensed financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

We expect to finance our future cash needs with cash on hand. If necessary or appropriate, we may raise additional capital through equity offerings, debt financings, collaborations, strategic partnerships or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants

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limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property on terms that may not be favorable to us.

Contractual Obligations and Commitments

See Note 5 to the condensed financial statements included in Item 1 of this Quarterly Report on Form 10-Q, under the subheading “Lease Commitments,” for information regarding our material lease agreements and Note 9 for information regarding our license agreement with Daiichi Sankyo Company, Limited for rights to tesetaxel.

Off–Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any off–balance sheet arrangements as defined under the rules of the SEC.

Jumpstart Our Business Startups Act

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under this act, an emerging growth company can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. However, we intend to rely on other exemptions provided by the JOBS Act, including without limitation, an exemption from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended. We will remain an emerging growth company until December 31, 2023 unless, prior to that time, we: (i) have more than $1.07 billion in annual gross revenue; (ii) have a market value for shares of our common stock held by non-affiliates of more than $700 million as of the last day of our second quarter of any year; or (iii) issue more than $1.0 billion of non-convertible debt over a three-year period.

Critical Accounting Policies and Significant Judgments and Estimates

We believe the estimates, assumptions and judgments involved in the accounting policies described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 are most critical to understanding and evaluating our reported financial results. During the six months ended June 30, 2021, there were no changes to our critical accounting policies and estimates as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Recent Accounting Pronouncements

See Note 2 to our condensed financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company, as defined by Rule 12b-2 under the Securities and Exchange Act of 1934 and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

Item 4. Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation of our disclosure controls and procedures as of June 30, 2021, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 5 to the condensed financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Our business is subject to various risks, including those described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 and Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2021. There have been no material changes from the risk factors disclosed in such reports.

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

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

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SIGNATURES

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

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