Rain Oncology Inc. - Quarter Report: 2023 September (Form 10-Q)

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 September 30, 2023


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

For the transition period fromto

Commission File Number: 001-40356

Rain Oncology Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		82-1130967
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
8000 Jarvis Avenue, Suite 204 Newark, CA		94560
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (510) 953-5559

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

RAIN

The Nasdaq Global Select Market

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

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

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


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

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

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of November 3, 2023, the registrant had 36,375,671 shares of common stock, $0.001 par value per share, outstanding, comprised of 27,579,947 shares of common stock, $0.001 par value per share and 8,795,724 shares of non-voting common stock, $0.001 par value per share.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for the three and nine months ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and nine months ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signatures	36

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Rain Oncology Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(unaudited)


	September 30,		December 31,
	2023		2022 (1)
Assets
Current assets:
Cash and cash equivalents	$	37,312	$	61,955
Short-term investments		40,008		68,499
Prepaid and other current assets		3,496		3,174
Total current assets		80,816		133,628
Property and equipment, net		628		93
Operating lease right-of-use asset		436		258
Other assets		180		1,201
Total assets	$	82,060	$	135,180
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	8,973	$	7,146
Accrued research and development		2,858		8,232
Other accrued liabilities		2,190		6,424
Operating lease liability, current portion		456		164
Total current liabilities		14,477		21,966
Operating lease liability, net of current portion		—		113
Other long-term liabilities		64		65
Total liabilities		14,541		22,144
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding		—		—
Common stock, $0.001 par value; 250,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 36,375,671 shares (comprised of 27,579,947 shares of common stock and 8,795,724 shares of non-voting common stock) and 36,290,292 shares (comprised of 25,947,572 shares of common stock and 10,342,720 shares of non-voting common stock) issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		37		37
Additional paid-in capital		282,816		278,853
Accumulated other comprehensive loss		(64)		(166)
Accumulated deficit		(215,270)		(165,688)
Total stockholders’ equity		67,519		113,036
Total liabilities and stockholders’ equity	$	82,060	$	135,180

(1)	The balance sheet at December 31, 2022 has been derived from the audited financial statements included in Rain Oncology Inc.’s Annual Report on Form 10-K filed on March 9, 2023.

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Rain Oncology Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	3,965	$	14,510	$	35,622	$	42,322
General and administrative		4,113		3,901		14,593		11,257
Restructuring charges		—		—		2,837		—
Total operating expenses		8,078		18,411		53,052		53,579
Loss from operations		(8,078)		(18,411)		(53,052)		(53,579)
Other income:
Interest income		1,044		370		3,470		533
Total other income		1,044		370		3,470		533
Net loss	$	(7,034)	$	(18,041)	$	(49,582)	$	(53,046)
Net loss per share, basic and diluted	$	(0.19)	$	(0.68)	$	(1.36)	$	(2.00)
Weighted-average shares used to compute net loss per share, basic and diluted		36,375,671		26,564,615		36,359,744		26,535,474

Net loss	$	(7,034)	$	(18,041)	$	(49,582)	$	(53,046)
Other comprehensive loss:
Unrealized gain (loss) on short-term investments		36		71		102		(213)
Comprehensive loss	$	(6,998)	$	(17,970)	$	(49,480)	$	(53,259)

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Rain Oncology Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(unaudited)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance as of December 31, 2022	36,290,292	$	37	$	278,853	$	(165,688)	$	(166)	$	113,036
Exercise of stock options	20,757		—		75		—		—		75
Issuance of common stock from employee stock purchase plan	20,129		—		137		—		—		137
Issuance of common stock in connection with equity financings, net of issuance costs	32,000		—		106						106
Stock-based compensation expense	—		—		1,568		—		—		1,568
Unrealized gain on investments	—		—		—		—		119		119
Net loss	—		—		—		(20,484)		—		(20,484)
Balance as of March 31, 2023	36,363,178	$	37	$	280,739	$	(186,172)	$	(47)	$	94,557
Issuance of common stock from employee stock purchase plan	12,493		—		12		—		—		12
Stock-based compensation expense	—		—		837		—		—		837
Unrealized loss on investments	—		—		—		—		(53)		(53)
Net loss	—		—		—		(22,064)		—		(22,064)
Balance as of June 30, 2023	36,375,671	$	37	$	281,588	$	(208,236)	$	(100)	$	73,289
Stock-based compensation expense	—		—		1,228		—		—		1,228
Unrealized gain on investments	—		—		—		—		36		36
Net loss	—		—		—		(7,034)		—		(7,034)
Balance as of September 30, 2023	36,375,671	$	37	$	282,816	$	(215,270)	$	(64)	$	67,519


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance as of December 31, 2021	26,475,812	$	27	$	220,530	$	(89,964)	$	(89)	$	130,504
Exercise of stock options	24,262		—		106		—		—		106
Issuance of common stock from employee stock purchase plan	26,804		—		293		—		—		293
Stock-based compensation expense	—		—		1,242		—		—		1,242
Unrealized loss on investments	—		—		—		—		(300)		(300)
Net loss	—		—		—		(17,394)		—		(17,394)
Balance as of March 31, 2022	26,526,878	$	27	$	222,171	$	(107,358)	$	(389)	$	114,451
Exercise of stock options	3,000		—		12		—		—		12
Stock-based compensation expense	—		—		1,417		—		—		1,417
Unrealized gain on investments	—		—		—		—		16		16
Net loss	—		—		—		(17,611)		—		(17,611)
Balance as of June 30, 2022	26,529,878	$	27	$	223,600	$	(124,969)	$	(373)	$	98,285
Exercise of stock options	3,890		—		15		—		—		15
Issuance of common stock from employee stock purchase plan	31,058		—		147		—		—		147
Stock-based compensation expense	—		—		932		—		—		932
Unrealized gain on investments	—		—		—		—		71		71
Net loss	—		—		—		(18,041)		—		(18,041)
Balance as of September 30, 2022	26,564,826	$	27	$	224,694	$	(143,010)	$	(302)	$	81,409

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Rain Oncology Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Nine Months Ended September 30,
	2023		2022
Operating activities
Net loss	$	(49,582)	$	(53,046)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense		3,633		3,591
Amortization of premium and accretion of discounts on short-term investments, net		(1,441)		(35)
Depreciation and amortization expense		189		62
Fair value gain on investments		8		—
In-process research and development expense		—		(1,000)
Changes in operating assets and liabilities:
Prepaid and other current assets		(322)		2,891
Operating lease right-of-use asset and liability, net		1		(5)
Other assets		724		(53)
Accounts payable		1,786		(2,028)
Accrued research and development		(5,374)		4
Other accrued liabilities		(2,084)		(286)
Net cash used in operating activities		(52,462)		(49,905)

Investing activities
Maturities of short-term investments		69,650		99,150
Purchases of short-term investments		(39,625)		(34,764)
Payment of in-process research and development expense		(2,000)		—
Purchases of property and equipment, net		(684)		—
Net cash provided by investing activities		27,341		64,386

Financing Activities
Proceeds from issuance of common stock in connection with the Company’s at-the-market facility		343		—
Proceeds from the issuance of common stock under the Company’s equity incentive plans and employee stock purchase plan		224		573
Payments of issuance costs related to equity financings		(89)		—
Net cash provided by financing activities		478		573

Net (decrease) increase in cash and cash equivalents		(24,643)		15,054
Cash and cash equivalents at beginning of period		61,955		24,780
Cash and cash equivalents at end of period	$	37,312	$	39,834

Supplemental schedule of non-cash investing and financing activities:
Operating lease right-of-use asset obtained in exchange for lease liabilities	$	349	$	—
Non-cash additions to property and equipment	$	40	$	—
Non-cash in-process research and development accrual	$	—	$	1,000

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Rain Oncology Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 – Organization and Nature of Operations

Description of Business

Rain Oncology Inc. (“Rain” or the “Company”), formerly known as Rain Therapeutics Inc., was incorporated in the state of Delaware in April 2017. Rain is a precision oncology company developing therapies that target oncogenic drivers for which the Company is able to genetically select patients the Company believes will most likely benefit. Rain’s product candidate, milademetan, is a small molecule, oral inhibitor of the MDM2-p53 complex that reactivates p53. The Company operates in one business segment and its principal operations are in the United States, with its headquarters in Newark, California.

On June 22, 2022, the Company formed Rain Oncology Australia Pty Ltd (“Rain Oncology Australia”), a wholly owned subsidiary incorporated under the laws of Australia.

On December 22, 2022, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a change of the Company’s name from “Rain Therapeutics Inc.” to “Rain Oncology Inc.” effective as of December 30, 2022.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) related to a Quarterly Report on Form 10-Q. These condensed consolidated financial statements include the accounts of the Company and Rain Oncology Australia. All significant inter-company transactions, balances and expenses have been eliminated upon consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”). The year-end balance sheet data was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K, filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The unaudited financial information for the interim periods presented herein reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial condition and results of operation for the periods presented, with such adjustments consisting only of normal recurring adjustments.

Liquidity and Capital Resources

The Company has devoted substantially all of its efforts to drug discovery and development, raising capital and building operations. The Company has a limited operating history and has not generated any revenue since its inception, and the sales and income potential of the Company’s business is unproven. The Company has incurred net losses and negative cash flows from operating activities since its inception and expects to continue to incur net losses into the foreseeable future as it continues the development of its product candidates. From inception through September 30, 2023, the Company has funded its operations through net proceeds from its initial public offering in April 2021, the offering, issuance and sale of its common stock in November 2022, as well as the issuance of convertible promissory notes and convertible preferred stock.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. Management believes that the Company’s current cash, cash equivalents and short-term investments will provide sufficient funds to enable the Company to meet its obligations for at least twelve months from the filing date of this report.

Table of Contents

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent liabilities in the Company’s condensed consolidated financial statements and accompanying notes. The most significant estimate in the Company’s condensed consolidated financial statements relates to the clinical trial expense accruals. Management evaluates its estimates on an ongoing basis. Although these estimates are based on the Company’s historical experience, knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents include money market funds, commercial paper, U.S. government securities and U.S. agency bonds.

Available-for-Sale Investments

The Company holds investment grade securities consisting of commercial paper, corporate debt securities, U.S. government securities and U.S. agency bonds, classified as available-for-sale (AFS) securities at the time of purchase, since it is the Company’s intent that these investments be available for current operations. The Company has classified all of its AFS securities as current assets in the condensed consolidated balance sheets even though the stated maturity date may be one year or more beyond the current condensed consolidated balance sheet date, which reflects management’s intention to use the proceeds from sales of these securities to fund its operations, as necessary.

The Company carries these securities at fair value and reports unrealized gains and losses, if any, as a separate component of accumulated other comprehensive loss. The cost of debt securities is adjusted for amortization of purchase premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income in the condensed consolidated statements of operations and comprehensive loss. Realized gains and losses on sales of securities are determined using the specific identification method and recorded in interest income in the condensed consolidated statement of operations and comprehensive loss.

Allowance for Credit Losses

For AFS securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that the Company will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through earnings. For AFS securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, market conditions, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive loss in the condensed consolidated statement of operations and comprehensive loss.

The Company elected the practical expedient to exclude the applicable accrued interest from both the fair value and amortized costs basis of its AFS securities for purposes of identifying and measuring an impairment. Accrued interest receivable on AFS securities is recorded in prepaid and other current assets in the condensed consolidated balance sheets. The Company’s accounting policy is to not measure an allowance for credit loss for accrued interest receivable and to write-off any uncollectible accrued interest receivable as a reversal of interest income in a timely manner, which the Company considers to be in the period in which it determines the accrued interest will not be collected by the Company.

Table of Contents

Research and Development Costs

Research and development costs primarily consist of costs associated with the Company’s research and development activities, including its drug discovery efforts, and the preclinical and clinical development of its product candidates. Research and development costs are expensed as incurred.

Preclinical Studies and Clinical Trial Accruals

The Company is required to estimate its expenses resulting from its obligations under contracts with vendors, consultants, clinical research organizations and clinical site agreements in connection with conducting preclinical activities and clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. The Company reflects preclinical study and clinical trial expenses in its condensed consolidated financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of the preclinical study or clinical trial as measured by the timing of various aspects of the preclinical study, clinical trial or related activities. The Company determines accrual and prepaid estimates through review of the underlying contracts along with preparation of financial models taking into account correspondence with clinical and other key personnel and third-party service providers as to the progress of preclinical studies, clinical trials or other services being conducted. During the course of a preclinical study or clinical trial, the Company adjusts its expense recognition if actual results differ from its estimates. To date, the Company has not experienced any material differences between accrued costs and actual costs incurred.

Stock-Based Compensation

Stock-based compensation expense represents the grant date fair value of equity awards recognized over the requisite service period of the awards (generally the vesting period) on a straight-line basis. The Company recognizes forfeitures as they occur. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The fair value of restricted stock units (“RSUs”) granted is based on the Company’s closing stock price on the date of grant.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more likely than not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.

Restructuring

Restructuring costs comprised of severance, other termination benefit costs and stock-based compensation expense for stock option modifications related to workforce reductions. The Company recognizes restructuring charges

Table of Contents

when the liability is probable, and the amount is estimable. Employee termination benefits are accrued at the date management has committed to a plan of termination and affected employees have been notified of their termination date and expected severance benefits.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss includes unrealized gains and losses from short-term investments.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the sum of the weighted-average number of shares of common stock plus the potential dilutive effects of potential dilutive securities outstanding during the period. Potential dilutive securities are excluded from diluted earnings or loss per share if the effect of such inclusion is antidilutive. The Company’s potentially dilutive securities, which include shares from the 2021 Employee Stock Purchase Plan (the “ESPP”) and outstanding stock options and RSUs under the Company’s equity incentive plan, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For the periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Recent Accounting Pronouncements

Financial Instruments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The objective of the standard is to improve financial reporting of expected credit losses on financial instruments and other commitments to extend credit. ASU 2016-13 requires that an entity measure and recognize expected credit losses for financial assets held at amortized cost and replaces the incurred loss impairment methodology in prior U.S. GAAP with a methodology that requires consideration of a broader range of information to estimate credit losses, and establishes additional disclosures related to credit risks. The Company adopted Topic 326 on January 1, 2023. The adoption did not have a significant impact on the Company’s condensed consolidated financial statements or the related disclosures.

There were no other significant updates to the recently issued accounting standards other than as disclosed herein for the three and nine months ended September 30, 2023. Although there are several other new accounting pronouncements issued or proposed by the FASB, based on the Company’s preliminary assessment, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.

Note 3 – Fair Value Measurements

The accounting guidance 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 non-recurring basis. Fair value is defined as 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. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Table of Contents

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and AFS securities. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers.

Investments are classified as Level 1 within the fair value hierarchy if their quoted prices are available in active markets for identical securities. Investments in money market funds and U.S. government securities were classified as Level 1 instruments.

Investments in commercial paper, corporate debt securities and U.S. agency bonds are valued using Level 2 inputs. The Company classifies investments within Level 2 if the investments are valued using model driven valuations using observable inputs such as quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Investments are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset pricing models.

The carrying amounts of cash, prepaid expenses and other current assets, other assets, accounts payable, accrued research and development and other current liabilities are reasonable estimates of their fair value due to the short-term nature of these accounts.

The Company’s money market funds under cash and cash equivalents are classified using Level 1 inputs within the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. There were no transfers between levels of the fair value hierarchy during the three and nine months ended September 30, 2023.

The following tables summarize financial assets that the Company measured at fair value on a recurring basis, classified in accordance with the fair value hierarchy (in thousands):


	Fair Value Measurements at Reporting Date Using:
	Level 1		Level 2		Level 3		Total
As of September 30, 2023:
Money market funds	$	8,669	$	—	$	—	$	8,669
Commercial paper		—		22,968		—		22,968
U.S. government securities		18,578		—		—		18,578
U.S. agency bonds		—		26,568		—		26,568
Total cash equivalents and short-term investments	$	27,247	$	49,536	$	—	$	76,783
Reported as:
Cash and cash equivalents (includes cash of $537)							$	37,312
Short-term investments								40,008
Total cash, cash equivalents and short-term investments							$	77,320

Table of Contents


	Fair Value Measurements at Reporting Date Using:
	Level 1		Level 2		Level 3		Total
As of December 31, 2022:
Money market funds	$	8,528	$	—	$	—	$	8,528
Commercial paper		—		83,423		—		83,423
U.S. government securities		10,837		—		—		10,837
U.S. agency bonds		—		22,143		—		22,143
Corporate debt securities		—		997		—		997
Total cash equivalents and short-term investments	$	19,365	$	106,563	$	—	$	125,928
Reported as:
Cash and cash equivalents (includes cash of $4,526)							$	61,955
Short-term investments								68,499
Total cash, cash equivalents and short-term investments							$	130,454

There were no liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.

Note 4 – Investments

The Company invests in available-for-sale securities consisting of money market funds, commercial paper, U.S. government securities, U.S. agency bonds and corporate debt securities. Available-for-sale securities are classified as either cash and cash equivalents or short-term investments in the condensed consolidated balance sheets.

The following tables summarize, by major types of cash equivalents, and investments that are measured at fair value on a recurring basis (in thousands):


	As of September 30, 2023
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Money market funds	$	8,669	$	—	$	—	$	8,669
Commercial paper		22,979		—		(11)		22,968
U.S. government securities		18,588		1		(11)		18,578
U.S. agency bonds		26,611		1		(44)		26,568
Cash equivalents and short-term investments	$	76,847	$	2	$	(66)	$	76,783


	As of December 31, 2022
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
Money market funds	$	8,528	$	—	$	—	$	8,528
Commercial paper		83,479		11		(67)		83,423
U.S. government securities		10,910		—		(73)		10,837
U.S. agency bonds		22,175		4		(36)		22,143
Corporate debt securities		1,002		—		(5)		997
Cash equivalents and short-term investments	$	126,094	$	15	$	(181)	$	125,928

The contractual maturities of the Company’s AFS securities were as follows (in thousands):


	As of September 30, 2023		As of December 31, 2022
Due within one year	$	37,354	$	63,595
Due within one to two years		2,654		4,904
Total	$	40,008	$	68,499

Table of Contents

The AFS investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current condensed consolidated balance sheet date, which reflects management’s intention to use the proceeds from sales of these securities to fund the Company’s operations, as necessary. There were no realized gains or losses due to investment sales for the three and nine months ended September 30, 2023 and 2022. As of September 30, 2023, $44.9 million of the Company’s marketable securities were in gross unrealized loss positions, of which none had been in such position for greater than 12 months and $22.5 million will mature within three months of September 30, 2023.

The Company does not intend to sell its AFS investments before maturity, and it is unlikely that the Company will be required to sell such investments before recovery of their amortized cost basis. Based on the Company’s review of these AFS securities, the unrealized losses as of September 30, 2023 were primarily due to changes in interest rates and not due to increased credit risks associated with specific securities. The Company has no allowance for credit losses as of September 30, 2023 and December 31, 2022. Unrealized gains and losses that are not credit-related are included in accumulated other comprehensive loss.

Accrued interest receivables on AFS securities were $0.2 million and $0.1 million as of September 30, 2023 and December 31, 2022, respectively. The Company has not written off any accrued interest receivables for the three and nine months ended September 30, 2023 and 2022.

Note 5 - Condensed Consolidated Balance Sheet Details

Prepaid and Other Current Assets

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


	As of September 30, 2023		As of December 31, 2022
Prepaid insurance	$	1,226	$	913
Prepaid research and development		991		1,103
FICA tax credit receivable		531		571
Prepaid other		448		416
Other current assets		281		152
Deposits		19		19
Prepaid and other current assets	$	3,496	$	3,174

Property and Equipment, Net

Property and equipment, net, consist of the following (in thousands):


	As of September 30, 2023		As of December 31, 2022
Leasehold improvements	$	794	$	67
Furniture and equipment		209		204
Computer equipment		50		50
Construction in progress		—		8
		1,053		329
Less: accumulated depreciation and amortization expense		(425)		(236)
Property and equipment, net	$	628	$	93

Depreciation and amortization expense for the three months ended September 30, 2023 and 2022 was $154,000 and $18,000, respectively. Depreciation and amortization expense for the nine months ended September 30, 2023 and 2022 was $189,000 and $62,000, respectively.

Table of Contents

Other Non-Current Assets

Other non-current assets consist of the following (in thousands):


	As of September 30, 2023		As of December 31, 2022
Deposits	$	110	$	781
FICA tax credit receivable		—		52
Other		70		368
Other non-current assets	$	180	$	1,201

Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):


	As of September 30, 2023		As of December 31, 2022
Accrued bonus	$	1,481	$	3,379
Accrued payroll and related		36		229
ESPP liability		35		155
Other		638		2,661
Other accrued liabilities	$	2,190	$	6,424

Note 6 – Stockholders’ Equity

In April 2021, the Company filed a certificate of amendment to its certificate of incorporation, which authorized 260,000,000 shares of capital stock, consisting of 250,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of undesignated preferred stock, par value $0.001 per share that may be issued from time to time by the Company’s board of directors (the “Board of Directors”) in one or more series. Of the 250,000,000 shares of common stock, 200,000,000 shares were designated as “Common Stock” and 50,000,000 shares were designated as “Non-Voting Common Stock.”

Equity Incentive Plan

In August 2020, the Board of Directors amended the Amended and Restated 2018 Stock Option—Stock Issuance Plan (the “2018 Plan”) to increase the maximum number of shares of common stock that may be issued over the term of the plan. The 2018 Plan provided for the grant of stock options, non-statutory stock options, incentive stock options and stock issuances to employees, nonemployees and consultants of the Company.

In April 2021, the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was approved by the Board of Directors and became effective on April 15, 2021. Upon the effectiveness of the 2021 Plan, no further grants may be made under the 2018 Plan.

The 2021 Plan allows the Company to grant equity-based awards to its officers, employees, directors and other key persons (including consultants). The Company initially reserved up to 3,246,120 shares of common stock for issuance under the 2021 Plan, plus (i) 1,722 shares that remained available for the issuance of awards under the 2018 Plan at the time the 2021 Plan became effective, and (ii) any shares subject to outstanding options or other share awards that were granted under the 2018 Plan that terminate or expire prior to exercise or settlement; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. The 2021 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2022 and each January 1 thereafter through January 31, 2032, by 4.0% of the outstanding number of shares of common stock on the immediately preceding December 31, or such lesser number of shares as determined by the Board of Directors. As a result, the number of shares of common stock reserved for issuance under the 2021 Plan increased by 1,451,611 shares on January 1, 2023.

Table of Contents

Stock Options

A summary of the Company’s stock option activities during the nine months ended September 30, 2023 is as follows:


		Weighted-		Weighted-
		Average		Average	Aggregate
		Exercise		Remaining	Intrinsic
		Price Per		Contract Term	Value
	Total Options	Share		(in years)	(in millions)
Outstanding as of December 31, 2022	2,593,761	$	8.08	8.2	$	—
Granted	2,517,700	$	5.49
Exercised	(20,757)	$	3.59
Forfeited or cancelled	(1,130,674)	$	(9.25)
Outstanding as of September 30, 2023	3,960,030	$	6.12	7.8	$	—
Vested and expected to vest as of September 30, 2023	3,960,030	$	6.12	7.8	$	—
Vested and exercisable as of September 30, 2023	1,514,801	$	7.20	5.4	$	—

The weighted-average grant date fair values of option grants during the nine months ended September 30, 2023 and 2022 were $4.54 and $7.33 per share, respectively. The weighted-average grant date fair values of options forfeited during the nine months ended September 30, 2023 and 2022 were $9.31 and $12.05 per share, respectively.

Restricted Stock Units

A summary of the Company’s RSU activities during the nine months ended September 30, 2023 is as follows:


		Weighted-		Aggregate
	Total	Average		Intrinsic
	Restricted	Grant Date		Value
	Stock Units	Fair Values		(in millions)
Outstanding as of December 31, 2022	8,945	$	6.25	$	—
Granted	95,333	$	9.59
Vested	(9,038)	$	8.71
Forfeited or cancelled	(53,755)	$	9.31
Outstanding as of September 30, 2023	41,485	$	9.42	$	—

Employee Stock Purchase Plan

The ESPP was approved by the Board of Directors and became effective on April 15, 2021. The ESPP initially reserved and authorized the issuance of up to 259,689 shares of common stock to participating employees. Under the ESPP, eligible employees can contribute up to 15% of their eligible compensation, as defined in the ESPP, towards the purchase of the Company’s common stock at a price of 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last trading day of the offering period. The ESPP provides for twenty-four-month offering periods with four six-month purchase periods in each offering period. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2022 and each January 1 thereafter through January 31, 2032, by 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. As a result, the number of shares of common stock reserved for issuance under the ESPP increased by 362,902 shares on January 1, 2023. Under the ESPP, the Company issued 32,622 shares of common stock for aggregate cash proceeds of $0.1 million during the nine months ended September 30, 2023.

Table of Contents

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development	$	656	$	728	$	2,316	$	2,821
General and administrative		572		204		1,280		770
Restructuring charges		—		-		37		-
Total stock-based compensation expense	$	1,228	$	932	$	3,633	$	3,591

As of September 30, 2023, the total unrecognized compensation cost was $10.5 million and is expected to be recognized as expense over approximately 1.9 years.

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock option grants were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Risk-free interest rate	5.1%	3.2%	1.6% - 5.1%	1.6% - 3.2%
Expected volatility	118.5%	103.3%	88.1% - 118.5%	88.1% - 112.1%
Expected term (in years)	5.6	6.1	5.3 - 6.1	5.3 - 6.1
Expected dividend yield	0%	0%	0%	0%

The determination of the fair value of share-based payment awards utilizing the Black-Scholes option-pricing model is affected by the Company’s stock price and the following assumptions:

Risk-free interest rate. The risk-free interest rate assumption is based on the U.S. Treasury instruments, the terms of which were consistent with the expected term of the Company’s stock-based awards.

Expected volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption was determined by examining the historical volatilities of a group of industry peers whose share prices are publicly available.

Expected term. The expected term represents the weighted-average period the stock-based awards are expected to be outstanding. The Company uses the simplified method for estimating the expected term. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the stock-based awards.

Expected dividend yield. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not intend to pay dividends.

Forfeitures. The Company reduces stock-based compensation expense for actual forfeitures during the period.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance consist of the following:


	As of September 30, 2023	As of December 31, 2022
Stock options	3,960,030	2,593,761
Restricted stock units	41,485	8,945
Reserved for future equity award grants	3,107,739	3,084,732
Reserved for future ESPP issuances	824,065	466,585
Common stock reserved for future issuance	7,933,319	6,154,023

Table of Contents

Note 7 – License Agreements

The Company has entered into license agreements, accounted for as asset acquisitions, under which the Company is required to use commercially reasonable efforts to meet certain specified development and regulatory milestones related to the licensed technologies within specified time periods. In consideration of the rights granted to the Company under the agreements, the Company is required to make cash milestone payments to the licensors upon the completion of certain development, regulatory and commercial milestones. For the arrangements that the Company accounted for as asset acquisitions, contingent consideration liabilities are recorded as an additional cost of the acquired assets when the contingency is resolved, and the consideration is paid or becomes payable. Additionally, the Company has agreed to pay royalties on net sales of products applicable to the license agreements. The Company may terminate the agreements upon written notice to the licensors.

Daiichi Sankyo License Agreement

On September 2, 2020, the Company licensed the rights to milademetan (DS-3032b) for all human prophylactic or therapeutic uses in all countries and territories of the world from Daiichi Sankyo Company, Limited (“Daiichi Sankyo”), a Japanese corporation (the “Daiichi Sankyo License Agreement”). Daiichi Sankyo conducted clinical studies of milademetan prior to the Company’s licensing the rights to this product. The Company refers to this product candidate as milademetan.

In accordance with the terms of the Daiichi Sankyo License Agreement, the Company paid Daiichi Sankyo an initial upfront payment of $5.0 million in September 2020.

Under the Daiichi Sankyo License Agreement, the Company obtained worldwide, sublicensable exclusive rights to seven families of patents with respect to milademetan (the “Licensed Compound”). The Company is solely responsible under the Daiichi Sankyo License Agreement for the research, development and registration of milademetan. Pursuant to the Daiichi Sankyo License Agreement, Daiichi Sankyo had the right to continue to conduct three clinical trials and prepare final reports with respect to these clinical trials, and such right expires upon all subjects completing the study treatment. The Company has agreed to reimburse Daiichi Sankyo certain third-party expenses incurred while conducting such trials. On March 3, 2022, the Company and Daiichi Sankyo entered into a Memorandum of Understanding, which provides that Daiichi Sankyo will terminate its U105 study, and the Company will reimburse a total of $2.0 million to Daiichi Sankyo for expenses related to such study in four installments of $0.5 million each until December 31, 2022. As of September 30, 2023, the Company paid all four installments under the Memorandum of Understanding. Under the Daiichi Sankyo License Agreement, the Company made other clinical trials payments in the aggregate of $30,000 for the three and nine months ended September 30, 2023. The Company made other clinical trials payments of $57,000 and $87,000 under the Daiichi Sankyo License Agreement for the three and nine months ended September 30, 2022, respectively.

The Company is required to make aggregate future milestone payments of up to $223.5 million, contingent on the attainment of certain development, regulatory and sales milestones. The $223.5 million aggregate future milestone payments include a $2.0 million increase that was agreed upon in the Memorandum of Understanding with Daiichi Sankyo. On July 20, 2021, the Company announced that the first patient has been randomized in the multicenter, open-label, Phase 3 registrational trial (MANTRA) evaluating milademetan for the treatment of de-differentiated liposarcoma. Accordingly, pursuant to the Daiichi Sankyo License Agreement, the Company recorded $5.5 million in milestone fees as research and development expense in the consolidated statement of operations and comprehensive loss during the year ended December 31, 2021. Of the $5.5 million milestone fees, $2.5 million was paid in the third quarter of 2021 and $3.0 million was accrued as part of accrued research and development in the consolidated balance sheet as of December 31, 2021. On June 29, 2022, the Company and Daiichi Sankyo entered into an amendment to the Daiichi Sankyo License Agreement. The amendment reduced the $3.0 million milestone fee liability associated with the previously achieved milestone to $2.0 million. The amendment also extended the due date of the previously achieved milestone fee payment to June 30, 2023 and the previously achieved milestone was paid in full as of September 30, 2023. During the three and nine months ended September 30, 2023 and 2022, the Company incurred no milestone research and development expense under the Daiichi Sankyo License Agreement.

Additionally, the Company is required to pay Daiichi Sankyo a high single digit royalty based on the annual net sales of products containing milademetan as an active pharmaceutical ingredient (the “Products”), subject to reduction at an agreed rate upon expiration of the licensed patent in the particular country where the Products are sold. To date, no royalty payments have been made to Daiichi Sankyo under the Daiichi Sankyo License Agreement. The royalty obligation terminates on a country-by-country and on a product-by-product basis on the later of: (i) loss of all market exclusivity for

Table of Contents

such Product in such country, (ii) the last-to-expire patent that covers the Licensed Compound or the Product in such country and (iii) twelve years from launch of the first Product sold by the Company in such country.

Unless sooner terminated or extended, the Daiichi Sankyo License Agreement will remain in full force and effect until the Company, its affiliates and its sublicensees cease all development and commercial activity related to milademetan. Either party may terminate the Daiichi Sankyo License Agreement for cause in the event of an uncured material breach (subject to a 90-day cure period). However, the Company may only terminate the Daiichi Sankyo License Agreement with respect to the countries affected by such uncured material breach. Daiichi Sankyo may also terminate the Daiichi Sankyo License Agreement in the event of Rain’s bankruptcy or insolvency. Additionally, Daiichi Sankyo may terminate the Daiichi Sankyo License Agreement immediately upon written notice if the Company, its affiliates or its sublicensors initiate or join any challenge to the validity or enforceability of a licensed patent, subject to certain exclusions. Furthermore, the Company may terminate the Daiichi Sankyo License Agreement in its entirety or on a country-by-country basis for bona fide material concerns regarding the (i) lack of safety for human use arising from toxicity of the Licensed Compound or Product(s), (ii) lack of efficacy of the Licensed Compound or Product(s) or (iii) adverse economic impact to the Company in connection with its continued development of the Products, in each case, upon six months’ prior written notice to Daiichi Sankyo. In addition, if the Company is acquired by a third party that is developing and commercializing a competing compound and the acquiring party decides not to discontinue the development or commercialization of such competing compound, such third party must terminate the Daiichi Sankyo License Agreement within 30 days of such acquisition if it does not discontinue such development or commercialization. Upon termination of the Daiichi Sankyo License Agreement by Daiichi Sankyo for the Company’s uncured material breach or by the Company for its bona fide material concerns regarding the safety, efficacy or adverse economic impacts relating to the Licensed Compound or Products, or its development thereof, the Company is required to, among other actions, if requested by Daiichi Sankyo (i) transfer to Daiichi Sankyo ongoing clinical trials, data, reports, records and materials, (ii) grant to Daiichi Sankyo an exclusive, irrevocable, sublicensable, fully paid-up license under any patents and know-how that are controlled and actually used by the Company at the time of termination in connection with the Products to allow Daiichi Sankyo exploit the Licensed Compound or Products in countries that are affected by the termination, (iii) grant to Daiichi Sankyo an exclusive, irrevocable, sublicensable, fully paid up license to use trademarks that are specific to the Products and (iv) assign any applicable sublicenses.

Drexel License Agreement and Sponsored Research Agreement

In February 2023, the Company decided to discontinue further development of its preclinical program focused on targeting RAD52 in the DNA damage repair pathway, and the Company notified Drexel University (“Drexel”) of the termination of the intellectual property license agreement, dated July 30, 2020, between Drexel and the Company to focus use of the Company’s financial and personnel resources on the milademetan clinical program.

Roche Clinical Supply Agreement

In December 2021, the Company entered into a clinical supply agreement with Roche for the supply of the anti-Programmed Death Ligand-1 (PD-L1) monoclonal antibody, atezolizumab. Clinical trials are planned to evaluate milademetan, in combination with atezolizumab for the treatment of patients in genetically selected populations. Under this agreement, Rain is the sponsor of the anticipated clinical trials, and Roche will supply atezolizumab. The Company does not have any financial commitments to Roche under this agreement. In May 2023, the Company notified Roche of the termination of the clinical supply agreement.

Note 8 – Commitments and Contingencies

Leases

In September 2018, the Company entered into a noncancelable operating lease agreement for office space for its corporate headquarters in Newark, California with an initial term of 5.25 years. The lease commenced in January 2019 and ends March 2024. Under the terms of the lease, the Company pays annual base rent, subject to an annual fixed percentage increase of 2% on March 1st of each year. The Company is obligated to pay for its share of direct expenses including operating expense and taxes, which are considered variable lease costs and are expensed as incurred.

In March 2020, Governor Newsom issued State of California Executive Order No. N-33-20 instructing all individuals in California to stay at home due to the COVID-19 pandemic. In connection with such order, the Company entered into an amendment to the noncancelable operating lease agreement in June 2020. The amendment provided the Company rent

Table of Contents

relief for three months in 2020. In consideration of the rent relief, the Company agreed to adjust the base rent annual fixed percentage increase of 3% on February 1st of each year and extend the lease until September 2024. The amendment was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract. Remeasurement of the right-of-use asset and operating lease liabilities at the date of modification did not result in a material increase of the right-of-use asset and operating lease liabilities.

In October 2022, the Company entered into a second amendment to its corporate headquarters lease agreement to expand the leased premises by approximately 3,880 square feet. The lease commencement date for the expansion premises was in July 2023 and will expire in September 2024.

In March 2023, the Company entered into a third amendment to its corporate headquarters lease agreement to expand the leased premises by approximately 5,600 square feet on a temporary basis. The lease commencement date for the expansion into the temporary space was March 2023 and will expire on the date the expanded premises under the second amendment are ready for occupancy. The expanded premises were occupied in July 2023. Pursuant to this third amendment, the Company will not pay any rent on the temporary space, but the Company will be responsible for its share of operating costs, taxes, and utilities.

The future minimum lease payments required under the operating lease are summarized as follows (in thousands):


	As of September 30, 2023
2023 - remainder	$	119
2024		358
Total minimum lease payments	$	477
Less: amount representing interest		(21)
Present value of operating lease liabilities	$	456
Operating lease liabilities, current		456
Operating lease liabilities, non-current		—
Total operating lease liabilities	$	456

Weighted-average remaining lease term (in years)		1.0
Weighted-average incremental borrowing rate		10.0%

The table below summarizes the Company’s lease costs and cash payments in connection with operating lease obligations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total operating lease expense	$	114	$	40	$	194	$	120
Operating cash flows used for operating lease	$	108	$	42	$	194	$	124

Contingencies

From time to time, the Company may become involved in various legal actions arising in the ordinary course of business.

On July 17, 2023, a purported securities class action lawsuit was commenced in the United States District Court for the Northern District of California, naming the Company and certain of the Company’s officers as defendants (the “Shareholders Class Action Lawsuit”), captioned Thant v. Rain Oncology, et al., Case No. 5:23-cv-3518-EJD. The Shareholder Class Action Lawsuit alleges violations of Sections 10(b) and 20(a) of the Exchange Act in connection with allegedly false and misleading information about the Phase 3 MANTRA trial design quality and risks related to its clinical development strategy and regulatory approval. The Shareholder Class Action Lawsuit seeks compensatory damages in an unspecified amount, attorneys fees and costs, and any other relief the court deems proper. On November 1, 2023, the Court entered an order appointing lead plaintiff and lead counsel.

Table of Contents

On September 27, 2023, a purported shareholder of the Company filed a shareholder derivative lawsuit purportedly on behalf of the Company in the United States District Court for the Northern District of California, naming the Company’s directors and certain of its officers as defendants (the “Shareholder Derivative Lawsuit”), captioned Livingston v. Vellanki, et al., Case No. 3:23-cv-4973. The Shareholder Derivative Lawsuit alleges violations of Section 14(a) of the Exchange Act, breaches of fiduciary duties, and other purported wrongdoing by the individual defendants based on substantially similar allegations as the Shareholder Class Action Lawsuit. The Shareholder Derivative Lawsuit seeks damages purported suffered by the Company, pre-and-post judgment interest, corporate governance reforms, attorneys fees and costs, and any other relief the court deems proper.

The Shareholder Class Action Lawsuit, the Shareholder Derivative Lawsuit and any other related lawsuits are subject to inherent uncertainties and the actual costs to be incurred relating to the Shareholder Class Action Lawsuit and Shareholder Derivative Lawsuit will depend upon many unknown factors. The outcome of the litigation is uncertain and the Company may not prevail. The Company could be forced to expend significant resources in the defense of the Shareholder Class Action Lawsuit and Shareholder Derivative Lawsuit. The Company is not currently able to estimate the possible cost to the Company from these matters, as the Shareholder Class Action Lawsuit and Shareholder Derivative Lawsuit are currently at an early stage and the Company cannot ascertain how long they may take to resolve. The Company has not established any reserve for any potential liability relating to the Shareholder Class Action Lawsuit or Shareholder Derivative Lawsuit. The Company and its officers and directors named as defendants in these matters believes that it has meritorious defenses and intends to defend the Shareholder Class Action Lawsuit and Shareholder Derivative Lawsuit vigorously.

Given the uncertainty of litigation, the preliminary stages of the litigation and other matters described above, and the legal standards that must be met for, among other things, success on the merits, the Company is unable to predict the ultimate outcome of these actions, and therefore cannot estimate the reasonably possible loss or range of loss, if any, that may result from these actions. The Company would accrue a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

Note 9 – Employee Benefits

The Company has a defined contribution 401(k) plan available to eligible employees. Under the terms of the plan, employees may make voluntary contributions as a percent of compensation, limited to the maximum amount allowable under federal tax regulations. The Company, at its discretion, may make certain contributions to the 401(k) plan. The Company made matching contributions of $54,000 and $164,000 for the three months ended September 30, 2023 and 2022, respectively. The Company made matching contributions of $630,000 and $320,000 for the nine months ended September 30, 2023 and 2022, respectively.

Note 10 – Restructuring Charges

In May 2023, the Company announced a reduction in its workforce in connection with the reprioritization of the Company’s clinical strategy designed to optimize Company resources. The Company recorded restructuring charges of $2.8 million in the statements of operations and comprehensive loss in the second quarter of 2023, comprised of $2.8 million cash severance, employee transition and related employee benefits and taxes of affected employees, as well as $37,000 of stock-based compensation expense related to option modifications. 1 As of September 30, 2023, the Company has paid in full the cash severance, employee transition and related employee benefits and taxes.

Table of Contents

Note 11 – Net Loss Per Share

The following table summarizes the computation of the basic and diluted net loss per share (in thousands, except share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(7,034)	$	(18,041)	$	(49,582)	$	(53,046)
Denominator:
Weighted-average shares of common stock outstanding, basic and diluted		36,375,671		26,564,615		36,359,744		26,535,474
Weighted-average shares used to compute net loss per share, basic and diluted		36,375,671		26,564,615		36,359,744		26,535,474
Net loss per share, basic and diluted	$	(0.19)	$	(0.68)	$	(1.36)	$	(2.00)

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:


	As of September 30,
	2023	2022
Stock options	3,960,030	2,630,258
Restricted stock units	41,485	9,289
ESPP shares	41,097	27,379
Total	4,042,612	2,666,926

Table of Contents

Note 12 – Subsequent Event

In October 2023, the Company received an unsolicited proposal from Tang Capital, LP on behalf of Concentra Biosciences LLC (“Concentra Biosciences”) to acquire all outstanding shares of common stock of the Company for $1.25 per share in cash, plus a contingent value right representing the right to receive 80% of the net proceeds payable from any license or disposition of the Company’s programs. The Board of Directors and the Company’s management team regularly review opportunities to generate stockholder value and are committed to acting in the best interests of all stockholders. Consistent with its fiduciary duties, the Board of Directors, in consultation with the Company’s independent financial and legal advisors, is currently reviewing and evaluating the proposal from Concentra Biosciences.

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 consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contain forward-looking statements based upon our current plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” and included in our Annual Report on Form 10-K for the year ended December 31, 2022. You should carefully read the sections titled “Note Regarding Forward-Looking Statements” and “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from the results described below.

Overview

We are a precision oncology company developing therapies that target oncogenic drivers to genetically select patients we believe will most likely benefit. Our product candidate, milademetan (also known as RAIN-32) is an oral, small molecule inhibitor of the mouse double minute 2 (MDM2)-p53 complex that reactivates p53. We in-licensed milademetan from Daiichi Sankyo Company, Limited (Daiichi Sankyo) in September 2020 based on the results of a Phase 1 clinical trial, which demonstrated meaningful antitumor activity in an MDM2-amplified subtype of liposarcoma (LPS) and other solid tumors.

Since our inception in 2017, we have incurred significant operating losses and have utilized substantially all of our resources to date in-licensing and developing our product candidates, organizing and staffing our company and providing other general and administrative support for our operations. As of September 30, 2023, we had an accumulated deficit of $215.3 million and we incurred net losses of approximately $7.0 million and $49.6 million for the three and nine months ended September 30, 2023, respectively. Our operations to date have been funded primarily through the issuance of convertible promissory notes, the issuance of convertible preferred stock, as well as issuance and sale of common stock through our initial public offering and our offering, issuance and sale of our common stock in November 2022 (the November 2022 Offering). From our inception through September 30, 2023, we have raised aggregate gross proceeds of $9.9 million from the issuance of convertible promissory notes and $81.9 million from the issuance of convertible preferred stock. In November 2022, we completed a registered direct offering of an aggregate of 8,576,330 shares of common stock and non-voting common stock at $5.83 per share. In addition, we issued an additional 1,140,068 shares of common stock in connection with the exercise of the underwriters’ option to purchase additional shares at the offering price. We received net proceeds from our November 2022 Offering of approximately $52.9 million, after deducting underwriting discounts and commissions, and other offering fees. As of September 30, 2023, we had cash, cash equivalents and short-term investments of $77.3 million. Although we believe, based on our current business plans, that our existing cash, cash equivalents and short-term investments will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We expect to continue to incur significant expenses and operating losses for at least the next several years as we continue our development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products, seek to expand our product pipeline, invest in our organization, as well as incur expenses associated with operating as a public company.

We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates, which will not be for many years, if ever. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings or other capital sources which may

Table of Contents

include strategic collaborations, licensing arrangements or other arrangements with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms or at all. If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our platform technology, future revenue streams, research programs or product candidates or we may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts. Our ability to raise additional funds may be adversely impacted by potential worsening global macroeconomic conditions and the disruptions to and volatility in the credit and financial markets in the United States and worldwide. Because of the numerous risks and uncertainties associated with our product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely and expect to continue to rely for the foreseeable future, on third parties for the manufacture of our drug candidates for preclinical and clinical testing, as well as for commercial manufacture of any drugs that we may commercialize. We expect to continue to develop drug candidates that can be produced cost-effectively at contract manufacturing facilities. For the milademetan program, we have transferred Daiichi Sankyo Company, Limited (Daiichi Sankyo) processes to suitable third-party contract manufacturing organizations to supply active pharmaceutical ingredients and clinical drug product for our clinical trials and in preparation for submission of marketing applications and potential future commercial supplies.

Recent Developments

In May 2023, we announced topline pivotal data from our Phase 3 MANTRA trial. The trial, evaluating the efficacy, safety, and tolerability of milademetan in patients with dedifferentiated (DD) LPS, did not meet its primary endpoint of progression free survival (PFS) by blinded independent central review compared to the standard of care, trabectedin.

The median PFS for milademetan was 3.6 months versus 2.2 months for trabectedin, with a hazard ratio of 0.89, p=0.53. The most common treatment emergent adverse events (TEAEs) in the milademetan arm included nausea, thrombocytopenia, anemia, vomiting and neutropenia. The most common Grade 3/4 TEAEs were thrombocytopenia (39.5%), neutropenia (25.5%) and anemia (18.6%). Dose reductions in the milademetan arm were 44.2% compared to 29.1% in the trabectedin arm. Discontinuation in the milademetan arm due to AEs were 11.6% compared to 19.0% in the trabectedin arm. The Phase 3 MANTRA data was reported at the European Society of Medical Oncology (Madrid, Spain) in October 2023.

Enrollment was suspended in the Phase 2 MANTRA-2 trial in July 2023 and the study was terminated in October 2023. Study results of the Phase 2 MANTRA-2 study were presented at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics (Boston, MA) in October 2023. As of the data cutoff date of September 15, 2023, 40 patients were enrolled in MANTRA-2 and 31 of these patients were considered efficacy evaluable as they met criteria for the centrally confirmed population. Six patients experienced a partial response (5 unconfirmed partial responses, and 1 confimed partial response) which occurred across different tumor histologies (lung, sarcoma, pancreatic, urothelial and gastric cancers). Within the safety evaluable population (n = 40), 2/38 patients (5.3%) discontinued therapy due to adverse events (AEs). The most common grade 3/4 AEs included thrombocytopenia (26%), neutropenia (15%) and anemia (10%). No grade 5 AEs occurred.

Our Development Pipeline

Our development pipeline is unified by a strategy to target oncogenic drivers through differentiated therapies for which we are able to genetically select the patients we believe will be most likely to benefit from treatment. We currently retain global development and commercialization rights to our product candidate, miladementan.

Our Product Candidate, Milademetan

Milademetan Overview

Our product candidate, milademetan, is a small molecule, oral inhibitor of MDM2 and is being developed in patients with MDM2-dependent cancers. Historically, MDM2 inhibition has presented treatment challenges due to dose-limiting, on-target hematologic toxicities. We believe an MDM2-targeted therapy must possess certain pharmacological characteristics

Table of Contents

related to potency and pharmacokinetics to allow for the design of an optimized dosing schedule. An optimized dosing schedule is intended to improve peak drug exposure leading to apoptosis and cell cycle arrest during the dosing period, while permitting hematopoietic precursor cell recovery during the dosing break, thereby minimizing hematologic toxicity.

Overview of p53 and MDM2

Milademetan reactivates p53, known as the “guardian of the genome,” by inhibiting MDM2. p53 is present in every normal cell and acts as a key regulator of a variety of cellular processes including cell cycle, DNA repair and apoptosis. In a normal cell, the activity of p53 is controlled and regulated by the inhibitory protein MDM2. MDM2 binds to p53, thereby inducing degradation and allowing normal cells to function properly. In response to cell damage and other stress conditions, p53 is activated and prevents the formation of cancerous cells by inducing apoptosis.

In contrast to normal cells, in tumor cells, the two primary mechanisms by which p53 can be inactivated in tumor cells are mutations in p53 and activation or overexpression of MDM2. Approximately half of all tumors are characterized by mutations of the p53 gene. The remaining cancer patients have a p53 gene that is not mutated, and is otherwise known as WT p53, but can be functionally suppressed through the activation or overexpression of MDM2. We have identified potential MDM2 dependence in several solid tumors. This dependence is caused by overexpression of MDM2 through gene amplification or other mechanisms, loss of a negative regulator of MDM2 or other causes. Overexpression of MDM2 promotes the degradation of p53 and also eliminates p53’s ability to activate transcription. Milademetan, by binding MDM2 at the p53 interaction site, prevents the formation of the MDM2-p53 complex, allowing p53 reactivation and subsequent transcription of genes that trigger cancer cell cycle arrest (e.g., p21) or apoptosis (e.g., PUMA) and can be readily measured by increases in the pharmacodynamic marker MIC-1 (GDF15) in the blood.

Clinical Development Plan

Phase 3 Trial in DDLPS Patients (MANTRA)

In July 2021, we initiated a randomized, multicenter, open-label, Phase 3 registrational trial (MANTRA) for patients with unresectable or metastatic DDLPS that has progressed on one or more prior systemic therapies, including at least one anthracycline-based therapy. This trial is an open label, 1:1 randomized trial comparing milademetan to trabectedin, a standard of care (SOC) therapeutic, planned for approximately 160 DDLPS patients with prior anthracycline-based therapy. The dosing schedule for the Phase 3 trial is identical to the Schedule D dose of 260 mg (qd 3/14x2) employed in the Phase 1 trial. The primary objective of the trial is to compare progression-free survival (PFS) evaluated by Response Evaluation Criteria in Solid Tumors (RECIST) criteria in blinded independent review between the milademetan treatment arm and the trabectedin control arm. Secondary endpoints include overall survival (OS), PFS by investigator assessment, objective response rate, duration of response, disease control rate, safety and patient reported outcomes.

The PFS assumptions for statistical powering are based on a PFS assumption for the control arm of 3.0 months and 6.0 months for milademetan. The doubling of PFS corresponds to a hazard ratio of 0.5.

In August 2022, we announced the completion of enrollment into our MANTRA Phase 3 trial of milademetan. In May 2023, we announced topline pivotal data from our MANTRA Phase 3 trial. As discussed above, the trial, evaluating the efficacy, safety, and tolerability of milademetan in patients with DD LPS, did not meet its primary endpoint of PFS by blinded independent central review compared to the standard of care, trabectedin.

Phase 2 MDM2-amplified Tumor-agnostic Basket Trial (MANTRA-2)

In November 2021, the first patient was dosed in the multicenter, single arm, open-label, Phase 2 basket trial evaluating Milademetan for the treatment of MDM2-amplified advanced solid (MANTRA-2). The MANTRA-2 trial is designed to evaluate the safety and efficacy of milademetan in patients with advanced or metastatic solid tumors refractory or intolerant to standard-of-care therapy and that exhibit WT p53 and a prespecified minimum MDM2 gene copy number. Approximately 65 patients are anticipated to be enrolled to receive milademetan. The primary endpoint of the trial is objective response rate (ORR) as measured by RECIST criteria. Secondary endpoints include duration of response, disease control rate PFS by investigator assessment, OS, and growth modulation index.

We enrolled patients that have received and progressed on SOC therapy and will be unlikely to tolerate or derive clinically meaningful benefit from SOC therapy. Patients with MDM2 amplification will be selected using local tumor testing,

Table of Contents

such as a commercially-available next generation sequencing-based diagnostic assay. Milademetan will be administered in doses of 260 mg using the Schedule D dosing schedule from the Phase 1 trial (qd 3/14). The primary endpoint of this trial is ORR by RECIST, with secondary endpoints of PFS, duration of response, OS, and growth-modulation index.

As discussed above, enrollment was suspended in the Phase 2 MANTRA-2 trial in July 2023 and the study was terminated in October 2023.

Phase 1/2 Trial for Milademetan in Combination with Atezolizumab in Patients with CDKN2A Loss and Wildtype p53 advanced solid tumors (MANTRA-4)

Cyclin-dependent kinase inhibitor 2A (CDKN2A) encodes for the tumor suppressor p14ARF, an inhibitor of MDM2, and the loss of CDKN2A may lead to MDM2-dependent cancers. This concept of MDM2 dependency is supported by nonclinical data demonstrating in vitro sensitivity to milademetan of cancer cell lines harboring CDKN2A loss and WT p53 as well as several in vivo models with CDKN2A loss showing anti-tumor activity of milademetan. Loss of p53 activity via MDM2 and/or CDKN2A loss has also been associated with poor clinical outcomes for patients treated with immune checkpoint inhibitors (ICI). Nonclinical data in an immune competent mouse model of colorectal cancer with CDKN2A loss demonstrated enhanced combinatorial activity of milademetan plus an anti-PD1 antibody compared to either agent alone.

In January 2022, we announced a clinical supply agreement with Roche for the supply of the anti-Programmed Death Ligand-1 (PD-L1) monoclonal antibody, atezolizumab. Clinical trials are planned to evaluate milademetan in combination with atezolizumab for the treatment of patients in genetically selected populations. Under this agreement, we are the sponsor of the anticipated clinical trials, and Roche will supply atezolizumab. In May 2023, the Company notified Roche of the termination of the clinical supply agreement.

An initial Phase 1/2 basket trial (MANTRA-4) was planned to evaluate the safety, tolerability and efficacy of milademetan in combination with atezolizumab in patients with loss of CDKN2A and WT p53 advanced solid tumors who have previously progressed on immune checkpoint inhibitors. In May 2023, we announced that we have terminated plans for the MANTRA-4 clinical trial in patients with CDKN2A-loss, p53 WT advanced solid tumors.

Collaboration and License Agreements

We are party to a license agreement for the in-license of our product candidates and development programs. See Note 7 to the Condensed Consolidated Financial Statements.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales, licenses or collaborations and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue from future product sales. If we enter into license or collaboration agreements for any of our product candidates or intellectual property, we may generate revenue in the future from payments as a result of such license or collaboration agreements. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates or from license or collaboration agreements. We may never succeed in obtaining regulatory approval for any of our product candidates.

Operating Expenses

Our operating expenses since inception have consisted solely of research and development costs, including acquisition of in-process research and development, and general and administrative costs.

Research and Development Expenses

To date, our research and development expenses have related to the discovery and clinical development of our product candidates, including acquisition of in-process research and development. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Table of Contents

Research and development expenses include:

●

salaries, payroll taxes, employee benefits and stock-based compensation charges for those individuals involved in research and development efforts;

●

expenses incurred in connection with research, laboratory consumables and preclinical studies;

●

external research and development expenses incurred under agreements with contract research organizations (CROs) and consultants to conduct and support our planned clinical trials of our product candidates;

●

the cost of consultants engaged in research and development-related services and the cost to manufacture drug product for use in our preclinical studies and clinical trials;

●

costs related to regulatory compliance;

●

the cost of annual license fees and the cost of acquiring in-process research and development, including upfront license payments; and

●

any development milestone payments that we may make under our license agreements.

We track external development costs by product candidate or development program, but we do not allocate personnel costs or other internal costs to specific development programs or product candidates as our personnel works across multiple development programs and product candidates. These costs are included in unallocated research and development expenses in the table below.

The following table summarizes our research and development expenses by product candidate or development program:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(in thousands)				(in thousands)
Milademetan	$	1,244	$	7,639	$	16,743	$	23,766
Other research and clinical candidates		216		158		419		569
Unallocated internal research and development costs		2,505		6,713		18,460		17,987
Total research and development expenses	$	3,965	$	14,510	$	35,622	$	42,322

To the extent we develop future product candidates, we expect our research and development expenses would substantially increase. We cannot predict with certainty the timing for initiation or completion of, the duration of, or the costs of current or future clinical trials and nonclinical studies of any of our product candidates due to the inherently unpredictable nature of clinical and preclinical development. The clinical development timeline, probability of success of clinical trials and development costs can differ materially from expectations. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our future clinical development costs may vary significantly. See the section titled “Risk Factors—Risks Related to Product Development—Preclinical and clinical development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of such product candidates” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Table of Contents

General and Administrative Expenses

General and administrative expenses consist of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and facility-related costs. We anticipate continued expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company as we continue to develop future product candidates.

Interest Income

Interest income consists of interest on our available-for-sale (AFS) securities.

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2023 and 2022

The following table summarizes our results of operations for the three and nine months ended September 30, 2023 and 2022, together with the changes in those items in dollars:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023		2022		Change		2023		2022		Change

	(in thousands)						(in thousands)
Operating expenses:
Research and development	$	3,965	$	14,510	$	(10,545)	$	35,622	$	42,322	$	(6,700)
General and administrative		4,113		3,901		212		14,593		11,257		3,336
Restructuring charges		—		—		—		2,837		—		2,837
Total operating expenses		8,078		18,411		(10,333)		53,052		53,579		(527)
Loss from operations		(8,078)		(18,411)		10,333		(53,052)		(53,579)		527
Other income:
Interest income		1,044		370		674		3,470		533		2,937
Total other income		1,044		370		674		3,470		533		2,937
Net loss	$	(7,034)	$	(18,041)	$	11,007	$	(49,582)	$	(53,046)	$	3,464

Research and Development Expenses

Research and development (R&D) expenses were $4.0 million and $14.5 million for the three months ended September 30, 2023 and 2022, respectively. The decrease in R&D expenses was primarily related to the winding down of the MANTRA and MANTRA-2 clinical trials for milademetan, lower payroll-related costs for our R&D personnel due to the reduction-in-force implemented in the second quarter of 2023, and various decreases in other R&D costs for milademetan. Non-cash stock-based compensation expenses included in R&D expenses were $0.7 million for the three months ended September 30, 2023 and 2022.

R&D expenses were $35.6 million and $42.3 million for the nine months ended September 30, 2023 and 2022, respectively. The decrease in R&D expenses was primarily related to the winding down of the MANTRA and MANTRA-2 clinical trial costs for milademetan, and various decreases in other R&D costs for milademetan. Non-cash stock-based compensation expenses, included as part of personnel costs, were $2.3 million and $2.8 million for the nine months ended September 30, 2023 and 2022, respectively.

We expect our R&D costs to decrease for the remainder of 2023 as we continue to wind down our MANTRA and MANTRA-2 clinical trials and implement the reprioritization of our clinical strategy designed to optimize our resources.

Table of Contents

General and Administrative Expenses

General and administrative (G&A) expenses were $4.1 million and $3.9 million for the three months ended September 30, 2023 and 2022, respectively. The slight increase in G&A expenses was primarily due to higher professional services and legal costs. Non-cash stock-based compensation expense included in G&A expenses was approximately $0.6 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively.

G&A expenses were $14.6 million and $11.3 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in G&A expenses was primarily due to higher professional services costs, legal costs, and payroll-related costs. Non-cash stock-based compensation expense included in G&A expenses was approximately $1.3 million and $0.8 million for the nine months ended September 30, 2023 and 2022, respectively. We expect our G&A expenses to continue to decrease for the remainder of 2023 as we continue to implement the reprioritization of our business strategy designed to optimize our resources.

Restructuring Charges

In May 2023, we announced a reduction in our workforce in connection with the reprioritization of our clinical strategy designed to optimize Company resources. The Company recorded restructuring charges of $2.8 million in the statements of operations and comprehensive loss in the second quarter of 2023, comprised of $2.8 million cash severance, employee transition and related employee benefits and taxes of affected employees, as well as $37,000 of stock-based compensation expense related to option modifications. 1 As of September 30, 2023, the Company has paid in full the cash severance, employee transition and related employee benefits and taxes.

Other Income

Other income for the three and nine months ended September 30, 2023 and 2022 represents interest income from money market or short-term investments.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our research programs and product candidates. We expect that our research and development and general and administrative costs will increase in the future in connection with conducting any future preclinical studies and clinical trials, expanding our intellectual property portfolio and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

We do not currently have any approved products and have not generated any revenue from product sales since inception. To date, we have financed our operations through the issuance of convertible promissory notes and the issuance of convertible preferred stock and common stock. From our inception through September 30, 2023, we have raised aggregate gross proceeds of $9.9 million from the issuance of convertible promissory notes and $81.9 million from the issuance of convertible preferred stock.

In May 2022, we entered into a sales agreement (the “Sales Agreement”) with Oppenheimer & Co. Inc. (the “Sales Agent”) pursuant to which we may offer and sell up to $50.0 million of shares of our common stock, from time to time, in “at-the-market” offerings (the “ATM Facility”). The Sales Agent is entitled to compensation at a commission equal to 3.0% of the aggregate gross sales price per share sold under the Sales Agreement. During the nine months ended September 30, 2023, we received $0.3 million of net proceeds, after deducting underwriting discounts and commissions, from the sales of 32,000 shares of our common stock pursuant to the ATM Facility. During the three months ended September 30, 2023, we had no sales pursuant to the ATM Facility.

In November 2022, we completed a registered direct offering of an aggregate of 8,576,330 shares of common stock and non-voting common stock at $5.83 per share. In addition, we issued an additional 1,140,068 shares of common stock in connection with the exercise of the underwriters’ option to purchase additional shares at the public offering price. We received net proceeds from our November 2022 Offering of approximately $52.9 million, after deducting underwriting discounts and commissions, and other offering fees.

Table of Contents

As of September 30, 2023, we had cash, cash equivalents and short-term investments of $77.3 million. Although we believe, based on our current business plans, that our existing cash, cash equivalents and short-term investments will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Future Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing development activities related to milademetan and other product candidates and programs, which are still in the early stages of development. In addition, we expect to continue to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:

●

initiate new clinical trials for our current and future programs;

●

initiate and continue research and preclinical and clinical development of our product candidates;

●

seek to identify and develop additional product candidates;

●

seek marketing approvals for any of our product candidates that successfully complete clinical trials, if any;

●

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

●

require the manufacture of larger quantities of our product candidates for clinical development and potentially commercialization;

●

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

●

acquire or in-license other drugs and technologies;

●

defend against any claims of infringement, misappropriation or other violation of third-party intellectual property;

●

hire and retain additional clinical, quality control and scientific personnel;

●

build out new facilities or expand existing facilities to support our ongoing development activity;

●

add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our transition to a public company;

●

potentially experience the effects of the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide from ongoing macroeconomic conditions and the geopolitical environment; and

●

operate as a public company.

Because of the numerous risks and uncertainties associated with the development of milademetan and other product candidates and programs and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates and programs. Our future capital requirements will depend on many factors, including:

●

the scope, progress, results and costs of our current and future clinical trials of milademetan for our current targeted indications;

Table of Contents

●

the scope, progress, results and costs of drug discovery, preclinical research and clinical trials for other product candidates;

●

the number of future product candidates that we pursue and their development requirements;

●

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

●

the extent to which we acquire or invest in businesses, products and technologies, including entering into or maintaining licensing or collaboration arrangements for product candidates on favorable terms, although we currently have no commitments or agreements to complete any such transactions;

●

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

●

our headcount growth and associated costs as we expand our business operations and our research and development activities;

●

our ability to successfully acquire or in-license other drugs and technologies;

●

the costs and timing of future commercialization activities, including drug sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval, to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of any collaborator that we may have at such time;

●

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

●

the costs of operating as a public company.

Developing drug products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Until such time, if ever, as we can generate product revenues to support our cost structure, we expect to finance our cash needs through public or private equity offerings, including our ATM Facility, debt financings or other capital sources which may include strategic collaborations, licensing arrangements or other arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts. Our ability to raise additional funds may be adversely impacted by potential worsening global macroeconomic conditions and the disruptions to and volatility in the credit and financial markets in the United States and worldwide. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses and cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Table of Contents

Cash Flows

The following table summarizes our sources and uses of cash and cash equivalents for the nine months ended September 30, 2023 and 2022:


	Nine Months Ended September 30,
	2023		2022

	(in thousands)
Net cash provided by (used in):
Operating activities	$	(52,462)	$	(49,905)
Investing activities		27,341		64,386
Financing activities		478		573
Net (decrease) increase in cash and cash equivalents	$	(24,643)	$	15,054

Operating Activities

We have incurred losses since inception. Net cash used in operating activities for the nine months ended September 30, 2023 was $52.5 million, consisting primarily of net loss of $49.6 million, resulting from expenses associated with research and development activities for our lead product candidate and general and administrative expenses, as well as changes in operating assets and liabilities of $7.3 million, partially offset by non-cash adjustments of $2.4 million.

Net cash used in operating activities for the nine months ended September 30, 2022 was $49.9 million, consisting primarily of net loss of $53.0 million resulting from expenses associated with research and development activities for our lead product candidate and general and administrative expenses. A net decrease in changes in operating assets and liabilities of $0.5 million also contributed to the use of cash. Partially offsetting the cash use were non-cash adjustments of $2.6 million.

Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2023 was $27.3 million, which related to $69.7 million of proceeds received from available for sale securities maturities, partially offset by purchases of available for sale securities of $39.6 million and the previously achieved milestone payment to Daiichi of $2.0 million.

Net cash provided by investing activities for the nine months ended September 30, 2022 was $64.4 million, which related to $99.2 million of proceeds received from available for sale securities maturities, partially offset by purchases of available for sale securities of $34.8 million.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 was $0.5 million, which primarily related to $0.3 million of net proceeds from the ATM Facility, after deducting underwriting discounts and commissions, and other offering fees and $0.2 million of net proceeds from option exercises and employee stock purchase plan (ESPP) purchases.

Net cash provided by financing activities in the nine months ended September 30, 2022 was $0.6 million, which related to the net proceeds from option exercises and ESPP purchases.

Obligations and other Commitments

As discussed in Note 7 to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we are party to agreements to license intellectual property. The license agreements may require us to pay future milestones if certain developmental, regulatory and commercial milestones are achieved, as well as to pay royalties on net sales of products applicable to the license agreements. We cannot estimate if milestone and/or royalty payments will occur in future periods and the agreements are cancelable by us at any time upon prior written notice to the licensor.

Table of Contents

In the normal course of business, we enter into contracts with CROs and other vendors for preclinical studies and clinical trials, research and development supplies and other testing and manufacturing services. These contracts generally do not contain minimum purchase commitments and are cancelable by either party at any time upon prior written notice.

Our incurred and accrued research and development obligations as of September 30, 2023 and December 31, 2022 were $2.9 million and $8.2 million, respectively.

There were no material changes outside of the ordinary course of business to our specific contractual obligations during the three and nine months ended September 30, 2023.

Critical Accounting Policies and Use of Estimates

There have been no significant changes to our critical accounting policies and use of estimates from our disclosure reported in “Critical Accounting Estimates” in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, except as described in Note 2 to the interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Accrued Research and Development

We are required to estimate our expenses resulting from our obligations under contracts with vendors, consultants, CROs and clinical site agreements in connection with conducting preclinical activities and clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. However, some payments are made in arrears and expenditures are accrued for the time periods which services are performed on a pre-determined schedule or when contractual milestones are met. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.

This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred when we have not yet been invoiced or otherwise notified of actual costs. During the course of a preclinical study or clinical trial, we adjust our prepaid and expense recognition if actual results differ from our estimates. To date, we have not experienced any material differences between accrued costs and actual costs incurred. The accrued research and development balances were $2.9 million and $8.2 million as of September 30, 2023 and December 31, 2022, respectively.

Stock-Based Compensation

We follow the provision of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, “Compensation – Stock Compensation” (ASC 718), which requires the measurement and recognition of compensation expense for all stock-based payment awards.

We estimate the fair value of our stock options using the Black-Scholes option pricing model, which requires us to develop subjective estimates to be used in calculating the fair value of stock options. The use of the model requires us to make estimates of subjective assumptions, such as expected stock price volatility and the estimated expected term of each award. The fair value of restricted stock units (RSUs) granted is based on our closing stock price on the date of grant.

Stock-based compensation expense based on the fair value estimated is recognized over the requisite service period of the awards (generally the vesting period) on a straight-line basis. For the three months ended September 30, 2023 and 2022, stock-based compensation expense was $1.2 million and $0.9 million, respectively. For the nine months ended

Table of Contents

September 30, 2023 and 2022, stock-based compensation expense was $3.6 million for each period. The following table summarizes unvested equity compensation costs not yet recognized as of September 30, 2023 and December 31, 2022.


	As of September 30, 2023		As of December 31, 2022
Unvested equity compensation costs not yet recognized (in millions)	$	11.2	$	10.8
Weighted average period over which the unvested awards are expected to be recognized (in years)		2.8		2.5

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of 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 (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the quarter ended September 30, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under 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 is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, 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 management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures.

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Except as discussed in Note 8 to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we are not presently a party to any other legal proceedings that, in the opinion of our management and if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.

Item 1A. Risk Factors.

Our business is subject to various risks, including those described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023. Except as disclosed below, there have been no material changes from the risk factors disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

Our business could face adverse consequences as a result of the actions of activist stockholders.

We are and may in the future be subject to unsolicited attempts to gain control of our company, proxy contests, and other forms of stockholder activism. For example, in October 2023, our board of directors (our Board) received an unsolicited proposal from a stockholder to acquire all outstanding shares of our common stock. Our Board will carefully review and evaluate the proposal in consultation with our independent financial and legal advisors. Our business could be adversely affected because responding to an unsolicited offer, proxy contest or other actions by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees from the execution of our strategy. In addition, actual or perceived uncertainties as to our future direction caused by activist activities may cause or appear to cause instability, potentially making it more difficult to attract and retain qualified personnel and collaborators or leading to the loss of collaboration opportunities, and if individuals are elected to our Board with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans. Activist stockholder activities may also cause significant fluctuations in our stock price based on temporary or speculative market perceptions, or other factors that do not necessarily reflect the fundamental underlying value of our business. Finally, we might experience a significant increase in legal fees and administrative and associated costs incurred in connection with responding to an unsolicited offer, proxy contest or related action. These actions could also negatively affect the price of our common stock.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.

The exhibits file or furnished as part of this Quarterly Report on Form 10-Q are set forth below.


Exhibit Number		Description of Exhibit
3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on April 27, 2021).

3.2		Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 29, 2022).

3.3		Second Amended and Restated Bylaws of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2023).

4.1		Form of Common Stock Certificate of the Registrant (incorporated by reference from Exhibit 4.1 of the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 filed on April 9, 2021).

4.2		Amended and Restated Investors’ Rights Agreement, dated September 2, 2020, by and among the Registrant and certain of its stockholders (incorporated by reference from Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 filed on April 2, 2021).
10.1*		Notice of Lease Terms, effective as of July 26, 2023, between the Registrant and BSP Senita 8000 Jarvis, LLC.
10.2*+		Rain Oncology Inc. Amended and Restated Executive Severance Plan.

31.1*		Certification of the principal executive officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934.

31.2*		Certification of the principal financial officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934.

32.1 (1)		Certification of the principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) under the Securities Exchange Act of 1934.

101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

*	Filed herewith.

+	Indicates management contract or compensatory plan.

(1)	The certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

Table of Contents

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.



	Rain Oncology Inc.

Date: November 9, 2023	By:	/s/ Avanish Vellanki
		Avanish Vellanki
		Chairman and Chief Executive Officer (principal executive officer)

Date: November 9, 2023	By:	/s/ Josephine Bruce
		Josephine Bruce
		Director of Accounting (principal financial and accounting officer)