SQZ Biotechnologies Co - Quarter Report: 2023 June (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2023


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

For the transition period from to

Commission File Number: 001-39662

SQZ BIOTECHNOLOGIES COMPANY

(Exact Name of Registrant as Specified in its Charter)


Delaware		46-2431115
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Arsenal Yards Blvd, Suite 210 Watertown, MA		02472
(Address of principal executive offices)		(Zip Code)

(617) 758-8672

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	SQZB	OTC Markets

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

As of August 4, 2023, the registrant had 29,491,125 shares of common stock, $0.001 par value per share, outstanding.

SQZ BIOTECHNOLOGIES COMPANY

Table of Contents


		Page
	Forward-Looking Statements		1
PART I.	FINANCIAL INFORMATION		2
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets		2
	Condensed Consolidated Statements of Operations and Comprehensive Loss		3
	Condensed Consolidated Statements of Stockholders’ Equity		4
	Condensed Consolidated Statements of Cash Flows		5
	Notes to Unaudited Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.	Controls and Procedures		25
PART II.	OTHER INFORMATION		26
Item 1.	Legal Proceedings		26
Item 1A.	Risk Factors		26
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities		28
Item 3.	Defaults Upon Senior Securities		28
Item 4.	Mine Safety Disclosures		28
Item 5.	Other Information		28
Item 6.	Exhibits		29
Signatures			30

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report, including without limitation statements regarding our plans to develop, manufacture and commercialize our product candidates, the timing or outcome of our ongoing or planned clinical trials for SQZ-AAC-HPV, SQZ-eAPC-HPV or any of our future product candidates, the clinical utility of our product candidates, the anticipated impact of overall economic conditions on our business and operations, including manufacturing, research and development, clinical trials and employees, our cash needs and availability, the sufficiency of our cash and cash equivalents and our ability to raise additional capital to fund our operations, the impact of our delisting from the New York Stock Exchange (the “NYSE”), our plans to explore potential strategic alternatives to support the advancement of our oncology programs, our plans to mitigate the risk that we are unable to continue as a going concern, and the plans and objectives of management for future operations, are forward-looking statements.

The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those projected in the forward-looking statements, including, but not limited to, risks and uncertainties related to our ability to continue as a going concern; risks related to the delisting of our common stock from the NYSE; our limited operating history; our significant losses incurred since inception and expectation to incur significant additional losses for the foreseeable future; the development of our initial product candidates, upon which our business is highly dependent; the impact of overall economic conditions on our operations and clinical activities; our need for additional funding and our cash runway; restructuring activities; the lengthy, expensive, and uncertain process of clinical drug development, including uncertain outcomes of clinical trials and potential delays in regulatory approval; our ability to maintain our relationships with our third party vendors and strategic collaborators; protection of our proprietary technology, intellectual property portfolio and the confidentiality of our trade secrets; general economic conditions and other important factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, this Quarterly Report on Form 10-Q and our other filings with the U.S. Securities and Exchange Commission.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SQZ BIOTECHNOLOGIES COMPANY

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)


	JUNE 30,			DECEMBER 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	24,710		$	63,709
Prepaid expenses and other current assets		2,975			4,495
Total current assets		27,685			68,204
Property and equipment, net		1,612			1,959
Restricted cash		2,305			2,305
Operating lease right-of-use assets		22,546			27,432
Total assets	$	54,148		$	99,900
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,563		$	2,511
Accrued expenses		4,861			8,893
Accrued restructuring expenses		328			3,162
Deferred revenue		500			715
Current portion of operating lease liabilities		2,659			6,562
Total current liabilities		9,911			21,843
Operating lease liabilities, net of current portion		19,700			20,909
Total liabilities		29,611			42,752
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2023 and December 31, 2022; No shares issued or outstanding.		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized at June 30, 2023 and December 31, 2022; 29,491,125 shares issued and outstanding at June 30, 2023 and December 31, 2022.		29			29
Additional paid-in capital		333,939			332,093
Accumulated deficit		(309,431	)		(274,974	)
Total stockholders’ equity		24,537			57,148
Total liabilities and stockholders’ equity	$	54,148		$	99,900

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

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SQZ BIOTECHNOLOGIES COMPANY

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)


	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2023			2022			2023			2022
Revenue:
Collaboration revenue	$	178		$	3,008		$	178		$	5,877
Grant revenue		—			207			—		$	207
Total revenue		178			3,215			178			6,084
Operating expenses:
Research and development		12,729			18,760			25,705			35,771
General and administrative		4,557			6,958			9,836			13,870
Total operating expenses		17,286			25,718			35,541			49,641
Loss from operations		(17,108	)		(22,503	)		(35,363	)		(43,557	)
Other income (expense):
Interest income		340			156			845			172
Other income (expense), net		(2	)		111			61			111
Total other income, net		338			267			906			283
Net loss and comprehensive loss		(16,770	)		(22,236	)		(34,457	)		(43,274	)
Net loss per share, basic and diluted	$	(0.57	)	$	(0.78	)	$	(1.17	)	$	(1.53	)
Weighted-average common shares outstanding, basic and diluted		29,491,125			28,367,355			29,491,125			28,256,810

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

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SQZ BIOTECHNOLOGIES COMPANY

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)


	COMMON STOCK
	SHARES		AMOUNT		ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT			TOTAL STOCKHOLDERS’ EQUITY
Balances at March 31, 2023		29,491,125	$	29	$	332,788	$	(292,661	)	$	40,156
Stock-based compensation expense		—		—		1,151		—			1,151
Net loss		—		—		—		(16,770	)		(16,770	)
Balances at June 30, 2023		29,491,125	$	29	$	333,939	$	(309,431	)	$	24,537


	COMMON STOCK				ADDITIONAL					TOTAL
	SHARES		AMOUNT		PAID-IN CAPITAL		ACCUMULATED DEFICIT			STOCKHOLDERS’ EQUITY
Balances at March 31, 2022		28,148,125	$	28	$	321,434	$	(216,548	)	$	104,914
Issuance of common stock under employee stock purchase plan		41,265		—		111		—			111
Issuance of common stock under at-the-market offering, net of issuance costs of $192		958,663		1		3,091					3,092
Stock-based compensation expense		—		—		2,307		—			2,307
Net loss		—		—		—		(22,236	)		(22,236	)
Balances at June 30, 2022		29,148,053	$	29	$	326,943	$	(238,784	)	$	88,188


	COMMON STOCK
	SHARES		AMOUNT		ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT			TOTAL STOCKHOLDERS’ EQUITY
Balances at December 31, 2022		29,491,125	$	29	$	332,093	$	(274,974	)	$	57,148
Stock-based compensation expense		—		—		1,846		—			1,846
Net loss		—		—		—		(34,457	)		(34,457	)
Balances at June 30, 2023		29,491,125	$	29	$	333,939	$	(309,431	)	$	24,537


	COMMON STOCK				ADDITIONAL					TOTAL
	SHARES		AMOUNT		PAID-IN CAPITAL		ACCUMULATED DEFICIT			STOCKHOLDERS’ EQUITY
Balances at December 31, 2021		28,133,368	$	28	$	319,458	$	(195,510	)	$	123,976
Issuance of common stock upon exercise of stock options		14,757		—		29		—			29
Issuance of common stock under employee stock purchase plan		41,265		—		111		—			111
Issuance of common stock under at-the-market offering, net of issuance costs of $192		958,663		1		3,091		—			3,092
Stock-based compensation expense		—		—		4,254		—			4,254
Net loss		—		—		—		(43,274	)		(43,274	)
Balances at June 30, 2022		29,148,053	$	29	$	326,943	$	(238,784	)	$	88,188

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

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SQZ BIOTECHNOLOGIES COMPANY

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	SIX MONTHS ENDED JUNE 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(34,457	)	$	(43,274	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense		409			558
Amortization of operating lease right-of-use assets		4,886			4,882
Stock-based compensation expense		1,846			4,254
(Gain) Loss on disposal of equipment		(106	)		42
Changes in operating assets and liabilities:
Accounts receivable		—			3,000
Prepaid expenses and other current assets		1,520			(356	)
Accounts payable		(948	)		(2,278	)
Accrued expenses		(4,032	)		2,901
Accrued restructuring expenses		(2,833	)		—
Deferred revenue		(215	)		(5,877	)
Operating lease liabilities		(5,112	)		(4,762	)
Net cash used in operating activities		(39,042	)		(40,910	)
Cash flows from investing activities:
Purchases of property and equipment		(112	)		(308	)
Proceeds from disposals of property and equipment		155			34
Net cash provided by (used in) investing activities		43			(274	)
Cash flows from financing activities:
Proceeds from issuance of common stock under at-the market offering		—			3,092
Proceeds from issuance of common stock under employee stock purchase plan		—			111
Proceeds from exercise of stock options		—			29
Net cash provided by financing activities		—			3,232
Net (decrease) increase in cash, cash equivalents and restricted cash		(38,999	)		(37,952	)
Cash, cash equivalents and restricted cash at beginning of period		66,014			145,818
Cash, cash equivalents and restricted cash at end of period	$	27,015		$	107,866
Supplemental disclosure of non-cash investing and financing activities:
Deferred offering costs included in accrued expenses at end of period	$	—		$	106

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

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SQZ BIOTECHNOLOGIES COMPANY

Notes to Unaudited Condensed Consolidated Financial Statements

1. Nature of the Business and Basis of Presentation

SQZ Biotechnologies Company (the “Company”) is a clinical-stage biotechnology company developing cell therapies for patients with cancer and other serious medical conditions. The Company uses its proprietary technology, Cell Squeeze, to physically squeeze cells through a microfluidic chip, temporarily opening the cell membrane and enabling biologic material of interest, or cargo, to diffuse into the cell. The Company is using Cell Squeeze technology to create multiple cell therapy platforms focused on directing specific immune responses. The Company was incorporated in March 2013 under the laws of the State of Delaware.

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

Since inception, the Company has funded its operations primarily with payments received in connection with collaboration agreements, proceeds from equity and debt financing, and most recently, with proceeds from its 2020 initial public offering (“IPO”) and its 2021 follow-on offering (the "Follow-On Offering"), and an Open Market Sales Agreement (the "Sales Agreement"). On November 10, 2021, the Company entered into the Sales Agreement with Jefferies LLC (“Jefferies”) to issue and sell up to $75,000,000 in shares of the Company’s common stock from time to time during the term of the Sales Agreement through an “at-the-market” equity offering program under which Jefferies acts as the Company’s sales agent (the “ATM Facility”). The Company did not sell any shares under the ATM Facility during both the three and six months ended June 30, 2023. During the three and six months ended June 30, 2022, the Company sold 958,663 shares of common stock under the ATM Facility for net proceeds of approximately $3.1 million.

Going Concern Assessment

Management has assessed the Company’s ability to continue as a going concern in accordance with the requirements of ASC 205-40, taking into consideration its recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future and the need to raise additional capital to finance future operations. Through June 30, 2023, the Company has funded its operations primarily with proceeds from sales of convertible preferred stock, payments received in connection with collaboration agreements, proceeds from borrowings under a convertible promissory note, which converted into shares of convertible preferred stock, and more recently the proceeds from its IPO, the Follow-On Offering and the ATM Facility. The Company has incurred recurring losses since inception, including a net loss of $34.5 million for the six months ended June 30, 2023. As of June 30, 2023, the Company had an accumulated deficit of $309.4 million. Based on its current cash expenditure forecast, the Company expects that its existing cash and cash equivalents will fund its operations through the end of 2023.

The Company expects to continue to generate operating losses in the foreseeable future. As of August 10, 2023, the issuance date of the interim condensed consolidated financial statements for the three and six months ended June 30, 2023, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these interim condensed consolidated financial statements are issued. The Company will require additional funding through private or public equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. If the Company is unable to obtain funding, the Company will be forced to incur additional restructuring costs, delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, or at all. See Note 13, Subsequent Events.

The Company has announced that it has determined to pursue potential strategic alternatives to support the advancement of its oncology and other programs, including HPV 16 positive tumors, in an effort to allow the Company to partner its clinical and preclinical assets across all disease areas and indications. Potential strategic partnerships may include, but are not limited to, a partnership, acquisition, merger, business combination, or other transaction. There can be no assurance that this process will result in the Company pursuing a

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transaction or that any transaction, if pursued, will be completed on attractive terms. The Company has not set a timetable for completion of this process and does not intend to comment further unless or until the Board of Directors has approved a definitive course of action, the process is concluded, or it is determined that other disclosure is appropriate.

The accompanying interim condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Accordingly, the interim condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Impact of Macroeconomic Conditions

The global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including, for example, severely diminished liquidity and credit availability, rising interest and inflation rates, crises involving banking and financial institutions, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. The Company is monitoring the potential impact of general economic conditions on its business and financial statements. To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of general economic conditions and it is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in these interim condensed consolidated financial statements. Unstable market and economic conditions or pandemics may have serious adverse consequences on the Company's business, financial condition and results of operations.

Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, SQZ Biotechnologies Security Corporation, SQZ Biotech HK Limited and SQZ Biotech (Shanghai) Co., Ltd. All intercompany accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The accompanying condensed consolidated balance sheet as of December 31, 2022 was derived from audited financial statements but does not include all disclosures required by GAAP. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 22, 2023. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position as of June 30, 2023, the consolidated results of operations for the three and six months ended June 30, 2023 and 2022, and the consolidated cash flows for the six months ended June 30, 2023 and 2022 have been made. The Company’s consolidated results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for the full year or any other subsequent interim period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses, and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, judgments and methodologies as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

Segment Information

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The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company is developing methods of engineering cell function and therapies for the treatment of patients across a range of indications. The Company has determined that its chief operating decision maker is its interim Chief Executive Officer. The Company’s chief operating decision maker reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and assessing financial performance.

Recently Issued Accounting Pronouncements

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.

3. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis (in thousands):


	FAIR VALUE MEASUREMENTS AT JUNE 30, 2023 USING:
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Assets:
Cash equivalents:
Money market funds	$	22,233	$	—	$	—	$	22,233
	$	22,233	$	—	$	—	$	22,233


	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2022 USING:
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Assets:
Cash equivalents:
Money market funds	$	62,598	$	—	$	—	$	62,598
	$	62,598	$	—	$	—	$	62,598

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. There were no changes to the valuation methods during the six months ended June 30, 2023.The Company evaluates transfers between levels at the end of each reporting period. There were no transfers between levels during the six months ended June 30, 2023.

4. Property and Equipment, Net

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


	JUNE 30,			DECEMBER 31,
	2023			2022
Machinery and equipment	$	6,530		$	6,840
Leasehold improvements		579			579
Furniture and fixtures		319			319
	$	7,428		$	7,738
Less: Accumulated depreciation and amortization		(5,816	)		(5,779	)
	$	1,612		$	1,959

Depreciation and amortization expense for the three months ended June 30, 2023 and 2022 was $0.2 million and $0.3 million respectively. Depreciation and amortization expense for the six months ended June 30, 2023 and 2022 was $0.4 million and $0.6 million, respectively.

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5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	JUNE 30,		DECEMBER 31,
	2023		2022

Accrued external research, development and manufacturing costs	$	3,390	$	5,264
Accrued employee compensation and benefits		198		2,578
Other		1,273		1,051
	$	4,861	$	8,893

6. Stock-Based Compensation

The following table summarizes the Company’s stock option activity since December 31, 2022:


	NUMBER OF SHARES			WEIGHTED- AVERAGE EXERCISE PRICE		WEIGHTED- AVERAGE REMAINING CONTRACTUAL TERM		INTRINSIC VALUE
						(in years)		(in thousands)
Outstanding at December 31, 2022		5,358,310		$	8.09		5.26	$	—
Granted		3,156,275			0.71
Forfeited or canceled		(1,015,386	)		7.89
Outstanding at June 30, 2023		7,499,199		$	5.01		7.15	$	—
Vested and expected to vest at June 30, 2023		7,499,199		$	5.01		7.15	$	—
Options exercisable at June 30, 2023		3,494,528		$	7.47		4.75	$	—

Stock-Based Compensation Expense

Stock-based compensation expense related to stock options was classified in the consolidated statements of operations as follows (in thousands):


	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
	2023		2022		2023		2022
Research and development expenses	$	490	$	874	$	929	$	1,529
General and administrative expenses		661		1,433		917		2,725
	$	1,151	$	2,307	$	1,846	$	4,254

As of June 30, 2023, total unrecognized stock-based compensation expense related to unvested stock-based awards was $7.5 million, which is expected to be recognized over a weighted-average period of 2.8 years.

7. Income Taxes

For the three and six months ended June 30, 2023 and 2022, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each period, due to its uncertainty of realizing a benefit from those items. Substantially all of the Company’s operating losses since inception have been generated in the United States.

8. Commitments and Contingencies

Leases

The Company’s commitments under its leases are described in Note 9.

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License and Supply Agreements

License Agreement with Massachusetts Institute of Technology

In December 2015, the Company entered into an exclusive patent license agreement with the Massachusetts Institute of Technology (“MIT”) (the “MIT Agreement”). The MIT Agreement replaced a May 2013 exclusive agreement with MIT. Under the MIT Agreement, the Company received an exclusive license under the licensed patent rights to develop, manufacture and commercialize any products related to certain intracellular delivery methods that were developed at MIT.

As of June 30, 2023 and December 31, 2022, the Company had no outstanding liabilities related to the MIT Agreement. During each of the three and six months ended June 30, 2023 and 2022, the Company recognized less than $0.1 million in research and development expense under the sublicense terms of the MIT Agreement.

Manufacturing Services Agreements

The Company has entered into agreements with contract manufacturing organizations to provide manufacturing services related to its product candidates. As of June 30, 2023, the Company had no non-cancelable payments under these agreements, as amended, other than the amounts included in the current portion of operating lease liabilities on the Company's consolidated balance sheets.

401(k) Plan

The Company sponsors a 401(k) defined contribution benefit plan (the “401(k) Plan”), which covers all employees who meet certain eligibility requirements as defined in the 401(k) Plan and allows participants to defer a portion of their annual compensation on a pre-tax basis. Contributions to the 401(k) Plan may be made at the discretion of management. For each of the six months ended June 30, 2023 and 2022, the Company contributed $0.1 million to the 401(k) Plan.

Indemnification Agreements

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

Legal Proceedings

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

9. Leases

As of June 30, 2023, the Company leases its office and laboratory facilities under a non-cancelable operating lease entered into in December 2018, which included lease incentives, payment escalations and rent holidays. In addition, the Company has an agreement entered into in April 2019 with a contract manufacturing supplier that is considered an embedded lease because the Company has substantially all the economic benefits of the related asset and can direct its use. The Company had not entered into any financing leases or any short-term operating leases as of June 30, 2023 and December 31, 2022.

The components of lease cost were as follows (in thousands):


	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
	2023		2022		2023		2022
Lease cost:
Operating lease cost	$	3,391	$	3,760	$	6,749	$	7,520
Variable lease cost		410		414		821		970
	$	3,801	$	4,174	$	7,570	$	8,490

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10. License and Collaboration Agreements

2018 License and Collaboration Agreement with Roche

In October 2018, the Company entered into a license and collaboration agreement (the “2018 Roche Agreement”) with F. Hoffmann-La Roche Ltd (“Roche Basel”) and Hoffmann-La Roche Inc. (“Roche US”, and together with Roche Basel, “Roche”) to jointly develop certain products based on mononuclear antigen presenting cells (“APCs”), including human papillomavirus (“HPV”), using the SQZ APC platform for the treatment of oncology indications. The Company granted Roche a non-exclusive license to its intellectual property, and Roche granted the Company a non-exclusive license to its and its affiliates’ intellectual property for the purpose of performing research activities. In connection with this agreement, the parties terminated an earlier agreement. The 2018 Roche Agreement has a term that extends until all royalty, profit-share and other payment obligations expire or have been satisfied. Roche has the right to terminate the 2018 Roche Agreement, in whole or on a product-by-product basis, upon a specified amount of notice to the Company. The Company or Roche may terminate the agreement if the other party fails to cure its material breach within a specified period after receiving notice of such breach.

Under the 2018 Roche Agreement, Roche was granted option rights to obtain an exclusive license to develop APC products or products derived from the collaboration programs on a product-by-product basis. These option rights were exercisable upon the achievement of clinical Phase 1 proof of concept and expire, if unexercised, as of a date specified in the agreement. In addition, Roche was granted an option right to obtain an exclusive license to develop a Tumor Cell Lysate (“TCL”) product. This option right is exercisable upon the achievement of clinical proof of concept and expires, if unexercised, as of a date specified in the agreement. For each of the APC products and TCL product, if Roche exercises its option and pays a specified incremental amount ranging from $15.0 million to $50.0 million for APC products and of $100.0 million for the TCL product, Roche would receive worldwide, exclusive commercialization rights for the licensed products, subject to the Company’s alternating option to retain U.S. APC commercialization rights. The Company will retain worldwide commercialization rights to any APC products or the TCL product for which Roche elects not to exercise its applicable option. For the first APC product that Roche exercises its option, Roche will receive worldwide, exclusive commercialization rights for the licensed product. On a product-by-product basis for the APC products, after the first product option is exercised by Roche and for every other product for which Roche exercises its option, the Company will retain an option to obtain the exclusive commercialization rights in the United States. Upon exercise of the TCL option by Roche, (i) the Company will be entitled to receive the aforementioned milestone payment of $100.0 million and (ii) profits from the TCL product will be shared equally by the Company and Roche. In July 2023, Roche determined that it would not exercise its option under the 2018 Roche Agreement, to obtain an exclusive license to develop and commercialize the Company’s candidate targeting HPV 16 positive solid tumors under the Company’s SQZ-APC-HPV program. See Note 13, Subsequent Events.

Under the 2018 Roche Agreement, the Company received an upfront payment of $45.0 million and is eligible to receive (i) reimbursement of a mid-double-digit percentage of its development costs; (ii) aggregate milestone payments on a product-by-product basis of up to $1.6 billion upon the achievement of specified milestones, consisting of up to $217.0 million of development milestone payments, up to $240.0 million of regulatory milestone payments and up to $1.2 billion of sales milestone payments; and (iii) tiered royalties on annual net sales of APC and TCL products licensed under the agreement, as described below. The Company received the upfront payment of $45.0 million in October 2018 upon execution of the agreement. In addition, during the second quarter of 2019, the Company received a payment of $10.0 million following the achievement of the first development milestone under the 2018 Roche Agreement related to submission by the Company of preclinical data to the U.S. Food and Drug Administration (“FDA”). During the first quarter of 2020, the Company received a payment of $20.0 million following the achievement of the second development milestone under the 2018 Roche Agreement related to first-patient dosing in a Phase 1 clinical trial. In the first quarter of 2022, the Company received a milestone payment of $3.0 million having achieved in the fourth quarter of 2021 the following: (i) the endorsement by an independent panel that it could advance its SQZ-PBMC-HPV clinical trial to combination therapy using checkpoint inhibitors and (ii) the initiation of that therapy.

The Company identified three performance obligations at the outset of the 2018 Roche Agreement: (1) the license to the Company’s intellectual property, the research and development activities related to HPV through Phase 1 clinical trials under a specified research plan, and the manufacturing of the Company’s SQZ APC platform and equipment in order to support the HPV research plan (the “first performance obligation”); (2) the license to the Company’s intellectual property and the research and development activities on next-generation APCs (the “second performance obligation”); and (3) the license to the Company’s intellectual property and the research and development activities on TCL (the “third performance obligation”).

The Company separately recognizes revenue associated with each of the three performance obligations as the research, development and manufacturing services are provided using an input method, based on the cumulative costs incurred compared to the total estimated costs expected to be incurred to satisfy each performance obligation. The transfer of control to the customer occurs over the time period that the research and development services are to be provided by the Company, and this cost-to-cost method is, in management’s judgment,

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the best measure of progress towards satisfying each performance obligation. The amounts received that have not yet been recognized as revenue are deferred as a contract liability in the Company’s consolidated balance sheet and will be recognized over the remaining research and development period until each performance obligation is satisfied.

During the three months ended June 30, 2023, as a result of the determination by Roche that it would not exercise its option in relation to the first performance obligation (see Note 13, Subsequent Events), the Company concluded that it would incur no further costs to satisfy its performance obligations under the 2018 Roche Agreement and as a result fully recognized the remaining deferred revenue. The Company recognized $0.2 million and $3.0 million during the three months ended June 30, 2023 and 2022, respectively, under this agreement. The Company recognized $0.2 million and $5.9 million during the six months ended June 30, 2023 and 2022, respectively, under this agreement. As of June 30, 2023, the Company had fully recognized all deferred revenue related to the 2018 Roche Agreement.

11. Net Loss per Share

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


	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2023			2022			2023			2022
Numerator:
Net loss	$	(16,770	)	$	(22,236	)	$	(34,457	)	$	(43,274	)
Denominator:
Weighted-average common shares outstanding, basic and diluted		29,491,125			28,367,355			29,491,125			28,256,810
Net loss per share attributable to common stockholders, basic and diluted	$	(0.57	)	$	(0.78	)	$	(1.17	)	$	(1.53	)

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


	JUNE 30,
	2023		2022
Stock options to purchase common stock		7,499,199		6,578,538
		7,499,199		6,578,538

12. Restructuring

On November 30, 2022, the Company’s Board of Directors approved a restructuring plan and strategic prioritization (the “Restructuring”) of its clinical portfolio to concentrate on the development of its second-generation enhanced Antigen Presenting Cells (eAPC) cell therapy program. In connection with the Restructuring, the Company reprioritized its clinical and development programs, determined to terminate operations in its Hong Kong and China subsidiaries and the Board of Directors approved a workforce reduction of approximately 60%, including research and development and general and administrative support functions in the United States and China. In the first quarter of 2023, the Company decided to continue to enroll patients in its SQZ-AAC-HPV clinical trial.

The following table summarizes the activity for accrued restructuring costs for the six months ended June 30, 2023 (in thousands):


	Employee Related Costs			Facility Related Costs			Total
Balance as of December 31, 2022	$	3,162		$	—		$	3,162
Expenses incurred		(7	)		—			(7	)
Payments		(2,758	)		(69	)		(2,827	)
Balance as of June 30, 2023	$	397		$	(69	)	$	328

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During the six months ended June 30, 2023, the Company recorded a net reduction of $7 thousand of restructuring charges based on a revised estimate of remaining employee related restructuring costs.

The accrued restructuring liability of $0.3 million is payable within the next twelve months and has been included as accrued restructuring costs in current liabilities in the consolidated balance sheet. The remaining accrued restructuring charges are subject to assumptions, and actual amounts may differ. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the Restructuring.

13. Subsequent Events

On July 3, 2023, the Company received a written notice from the New York Stock Exchange (“NYSE”) notifying the Company that the NYSE will commence proceedings to delist the Company’s common stock (“Common Stock”) from the NYSE. The NYSE reached this determination pursuant to Section 802.01B of the NYSE’s Listed Company Manual because the Company had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization of at least $15 million over a consecutive 30-trading day period. The NYSE suspended trading in the Common Stock immediately after market close on July 3, 2023. The Company’s common stock began trading in the over-the-counter markets under the symbol SQZB commencing on July 5, 2023.

On July 25, 2023, the Company announced that Roche determined that it will not exercise its option under the License and Collaboration Agreement, dated October 5, 2018, by and between the Company and Roche, to obtain an exclusive license to develop and commercialize the Company’s candidate targeting HPV 16 positive solid tumors under the Company’s SQZ-APC-HPV program. The Company will regain full clinical development and future commercialization rights for its programs targeting HPV 16 positive tumors. The Company also announced that it intends to explore potential strategic alternatives to support the advancement of its oncology and other programs, including HPV 16 positive tumors, in an effort to allow the Company to partner its clinical and preclinical assets across all disease areas and indications. In July 2023, the Company engaged an investment bank to assist in evaluating strategic alternatives. Potential strategic partnerships may include, but are not limited to, a partnership, acquisition, merger, business combination, or other transaction. There can be no assurance that this process will result in the Company pursuing a transaction or that any transaction, if pursued, will be completed on attractive terms. the Company has not set a timetable for completion of this process and does not intend to comment further unless or until the Board of Directors has approved a definitive course of action, the process is concluded, or it is determined that other disclosure is appropriate.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission, or SEC, on March 22, 2023 (the “2022 Form 10-K”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of our 2022 Form 10-K and this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biotechnology company focused on unlocking the full potential of cell therapies to benefit patients with cancer and other serious medical conditions. The company was founded on the therapeutic potential of Cell Squeeze®, our proprietary technology which allows for rapid delivery of a variety of cargo into different cell types. We aim to create multiple cell therapies that drive the immune system to combat diseases.

On November 30, 2022, our Board of Directors approved a restructuring plan and strategic prioritization of our clinical portfolio (the Restructuring Plan) to concentrate on the development of our second-generation enhanced Antigen Presenting Cells (eAPC) cell therapy program, focused on HPV16 positive recurrent, locally advanced, or metastatic solid tumors and reduce our workforce by approximately 60 percent. On November 30, 2022, the Board appointed Howard Bernstein, MD, PhD, our director and former Chief Scientific Officer, as Interim Chief Executive Officer.

Additionally, on November 30, 2022, we announced a pause of our Antigen Presenting Cells (APC), Activating Antigen Carrier (AAC) and Tolerizing Antigen Carrier (TAC) programs. This portfolio prioritization was designed to allow us to deliver initial data readouts for the SQZ® eAPC program’s highest-dose monotherapy cohort, which we anticipate in the third quarter of 2023. We will continue to explore partnerships and collaborations for our earlier stage assets and programs, including TAC, as well as our point-of-care manufacturing capabilities.

In oncology, we are developing cell therapy platforms that are based on directing tumor antigen-specific immune activation via engineered antigen presentation. We believe that by engineering physiological antigen presentation signals in subsets of peripheral blood cells that act on immune priming pathways, we have the potential to develop cell therapies that are designed to be potent drivers of tumor-specific immunity, well-tolerated, administered without lymphodepleting preconditioning or hospitalization, and produced in under 24 hours.

We have continued to build upon the progress of our SQZ® APC platform through the development of the novel SQZ® eAPC platform. Our lead eAPC product candidate leverages the added capabilities and functionality of multiple antigen presentation and immunological signals achieved through multiplexed mRNA delivery to diverse immune cell types. In January 2022, we received allowance to proceed with clinical trials from the U.S. Food and Drug Administration, or FDA, under our Investigational New Drug, or IND, application for SQZ-eAPC-HPV, our lead eAPC candidate engineered with HPV16 antigens and costimulatory signals. We initiated the SQZ-eAPC-HPV trial, the COMMANDER-001 Phase 1/2 study, in patients with HPV16+ advanced solid tumors in the first half of 2022. We expect to announce initial data from highest-dose monotherapy cohort in this trial in the third quarter of 2023.

At the time of the November 2022 strategic realignment announcement, the SQZ-AAC-HPV trial had one patient in the lowest-dose cohort on study. On December 21, 2022, after two treatment cycles, the patient’s CT scan showed reduction of the target lesion—a right hilar lymph node—from 16 millimeters (mm) at baseline to 10mm, or approximately 38% from baseline, which was consistent with a partial response by RECIST 1.1 criteria. A subsequent scan on February 2, 2023, after four treatment cycles, showed further reduction of the target lesion to 8mm, or 50% from baseline, which was consistent with a confirmed partial response / unconfirmed complete response by RECIST 1.1 criteria, as well as an unconfirmed complete response. In March 2023, after seven cycles of SQZ-AAC-HPV, a CT scan confirmed the complete response by RECIST 1.1 criteria. Biomarker analysis on this patient identified an inflamed tumor microenvironment that highly expressed MHC1 cells and an increase in CD8+ cell density was observed. In light of this response in the first patient dosed, we decided to continue to enroll patients in the SQZ-AAC-HPV clinical trial. We subsequently enrolled two additional patients in the low-dose cohort of the SQZ-AAC-HPV trial. Both patients achieved a best overall response of stable disease.

Upon completion of the dose-limiting toxicity period for the lowest-dose cohort and following review and recommendation by the Study Safety Committee, we advanced SQZ-AAC-HPV-101 trial to the highest-dose cohort.

NYSE Delisting

On July 3, 2023, we received a written notice from the New York Stock Exchange (“NYSE”) notifying us that the NYSE commenced proceedings to delist our common stock (“Common Stock”) from the NYSE. The NYSE reached this determination pursuant to Section 802.01B of the NYSE’s Listed Company Manual because the Company had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization of at least $15 million over a consecutive 30-trading day period.

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The NYSE suspended trading in the Common Stock immediately after market close on July 3, 2023. Our Common Stock began trading in the over-the-counter markets, under the symbol SQZB, commencing on July 5, 2023.The over-the-counter markets are significantly more limited than the NYSE, and quotation on the over-the-counter markets may result in a less liquid market available for existing and potential securityholders to trade the Common Stock and could further depress the trading price of the Common Stock. We can provide no assurance that the Common Stock will continue to trade on the over-the-counter markets, whether broker-dealers will continue to provide public quotes of the Common Stock or whether the trading volume of the Common Stock will be sufficient to provide for an efficient trading market. See Part I, Item 1A. “Risk Factors—An active, liquid trading market for our common stock may not be sustained” in the 2022 Form 10-K.

Recent Developments

On July 25, 2023, we announced that F. Hoffmann-La Roche Ltd (“Roche Basel”) and Hoffmann-La Roche Inc. (“Roche US”, and together with Roche Basel, “Roche”) determined that Roche will not exercise its option under the License and Collaboration Agreement, dated October 5, 2018, by and between us and Roche, to obtain an exclusive license to develop and commercialize the Company’s candidate targeting HPV 16 positive solid tumors under our SQZ-APC-HPV program. We will regain full clinical development and future commercialization rights for our programs targeting HPV 16 positive tumors. We also announced that we intend to explore potential strategic alternatives to support the advancement of our oncology programs including HPV 16 positive tumors, in an effort to allow us to partner all our clinical and preclinical assets across all disease areas and indications. Potential strategic partnerships may include, but are not limited to, a partnership, acquisition, merger, business combination, or other transaction. There can be no assurance that this process will result in us pursuing a transaction or that any transaction, if pursued, will be completed on attractive terms. We have not yet set a timetable for completion of this process and do not intend to comment further unless or until the Board of Directors has approved a definitive course of action, the process is concluded, or it is determined that other disclosure is appropriate.

Other Developments

Since our inception, we have focused substantially all of our resources on building our Cell Squeeze technology, establishing and protecting our intellectual property portfolio, conducting research and development activities, developing our manufacturing process and manufacturing product candidate materials, preparing for and initiating clinical trials of our product candidates, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. Through June 30, 2023, we have funded our operations primarily with upfront and milestone payments received under our collaboration agreements with Hoffman La Roche Inc. and F. Hoffman La Roche Ltd. (together, "Roche",) and with proceeds from equity and debt offerings, most recently from our initial public offering, or IPO, follow-on public offering of common stock, or the Follow-on Offering, and our at-the market offering facility with Jefferies LLC ("ATM Facility").

Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. We reported a net loss of $34.5 million for the six months ended June 30, 2023. As of June 30, 2023, we had an accumulated deficit of $309.4 million. Although we anticipate reduced quarterly expenses in each of the remaining quarters in 2023 as a result of the 2022 Restructuring Plan, we expect to continue to incur significant expenses and increasing operating losses. Absent significant changes to our current operating structure, we expect that although our anticipated quarterly expenses for the remainder of 2023 will be lower compared to the corresponding quarters in 2022, we will continue to incur substantial expenses in connection with our ongoing activities, particularly if and as we:

•

conduct clinical trials for our product candidates, including our ongoing clinical trials of SQZ-AAC-HPV and SQZ-eAPC-HPV;

•

further develop our Cell Squeeze® technology;

•

continue to develop additional product candidates;

•

maintain, expand and protect our intellectual property portfolio;

•

hire additional clinical, scientific manufacturing and commercial personnel;

•

expand external and/or establish internal commercial manufacturing sources and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;

•

acquire or in-license other product candidates and technologies;

•

seek regulatory approvals for any product candidates that successfully complete clinical trials;

•

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

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•

add operational, financial and management information systems and personnel to support our product development, clinical execution and planned future commercialization efforts, as well as to continue to support our status as a public company.

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

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. Currently, market conditions in the biotechnology sector are challenging due to ongoing global and economic uncertainties. Accordingly, 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 fail to raise capital or enter into such agreements as, and when, needed, we would have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with cell therapy product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of August 10, 2023, the issuance date of the interim condensed consolidated financial statements for the three and six months ended June 30, 2023, included elsewhere in this Quarterly Report on Form 10-Q, based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future and the need to raise additional capital to finance future operations, our management has concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that the condensed consolidated financial statements are issued. See “—Liquidity and Capital Resources.”

Impact of Macroeconomic Conditions

The global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including, for example, severely diminished liquidity and credit availability, rising interest and inflation rates, crises involving banking and financial institutions, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. We are monitoring the potential impact of general economic conditions on our business and financial statements. To date, we have not incurred impairment losses in the carrying values of our assets as a result of general economic conditions and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in these interim condensed consolidated financial statements. Unstable market and economic conditions or pandemics may have serious adverse consequences on our business, financial condition and results of operations.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to do so for the next several years. All of our revenue to date has been derived from three collaboration agreements with Roche, and, to a lesser extent, from government grants.

If our development efforts for our product candidates are successful and result in regulatory approval, or in license or additional collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from additional collaboration or license agreements that we may enter into with third parties, or any combination thereof. We expect that our revenue for the next several years will be derived primarily from collaborations that we may enter into in the future. We cannot provide assurance as to the timing of future milestone or royalty payments or that we will receive any of these payments at all.

Collaboration Revenue

2018 License and Collaboration Agreement with Roche

In October 2018, we entered into a license and collaboration agreement with Roche, or the 2018 Roche Agreement, to jointly develop certain products based on mononuclear antigen presenting cells, or APCs, including human papillomavirus, or HPV, using our SQZ APC platform for the treatment of oncology indications. We granted Roche a non-exclusive license to our intellectual property, and Roche granted us a non-exclusive license to its and its affiliates’ intellectual property for the purpose of performing research activities. In connection with this agreement, the parties terminated an earlier agreement.

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Under the 2018 Roche Agreement, Roche was granted option rights to obtain an exclusive license to develop APC products or products derived from the collaboration programs on a product-by-product basis and to develop a Tumor Cell Lysate, or TCL, product. For each of the APC products and TCL product, once Roche exercises its option and pays a specified incremental amount, Roche will receive worldwide, exclusive commercialization rights for the licensed products. In July 2023, Roche determined that it will not exercise its option under the 2018 Roche Agreement, to obtain an exclusive license to develop and commercialize the Company’s candidate targeting HPV 16 positive solid tumors under the Company’s SQZ-APC-HPV program.

Under the 2018 Roche Agreement, we received an upfront payment of $45.0 million and are eligible to receive (i) reimbursement of a mid-double-digit percentage of our development costs; (ii) aggregate milestone payments on a product-by-product basis of up to $1.6 billion upon the achievement of specified milestones, consisting of up to $217.0 million of development milestone payments, up to $240.0 million of regulatory milestone payments and up to $1.2 billion of sales milestone payments; and (iii) tiered royalties on annual net sales of APC and TCL products licensed under the agreement at specified rates ranging from a mid-single-digit percentage to a percentage in the mid-twenties. We received the upfront payment of $45.0 million in October 2018 upon execution of the agreement. In addition, during the second quarter of 2019, we received a payment of $10.0 million following the achievement of the first development milestone under the 2018 Roche Agreement related to submission by us of preclinical data to the FDA. During the first quarter of 2020, we received a payment of $20.0 million following the achievement of the second development milestone under the 2018 Roche Agreement related to first-patient dosing in a Phase 1 clinical trial. In the first quarter of 2022, we received a milestone payment of $3.0 million having achieved in the fourth quarter of 2021 the following: (i) the endorsement by an independent panel that we could advance our SQZ-PBMC-HPV clinical trial to combination therapy using checkpoint inhibitors and (ii) the initiation of that therapy.

We identified three performance obligations at the outset of the 2018 Roche Agreement: (1) the license to our intellectual property, the research and development activities related to HPV through Phase 1 clinical trials under a specified research plan, and the manufacturing of our SQZ APC platform and equipment in order to support the HPV research plan (the “first performance obligation”); (2) the license to our intellectual property and the research and development activities on next-generation APCs (the “second performance obligation”); and (3) the license to our intellectual property and the research and development activities on TCL (the “third performance obligation”).

In addition, we determined that the upfront payment of $45.0 million as well as the reimbursable costs of $10.8 million estimated by us constituted the entirety of the consideration to be included in the transaction price. This transaction price of $55.8 million was initially allocated to the three performance obligations based on the relative standalone selling price of each obligation. The potential milestone payments that we may be eligible to receive were excluded from the transaction price at the outset of the arrangement. We reevaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, and, if necessary, we will adjust our estimate of the transaction price.

We separately recognize revenue associated with each of the three performance obligations as the research, development and manufacturing services are provided using an input method, based on the cumulative costs incurred compared to the total estimated costs expected to be incurred to satisfy each performance obligation. The amounts received from Roche that have not yet been recognized as revenue are deferred as a contract liability in our consolidated balance sheet and will be recognized over the remaining research and development period until each performance obligation is satisfied.

During the three months ended June 30, 2023, as a result of the determination by Roche that it would not exercise its option in relation to the first performance obligation, we concluded that we would incur no further costs to satisfy our performance obligations and as a result we fully recognized the remaining deferred revenue under this agreement. We recognized $0.2 million and $3.0 million during the three months ended June 30, 2023 and 2022, respectively, under this agreement. As of June 30, 2023, we had fully recognized all deferred revenue related to the 2018 Roche Agreement.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including development of our product candidates and costs incurred under our collaboration arrangements with Roche, which include:

•

employee-related expenses, including salaries, retention incentives, related benefits and stock-based compensation expense for employees engaged in research and development functions;

•

expenses incurred in connection with the preclinical and clinical development of our product candidates and research programs, including under agreements with third parties, such as consultants, contractors and contract research organizations, or CROs;

•

the costs of developing and scaling our manufacturing process and of manufacturing our product candidates for use in our preclinical studies and clinical trials, including the costs under agreements with third parties, such as consultants, contractors and contract manufacturing organizations, or CMOs;

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•

laboratory and consumable materials and research materials;

•

facilities, depreciation and other expenses, which include direct and allocated expenses for rent and utilities; and

•

payments made under third-party licensing agreements.

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

Our direct research and development expenses are tracked on a program-by-program basis and consist of external costs and fees paid to consultants, contractors, CMOs and CROs in connection with our preclinical and clinical development and manufacturing activities. Such program costs also include the external costs of laboratory and consumable materials and costs of raw materials that are directly attributable to and incurred for any single program. We do not allocate employee costs, costs associated with our platform development and discovery efforts, payments made under third-party licensing agreements, costs of laboratory supplies and consumable materials that are not directly attributable to any single program, and facilities expenses, including rent, depreciation and other indirect costs, to specific product development programs because these costs are deployed across multiple programs and our platform technology and, as such, are not separately classified.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned preclinical and clinical development activities in the near term and in the future, as we continue clinical development of our product candidates. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:

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the timing and progress of preclinical and clinical development activities;

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the number and scope of preclinical and clinical programs we decide to pursue;

•

our ability to raise the additional funds necessary to complete preclinical and clinical development of our product candidates;

•

the progress of the development efforts of parties with whom we have entered, or may enter, into collaboration arrangements;

•

our ability to maintain our current research and development programs and to establish new ones;

•

our ability to establish new licensing or collaboration arrangements;

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the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

•

the receipt and related terms of regulatory approvals from applicable regulatory authorities;

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the availability of specialty raw materials for use in production of our product candidates;

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our ability to consistently manufacture our product candidates for use in clinical trials;

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our ability to establish and operate a manufacturing facility, or secure manufacturing supply through relationships with third parties;

•

our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the United States and internationally; and

•

our ability to protect our rights in our intellectual property portfolio.

A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. In addition, we may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including retention incentives and stock-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct

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and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting, and audit services. We anticipate that we will continue to incur general and administrative expenses as we manage our headcount to support development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

Other Income (Expense)

Interest Income

Interest income consists of interest earned on our cash equivalents balances.

Other Income (Expense), Net

Other income (expense), net consists of miscellaneous income and expense unrelated to our core operations.

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credit carryforwards will not be realized.

Results of Operations

Comparison of the Three Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022:


	THREE MONTHS ENDED JUNE 30,
	2023	2022	CHANGE
	(in thousands)
Revenue:
Collaboration revenue	$178	$3,008	$(2,830)
Grant revenue	—	$207	(207)
Total revenue	178	3,215	(3,037)
Operating expenses:
Research and development	12,729	18,760	(6,031)
General and administrative	4,557	6,958	(2,401)
Total operating expenses	17,286	25,718	(8,432)
Loss from operations	(17,108)	(22,503)	5,395
Other income (expense):
Interest income	340	156	184
Other income (expense), net	(2)	111	(113)
Total other income, net	338	267	71
Net loss	$(16,770)	$(22,236)	$5,466

Revenue

Collaboration revenue decreased by $2.8 million to $0.2 million for the three months ended June 30, 2023, compared to $3.0 million for the three months ended June 30, 2022. The decrease in collaboration revenue was primarily because we had substantially satisfied the majority of the performance obligations related to the 2018 Roche Agreement as of December 31, 2022. Grant revenue decreased by $0.2 million to $0 for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease in grant revenue was because we did not perform any government grant related services during the three months ended June 30, 2023.

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Research and Development Expenses


	THREE MONTHS ENDED JUNE 30,
	2023	2022	CHANGE
	(in thousands)
Direct research and development expenses by program:
SQZ-PBMC-HPV	$1,238	$2,315	$(1,077)
SQZ-AAC-HPV	2,566	1,530	1,036
SQZ-eAPC-HPV	4,180	2,723	1,457
Other programs	483	3,855	(3,372)
Unallocated research and development expenses:
Personnel related (including stock-based compensation)	2,591	5,908	(3,317)
Facility related	1,313	1,310	3
Laboratory and consumable materials	11	320	(309)
Platform-related external services and other	347	799	(452)
Total research and development expenses	$12,729	$18,760	$(6,031)

Research and development expenses decreased by $6.0 million to $12.7 million for the three months ended June 30, 2023, from $18.8 million for the three months ended June 30, 2022. The net decrease was primarily due to the following:

•

SQZ-PBMC-HPV and other program costs decreased by $1.1 million and $3.4 million, respectively, primarily due to the conclusion of patient enrollment in the SQZ-PBMC-HPV clinical trial and the reprioritization of our clinical portfolio in order to focus on the SQZ-eAPC-HPV and SQZ-AAC-HPV programs.

•

Personnel-related costs decreased by $3.3 million primarily due to a $2.9 million decrease in salary and benefit costs and a $0.4 million decrease in stock-based compensation as a result of the headcount reductions included in the implementation of the Restructuring Plan in the fourth quarter of 2022.

The decreases in facilities, laboratory and consumable materials and platform-related external services and other costs were due to cost reductions as a result of the implementation of the Restructuring Plan.

Partially offsetting the above decreases were:

•

SQZ-AAC-HPV program costs increased by $1.0 million primarily as a result of an increase in allocated manufacturing costs and clinical trial-related costs related to patient enrollment.

•

SQZ-eAPC-HPV program costs increased by $1.5 million due to an increase in clinical trial-related costs related to patient enrollment.

General and Administrative Expenses


	THREE MONTHS ENDED JUNE 30,
	2023	2022	CHANGE
	(in thousands)
Personnel related (including stock-based compensation)	$2,191	$3,626	$(1,435)
Professional, consultant and patent related costs	1,039	1,356	(317)
Facility related and other costs	1,327	1,976	(649)
Total general and administrative expenses	$4,557	$6,958	$(2,401)

General and administrative expenses decreased by $2.4 million during the three months ended June 30, 2023 to $4.6 million, compared to $7.0 million for the three months ended June 30, 2022. The decrease was primarily due to cost and headcount reductions as a result of the implementation of the Restructuring Plan.

Interest Income

Interest income for the three months ended June 30, 2023 and 2022 was $0.3 million and $0.2 million, respectively. The increase in interest income was due to the increase in average interest rates in 2023 despite lower average cash and equivalents available for investment.

Other Income (Expense), Net

Other income (expense), net for the both the three months ended June 30, 2023 and 2022 was not significant.

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Comparison of the Six Months Ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:


	FOR THE SIX MONTHS ENDED JUNE 30,
	2023			2022			CHANGE
	(in thousands)
Revenue:
Collaboration revenue	$	178		$	5,877		$	(5,699	)
Grant revenue		—			207			(207	)
Total revenue	$	178		$	6,084		$	(5,906	)
Operating expenses:
Research and development		25,705			35,771			(10,066	)
General and administrative		9,836			13,870			(4,034	)
Total operating expenses		35,541			49,641			(14,100	)
Loss from operations		(35,363	)		(43,557	)		8,194
Other income (expense):
Interest income		845			172			673
Other income (expense), net		61			111			(50	)
Total other income, net		906			283			623
Net loss	$	(34,457	)	$	(43,274	)	$	8,817

Revenue

Collaboration revenue decreased by $5.7 million to $0.2 million for the six months ended June 30, 2023, compared to $5.9 million for the six months ended June 30, 2022 The decrease in revenue was primarily because we had substantially satisfied the majority of the performance obligations related to the 2018 Roche Agreement as of December 31, 2022. Grant revenue decreased by $0.2 million to $0 for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease in grant revenue was because we did not perform any government grant related services during the six months ended June 30, 2023.

Research and Development Expenses


	FOR THE SIX MONTHS ENDED JUNE 30,
	2023		2022		CHANGE
	(in thousands)
Direct research and development expenses by program:
SQZ-PBMC-HPV	$	1,911	$	4,218	$	(2,307	)
SQZ-AAC-HPV		5,046		2,887		2,159
SQZ-eAPC-HPV		8,232		6,055		2,177
Other programs		1,373		6,345		(4,972	)
Unallocated research and development expenses:
Personnel related (including stock-based compensation)		5,816		11,268		(5,452	)
Facility related		2,297		2,721		(424	)
Laboratory and consumable materials		35		646		(611	)
Platform-related external services and other		995		1,631		(636	)
Total research and development expenses	$	25,705	$	35,771	$	(10,066	)

Research and development expenses decreased by $10.1 million to $25.7 million for six months ended June 30, 2023, from $35.8 million for the six months ended June 30, 2022. The net decrease was primarily due to the following:

•

SQZ-PBMC-HPV and other program costs decreased by $2.3 million and $5.0 million, respectively, primarily due to the conclusion of patient enrollment in the SQZ-PBMC-HPV clinical trial and the reprioritization of our clinical portfolio in order to focus on the SQZ-eAPC-HPV and SQZ-AAC-HPV programs.

•

Personnel-related costs decreased by $5.5 million primarily due to a $4.9 million decrease in salary and benefit costs and a $0.6 million decrease in stock-based compensation as a result of the headcount reductions included in the implementation of the Restructuring Plan in the fourth quarter of 2022.

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Partially offsetting the above decreases were:

•

SQZ-AAC-HPV program costs increased by $2.2 million primarily as a result of an increase in allocated manufacturing costs and clinical trial-related costs related to patient enrollment.

•

SQZ-eAPC-HPV program costs increased by $2.2.million due to an increase in clinical trial-related costs related to patient enrollment.

General and Administrative Expenses


	FOR THE SIX MONTHS ENDED JUNE 30,
	2023		2022		CHANGE
	(in thousands)
Personnel related (including stock-based compensation)	$	4,817	$	7,108	$	(2,291	)
Professional, consultant and patent related costs		2,190		3,102		(912	)
Facility related and other costs		2,829		3,660		(831	)
Total general and administrative expenses	$	9,836	$	13,870	$	(4,034	)

General and administrative expenses decreased by $4.1 million during the six months ended June 30, 2023 to $9.8 million, compared to $13.9 million for the six months ended June 30, 2022. The decrease was primarily due to cost and headcount reductions as a result of the implementation of the Restructuring Plan.

Interest Income

Interest income for the six months ended June 30, 2023 and 2022 was $0.8 million and $0.2 million, respectively. The increase in interest income was due to the increase in average interest rates in 2023 despite lower average cash and equivalents available for investment.

Other Income (Expense), Net

Other income (expense), net for both the six months ended June 30, 2023 and 2022 was not significant.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for the next several years, if at all. Through June 30, 2023, we have funded our operations primarily with payments received in connection with collaboration agreements, proceeds from equity and debt financing, most recently, with proceeds from our IPO, Follow-On Offering and our at-the market offering facility with Jefferies LLC ("ATM Facility"). As of June 30, 2023, we had cash and cash equivalents of $24.7 million. We maintain the majority of our cash and cash equivalents in accounts with major financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

Cash Flows

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


	SIX MONTHS ENDED JUNE 30,
	2023			2022
	(in thousands)
Net cash used in operating activities	$	(39,042	)	$	(40,910	)
Net cash provided by (used in) investing activities		43			(274	)
Net cash provided by financing activities		—			3,232
Net decrease in cash, cash equivalents and restricted cash	$	(38,999	)	$	(37,952	)

Operating Activities

During the six months ended June 30, 2023, operating activities used $39.0 million of cash, primarily resulting from our net loss of $34.5 million and changes in our operating assets and liabilities of $11.6 million, partially offset by net non-cash charges of $7.0 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2023 consisted of a $5.1 million decrease in

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operating lease liabilities, a $1.5 million decrease in prepaid expenses and other current assets, a $4.0 million decrease in accrued expenses, including the payment of approximately $2.8 million of restructuring costs.

During the six months ended June 30, 2022, operating activities used $40.9 million of cash, primarily resulting from our net loss of $43.3 million and changes in our operating assets and liabilities of $7.4 million, partially offset by net non-cash charges of $9.7 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2022 consisted primarily of a $5.9 million decrease in deferred revenue, a $4.8 million decrease in operating lease liabilities, a $0.4 million increase in prepaid expenses and other current assets, a $2.9 million increase in accrued expenses, all of which were partially offset by a $3.0 million decrease in accounts receivable. The decrease in deferred revenue during the six months ended June 30, 2022, was due to the revenue we recognized in that same period under the 2018 Roche Agreement.

In all periods presented, other changes in prepaid expenses and other current assets, accounts receivable, accounts payable, accrued expenses and other liabilities not described above were generally due to growth in our business, the advancement of our research programs and the timing of vendor invoicing and payments. In all periods presented, decreases in operating lease liabilities were primarily due to our recurring payments made under recorded operating lease liabilities, including those arising from embedded leases.

Investing Activities

During the six months ended June 30, 2023, net cash provided by investing activities was $43 thousand consisting of proceeds from disposal of equipment, offset by purchases of property and equipment. During the six months ended June 30, 2022, net cash used by investing activities was $0.3 million consisting of purchases of property and equipment.

Financing Activities

During the six months ended June 30, 2023, net cash provided by financing activities was $0.

During the six months ended June 30, 2022, net cash provided by financing activities was $3.2 million consisting of proceeds from the ATM Facility, employee stock purchase plan issuances, and stock option exercises during the period.

Funding Requirements

Absent significant changes to our current operating structure, we expect that although our anticipated quarterly expenses for the remainder of 2023 will be lower compared to the corresponding quarters in 2022, we will continue to incur substantial expenses in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials for our product candidates in development. The timing and amount of our operating and capital expenditures will depend largely on:

•

the timing and progress of preclinical and clinical development activities;

•

the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;

•

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

•

our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial as well as Roche’s decision whether to exercise its options;

•

changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial requirements for approvals;

•

adverse developments concerning our manufacturers and other third-party providers;

•

our ability to obtain materials to produce adequate product supply for any approved product or inability to do so at acceptable prices;

•

our ability to establish collaborations if needed;

•

the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we obtain marketing approval;

•

the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;

•

additions or departures of key scientific or management personnel;

•

unanticipated serious safety concerns related to the use of our product candidates;

•

the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; and

•

the severity, duration and impact of the COVID-19 pandemic and macroeconomic conditions, which may adversely impact our business.

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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders' interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred 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 acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, including due to adverse macroeconomic conditions such as rising interest rates, we would be required to delay, scale back or discontinue our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

As of June 30, 2023, we had an accumulated deficit of $309.4 million. During the six months ended June 30, 2023, we recorded a net loss of $34.5 million. In addition, during the six months ended June 30, 2023 we used $39.0 million in operating and investing activities resulting in a cash and cash equivalents balance of $24.7 million as of June 30, 2023. We expect that our operating losses and negative cash flows will continue for the foreseeable future. Based on our currently forecasted operating plan, which reflects reduced quarterly spending for the remainder of 2023 as compared to the corresponding quarters in 2022, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through the end of 2023. Therefore, based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future and the need to raise additional capital to finance future operations, as of August 10, 2023, the issuance date of the interim condensed consolidated financial statements for the three and six months ended June 30, 2023, included elsewhere in this Quarterly Report on Form 10-Q, management has concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that the condensed consolidated financial statements are issued. We are developing plans to mitigate this risk, which primarily consist of raising additional capital through some combination of equity or debt financings, and/or potentially new collaborations, business transactions and reducing cash expenditures. If we are not able to secure adequate additional funding, we plan to make significant reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of our research and development programs and technology platform activities which could adversely affect our business prospects, or we may be unable to continue operations.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations from those described in our 2022 Form 10-K. For additional information, see Note 8 and 9 to our condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our 2022 Form 10-K. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. There have been no significant changes to our critical accounting policies from those described in the 2022 Form 10-K.

Recently Issued Accounting Pronouncements

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

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As of June 30, 2023, we had cash and cash equivalents of $24.7 million, which consisted of cash and money market funds. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these balances, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash and cash equivalents.

We are not currently exposed to significant market risk related to changes in interest rates or foreign currency exchange rates. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.

We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. Our operations may be subject to inflation in the future.

Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

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.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and 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 of 1934). Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2023.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not subject to any material legal proceedings.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. In addition to the other information in this Quarterly Report on Form 10-Q, including our interim condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Results of Operations and Financial Condition”, you should carefully consider the factors described in the section titled “Risk Factors” in our 2022 Form 10-K. There have been no material changes to our risk factors as previously disclosed in our 2022 Form 10-K, except for as set forth below.

An active, liquid trading market for our common stock may not be sustained.

On July 3, 2023, we received a written notice from the NYSE notifying us that the NYSE commenced proceedings to delist our common stock from the NYSE. The NYSE reached this determination pursuant to Section 802.01B of the NYSE’s Listed Company Manual because the Company had fallen below the NYSE’s continued listing standard requiring listed companies to maintain an average global market capitalization of at least $15 million over a consecutive 30-trading day period.

The NYSE suspended trading in our common stock immediately after market close on July 3, 2023. On July 5, 2023, our common stock began trading in the over-the-counter markets, under the symbol SQZB. The over-the-counter markets are significantly more limited than the NYSE, and quotation on the over-the-counter markets may result in a less liquid market available for existing and potential securityholders to trade our common stock and has depressed and could further depress the trading price of our common stock. We can provide no assurance that our common stock will continue to trade on the over-the-counter markets, whether broker-dealers will continue to provide public quotes of our common stock or whether the trading volume of our common stock will be sufficient to provide for an efficient trading market.

Further, an inactive trading market may also impair our ability to raise capital by selling our securities, to attract and motivate employees through equity incentive awards, or to acquire other companies, products, or technologies by using our securities as consideration.

The Roche Agreement is important to our business. If we or Roche fail to adequately perform under the Roche Agreement, or if we or Roche terminate the Roche Agreement, the development and commercialization of certain of our product candidates could be materially delayed and our business would be adversely affected.

Under the Roche Agreement, Roche is jointly responsible for the clinical development, with Roche being primarily responsible for the late-stage clinical development of certain potential product candidates. We and Roche may be jointly responsible for conducting global clinical studies and coordinating commercial launch activities.

Termination of the Roche Agreement, in whole or in part, could cause significant delays in any development and commercialization efforts we undertake for our SQZ APC platform in oncology. If the Roche Agreement is terminated, we would need to expand our internal capabilities or enter into another collaboration agreement to compensate for the loss in funding and clinical development support from Roche. Any suitable alternative agreement may take considerable time to negotiate and may also be on less favorable terms to us. Whether or not we identify another suitable collaborator, we would need to seek additional financing to continue development in oncology, or we may be forced to discontinue development of our product candidates in oncology either of which could have a material adverse effect on our business.

In addition, under the Roche Agreement, we also agreed to use commercially reasonable efforts to mutually select additional antigens other than the HPV targeted SQZ-PBMC-HPV to develop collaboratively. With respect to each mutually selected antigen, we granted Roche an option, exercisable after we supply Roche with a clinical proof of concept for a product containing the antigen, to obtain an exclusive license of our intellectual property to exploit the product worldwide for the treatment of oncologic indications using our SQZ APC platform and a microfluidic chip. Roche granted us an option, exercisable with respect to every alternating mutually selected antigen product for which Roche exercises its own option, beginning with the second, to obtain an exclusive license of Roche’s intellectual property to exploit the antigen product in the United States. There can be no assurance that we will mutually agree to select additional antigens or that Roche would exercise any options they may have.

In July 2023, Roche determined that it will not exercise its option under the Roche Agreement to obtain an exclusive license to develop and commercialize the Company’s candidate targeting HPV 16 positive solid tumors under our SQZ-APC-HPV program. We will regain full clinical development and future commercialization rights for our programs targeting HPV 16 positive tumors. In connection with this

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determination, we intend to explore potential strategic alternatives to support the advancement of our oncology programs including HPV 16 positive tumors, in an effort to allow us to partner all our clinical and preclinical assets across all disease areas and indications. Potential strategic partnerships may include, but are not limited to, a partnership, acquisition, merger, business combination, or other transaction. There can be no assurance that this process will result in us pursuing a transaction or that any transaction, if pursued, will be completed on attractive terms or at all.

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Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

(a) None.

(b) None.

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Item 6. Exhibits.

Exhibit

Number

Description

Form

File No.

Exhibit

Filing

Date

Filed/

Furnished

Herewith

3.1

Restated Certificate of Incorporation of SQZ Biotechnologies Company.

8-K

001-39662

3.1

11/04/2020

3.2

Amended and Restated Bylaws of SQZ Biotechnologies Company.

S-1/A

333-249422

3.4

10/26/2020

4.1

Amended and Restated Investors’ Rights Agreement, dated as of December 19, 2019, as amended.

S-1

333-252889

4.1

02/09/2021

4.2

Specimen Stock Certificate.

S-1/A

333-249422

4.2

10/26/2020

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Instance Document – the instance document does not appear in the Interactive Data file because its 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 (as formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

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SIGNATURES

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


	SQZ Biotechnologies Company

Date: August 10, 2023	By:	/s/ Howard Bernstein, MD, Ph.D.
		Howard Bernstein, MD, Ph.D.
		Interim Chief Executive Officer
		(principal executive officer)



Date: August 10, 2023	By:	/s/ Richard Capasso
		Richard Capasso
		Chief Accounting Officer
		(principal financial officer)