10-Q
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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 March 31, 2024

OR

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: 001-41551

 

Acrivon Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-5125532

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

480 Arsenal Way, Suite 100

Watertown, Massachusetts

02472

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 207-8979

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

ACRV

 

Nasdaq Global Market

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

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

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

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

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

As of May 9, 2024, the registrant had 30,876,932 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

1

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to the Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

 

 

PART II.

OTHER INFORMATION

28

 

 

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

 

 

 

Signatures

34

 

 

 

i


 

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or the Quarterly Report, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements about the following:

the timing, progress and results of our preclinical studies and clinical trials of our drug candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
the timing of any Investigational New Drug, or IND, submissions, initiation of clinical trials and timing of expected clinical results for our lead drug candidate, ACR-368, ACR-2316, and our other future drug candidates;
the timing of any submission of filings for regulatory approval of, and our ability to obtain and maintain regulatory approvals for, ACR-368, ACR-2316, and any other drug candidates for any indication;
our ability to identify patients with the cancers treated by our drug candidates, and to enroll patients in trials;
our expectations regarding the size of the patient populations, market acceptance and opportunity for and clinical utility of our drug candidates, if approved for commercial use;
our manufacturing capabilities and strategy, including the scalability and commercial viability of our manufacturing methods and processes;
our expectations regarding the scope of any approved indication for ACR-368, ACR-2316, or any other drug candidate;
our ability to successfully commercialize our drug candidates;
our ability to leverage our proprietary precision medicine platform, Acrivon Predictive Precision Proteomics, or AP3, to identify and develop future drug candidates;
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our need for or ability to obtain additional funding before we can expect to generate any revenue from drug sales;
our ability to establish or maintain collaborations or strategic relationships;
our ability to identify, recruit and retain key personnel;
our reliance upon intellectual property licensed from third parties and our ability to obtain such licenses on commercially reasonable terms or at all;
our ability to protect and enforce our intellectual property position for our drug candidates, and the scope of such protection;
our financial performance;
our competitive position and the development of and projections relating to our competitors or our industry;
our estimates regarding future revenue, expenses and needs for additional financing;
the impact of laws and regulations; and
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and results of operations. The outcome of the events described in these forward-looking statements is subject to risks and uncertainties, including the factors described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 28, 2024, “Part II, Item 1A. Risk Factors” of this Quarterly Report and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. The results, events, and circumstances

1


 

reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

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

The forward-looking statements contained in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in or expressed by, and you should not place undue reliance on, our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

Unless the context otherwise requires, all references in this Quarterly Report to “we,” “us,” “our,” “our company,” and “Acrivon” refer to Acrivon Therapeutics, Inc. and its subsidiaries.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ACRIVON THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,607

 

 

$

36,015

 

Short-term investments

 

 

85,368

 

 

 

91,443

 

Prepaid expenses and other current assets

 

 

2,168

 

 

 

2,234

 

Total current assets

 

 

112,143

 

 

 

129,692

 

Property and equipment, net

 

 

3,408

 

 

 

3,479

 

Operating lease right-of-use assets

 

 

4,205

 

 

 

4,429

 

Restricted cash

 

 

417

 

 

 

414

 

Deferred offering costs

 

 

348

 

 

 

251

 

Total assets

 

$

120,521

 

 

$

138,265

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,056

 

 

$

5,048

 

Accrued expenses and other current liabilities

 

 

6,041

 

 

 

7,378

 

Operating lease liabilities, current

 

 

944

 

 

 

877

 

Total current liabilities

 

 

9,041

 

 

 

13,303

 

Operating lease liabilities, long-term

 

 

3,501

 

 

 

3,767

 

Total liabilities

 

 

12,542

 

 

 

17,070

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized as of
   March 31, 2024 and December 31, 2023;
0 shares issued and outstanding
   as of March 31, 2024 and December 31, 2023.

 

 

 

 

 

 

Common stock, par value $0.001; 500,000,000 shares authorized as of
   March 31, 2024 and December 31, 2023;
22,637,539 and 22,522,644 shares
   issued and outstanding as of March 31, 2024 and December 31, 2023,
   respectively.

 

 

23

 

 

 

23

 

Additional paid-in capital

 

 

240,932

 

 

 

237,675

 

Accumulated other comprehensive loss

 

 

(70

)

 

 

(83

)

Accumulated deficit

 

 

(132,906

)

 

 

(116,420

)

Total stockholders’ equity

 

 

107,979

 

 

 

121,195

 

Total liabilities and stockholders’ equity

 

$

120,521

 

 

$

138,265

 

 

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

3


 

ACRIVON THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands, except share and per share data)

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

11,473

 

 

$

9,758

 

General and administrative

 

 

6,195

 

 

 

4,635

 

Total operating expenses

 

 

17,668

 

 

 

14,393

 

Loss from operations

 

 

(17,668

)

 

 

(14,393

)

Other income (expense), net:

 

 

 

 

 

 

Interest income

 

 

1,446

 

 

 

1,807

 

Other expense, net

 

 

(264

)

 

 

(170

)

Total other income, net

 

 

1,182

 

 

 

1,637

 

Net loss

 

$

(16,486

)

 

$

(12,756

)

Net loss per share—basic and diluted

 

$

(0.73

)

 

$

(0.58

)

Weighted-average common stock outstanding—basic and diluted

 

 

22,590,804

 

 

 

21,920,570

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(16,486

)

 

$

(12,756

)

Other comprehensive income:

 

 

 

 

 

 

Unrealized gain on available-for-sale investments, net of tax

 

 

13

 

 

 

104

 

Comprehensive loss

 

$

(16,473

)

 

$

(12,652

)

 

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

4


 

ACRIVON THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share data)

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

 

Additional
Paid-In
Capital

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Accumulated
Deficit

 

 

Total
Stockholders’
Equity

 

Balance at December 31, 2023

 

 

22,522,644

 

 

$

23

 

 

 

$

237,675

 

 

$

(83

)

 

$

(116,420

)

 

$

121,195

 

Exercise of common stock options

 

 

20,277

 

 

 

 

 

 

 

79

 

 

 

 

 

 

 

 

 

79

 

Issuance of common stock upon vesting of restricted
   stock units, net of shares withheld for tax

 

 

94,618

 

 

 

 

 

 

 

(166

)

 

 

 

 

 

 

 

 

(166

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

3,344

 

 

 

 

 

 

 

 

 

3,344

 

Unrealized gain on available-for-sale investments,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,486

)

 

 

(16,486

)

Balance at March 31, 2024

 

 

22,637,539

 

 

$

23

 

 

 

$

240,932

 

 

$

(70

)

 

$

(132,906

)

 

$

107,979

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

 

Additional
Paid-In
Capital

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Accumulated
Deficit

 

 

Total
Stockholders’
Equity

 

Balance at December 31, 2022

 

 

21,920,402

 

 

$

22

 

 

 

$

226,580

 

 

$

(95

)

 

$

(56,032

)

 

$

170,475

 

Exercise of common stock options

 

 

232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

2,646

 

 

 

 

 

 

 

 

 

2,646

 

Unrealized gain on available-for-sale investments,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

104

 

 

 

 

 

 

104

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,756

)

 

 

(12,756

)

Balance at March 31, 2023

 

 

21,920,634

 

 

$

22

 

 

 

$

229,226

 

 

$

9

 

 

$

(68,788

)

 

$

160,469

 

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

5


 

ACRIVON THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,486

)

 

$

(12,756

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

224

 

 

 

125

 

Stock-based compensation expense

 

 

3,344

 

 

 

2,646

 

Non-cash lease expense

 

 

224

 

 

 

191

 

Net amortization of premiums and accretion of discounts on investments

 

 

(577

)

 

 

(1,133

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

140

 

 

 

593

 

Accounts payable

 

 

(2,272

)

 

 

470

 

Accrued expenses and other liabilities

 

 

(1,481

)

 

 

(1,318

)

Operating lease liabilities

 

 

(199

)

 

 

(175

)

Net cash used in operating activities

 

 

(17,083

)

 

 

(11,357

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of short-term and long-term investments

 

 

(28,335

)

 

 

(16,963

)

Proceeds from maturities of short-term investments

 

 

35,000

 

 

 

26,315

 

Purchases of property and equipment

 

 

(815

)

 

 

(25

)

Net cash provided by investing activities

 

 

5,850

 

 

 

9,327

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

79

 

 

 

 

Payments of offering costs

 

 

(85

)

 

 

 

Payments of tax withholdings related to vesting of restricted stock units

 

 

(166

)

 

 

 

Net cash used in financing activities

 

 

(172

)

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(11,405

)

 

 

(2,030

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

36,429

 

 

 

29,907

 

Cash, cash equivalents and restricted cash at end of period

 

$

25,024

 

 

$

27,877

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Purchases of property and equipment included in accrued expenses and other
   current liabilities

 

$

47

 

 

$

 

Deferred offering costs in accrued expenses and other current liabilities

 

$

97

 

 

$

 

Reconciliation of cash, cash equivalents, and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,607

 

 

$

27,489

 

Restricted cash

 

417

 

 

388

 

Total cash, cash equivalents, and restricted cash

 

$

25,024

 

 

$

27,877

 

 

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

6


 

ACRIVON THERAPEUTICS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Nature of the Business

Acrivon Therapeutics, Inc., (the “Company”) is a clinical stage biopharmaceutical company developing precision medicines that the Company matches to patients whose tumors are predicted to be sensitive to each specific medicine by utilizing its proteomics-based patient responder identification platform. Acrivon is currently advancing its lead candidate, ACR-368, (also known as prexasertib), a selective small molecule inhibitor targeting CHK1 and CHK2 in a potentially registrational Phase 2 trial across multiple tumor types. The Company has received Fast Track designation from the Food and Drug Administration (“FDA”) for the investigation of ACR-368 as monotherapy based on OncoSignature-predicted sensitivity in patients with platinum-resistant ovarian or endometrial cancer. Acrivon’s ACR-368 OncoSignature test, which has not yet obtained regulatory approval, has been extensively evaluated in preclinical studies, including in two separate, blinded, prospectively-designed studies on pretreatment tumor biopsies collected from past third-party Phase 2 trials in patients with ovarian cancer treated with ACR-368. The FDA has granted Breakthrough Device designation for the ACR-368 OncoSignature assay for the identification of ovarian cancer patients who may benefit from ACR-368 treatment. In addition to ACR-368, Acrivon is also leveraging its proprietary AP3 precision medicine platform for developing its co-crystallography-driven, internally-discovered preclinical stage pipeline programs. These include ACR-2316, a potent, selective WEE1/PKMYT1 inhibitor designed for superior single-agent activity as demonstrated in preclinical studies against benchmark inhibitors, and a cell cycle program with an undisclosed target.

The Company was incorporated in March 2018 under the laws of the state of Delaware, and its principal offices are in Watertown, Massachusetts. Also in March 2018, the Company formed Acrivon AB, a wholly-owned subsidiary of the Company, established in Lund, Sweden. In December 2021, the Company formed Acrivon Securities Corporation, a wholly-owned subsidiary, established in Massachusetts.

Liquidity

As an emerging growth entity, the Company has devoted substantially all of its resources since inception to organizing and staffing the Company, business planning, raising capital, establishing its intellectual property portfolio, acquiring or discovering drug candidates, research and development activities for the Company's lead candidate ACR-368, for the Company's internally discovered development candidate ACR-2316, and other compounds, establishing arrangements with third parties for the manufacture of its drug candidates and component materials, and providing general and administrative support for these operations. As a result, the Company has incurred significant operating losses and negative cash flows from operations since its inception and anticipates such losses and negative cash flows will continue for the foreseeable future.

The Company has incurred recurring losses since its inception, including net losses of $16.5 million and $12.8 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023 the Company had an accumulated deficit of $132.9 million and $116.4 million, respectively. To date the Company has not generated any revenues and expects to continue generating operating losses for the foreseeable future as it continues to expand its research and development efforts.

Since its inception, the Company has funded its operations primarily with proceeds from the sales of shares of its convertible preferred stock, the issuance of convertible notes, and an initial public offering (“IPO”) and concurrent private placement. Upon the closing of the Company’s IPO on November 17, 2022, only common stock remains issued and outstanding. On April 8, 2024, the Company entered into a Private Investment in Public Equity (“PIPE”) securities purchase agreement (the “PIPE Purchase Agreement”) for a private placement with certain institutional and accredited investors (the “April 2024 Private Placement”). The Company received $130.0 million in aggregate gross proceeds from the April 2024 Private Placement. The April 2024 Private Placement is further described in Note 13.

The Company expects that its existing cash, cash equivalents and investments of $110.0 million as of March 31, 2024, together with the gross proceeds of $130.0 million raised from the April 2024 Private Placement, will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the date these condensed consolidated financial statements were issued.

The Company will need additional funding to support its planned operating activities. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all, considering the current interest rate environment. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects.

 

7


 

ATM Program

On December 1, 2023, the Company filed a registration statement on Form S-3 (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “SEC”), which was declared effective on December 15, 2023, which registered the offering, issuance, and sale of up to a maximum aggregate offering price of $300.0 million of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof. The Company simultaneously entered into a sales agreement with Cowen and Company, LLC, as sales agent, to provide for the issuance and sale by the Company of up to $100.0 million of common stock from time to time in “at-the-market” offerings under the Registration Statement and related prospectus (“ATM Program”). As of March 31, 2024, no sales had been made pursuant to the ATM Program.

2. Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2024. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2024, except as noted below.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the operations of Acrivon Therapeutics, Inc. and its wholly-owned subsidiaries. All intercompany accounts, transactions and balances have been eliminated in consolidation.

The accompanying condensed consolidated interim financial statements are unaudited but have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of March 31, 2024 and the results of its operations for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. The consolidated balance sheet as of December 31, 2023 was derived from audited annual financial statements but does not include all disclosures required by U.S. GAAP.

The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the full year or for any other subsequent interim period.

Recently Adopted Accounting Pronouncements

ASU 2023-07, Segment Reporting (Topic 280)

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for annual periods beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted this accounting standard as of January 1, 2024, with no material impact on its condensed consolidated financial statements and related disclosures.

3. Investments

The following table summarizes the amortized cost and estimated fair value of the Company's U.S. Treasury securities and U.S. government-sponsored enterprise securities, which are considered to be available-for-sale investments and were included in short-term investments as of March 31, 2024 and December 31, 2023 (in thousands):

 

 

 

March 31, 2024

 

Short-term investments:

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

U.S. Treasury securities

 

$

55,353

 

 

$

 

 

$

(25

)

 

$

55,328

 

U.S. government-sponsored enterprise securities

 

 

30,085

 

 

 

 

 

 

(45

)

 

 

30,040

 

 

$

85,438

 

 

$

 

 

$

(70

)

 

$

85,368

 

 

8


 

 

 

 

December 31, 2023

 

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

41,470

 

 

$

22

 

 

$

(19

)

 

$

41,473

 

U.S. government-sponsored enterprise securities

 

 

50,056

 

 

 

 

 

 

(86

)

 

 

49,970

 

 

$

91,526

 

 

$

22

 

 

$

(105

)

 

$

91,443

 

 

Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents on the condensed consolidated balance sheets and are not included in the tables above. As of March 31, 2024 and December 31, 2023, all short-term investments had contractual maturities within one year.

The aggregate fair value of available-for-sale securities held by the Company in an unrealized loss position for less than 12 months as of March 31, 2024 was $80.4 million. There were no available-for-sale securities in a continuous unrealized loss position for greater than 12 months. The Company evaluated its securities for potential impairment and considered the decline in market value to be primarily attributable to current economic and market conditions. Additionally, the Company does not intend to sell the investments in an unrealized loss position and does not expect it will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. Given the Company's intent and ability to hold such investments until recovery, and the lack of a significant change in credit risk for these investments, the Company does not consider these investments to be impaired and there are no allowances for credit losses as of March 31, 2024.

4. Fair Value Measurement

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis (in thousands):

 

 

 

 

Fair Value Measurements at March 31, 2024 Using:

 

Assets:

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

18,567

 

 

$

18,567

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

55,328

 

 

 

55,328

 

 

 

 

 

 

 

U.S. government-sponsored enterprise securities

 

 

30,040

 

 

 

 

 

 

30,040

 

 

 

 

Total assets

 

$

103,935

 

 

$

73,895

 

 

$

30,040

 

 

$

 

 

 

 

 

 

Fair Value Measurements at December 31, 2023 Using:

 

Assets:

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

31,191

 

 

$

31,191

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

41,473

 

 

 

41,473

 

 

 

 

 

 

 

U.S. government-sponsored enterprise securities

 

 

49,970

 

 

 

 

 

 

49,970

 

 

 

 

Total assets

 

$

122,634

 

 

$

72,664

 

 

$

49,970

 

 

$

 

 

The Company classifies its money market funds and U.S. Treasury securities as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in active markets without any valuation adjustment. The Company classifies its U.S. government-sponsored enterprise securities as Level 2 assets under the fair value hierarchy as these assets have been valued using information obtained through a third-party pricing service as of the balance sheet date, using observable market inputs that may include trade information, broker or dealer quotes, bids, offers, or a combination of these data sources.

During the three months ended March 31, 2024 and the year ended December 31, 2023, there were no transfers between levels. The Company uses the carrying amounts of its restricted cash, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities to approximate their fair values due to the short-term nature of these amounts.

9


 

5. Property and Equipment, net

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

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Laboratory and computer equipment

 

$

4,416

 

 

$

2,955

 

Furniture and fixtures

 

 

172

 

 

 

172

 

Construction in progress

 

 

 

 

 

1,308

 

Total property and equipment

 

 

4,588

 

 

 

4,435

 

Less: accumulated depreciation

 

 

(1,180

)

 

 

(956

)

Property and equipment, net

 

$

3,408

 

 

$

3,479

 

 

Depreciation expense related to property and equipment for the three months ended March 31, 2024 and 2023 was $0.2 million and $0.1 million, respectively.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

March 31,
2024

 

 

December 31,
2023

 

Accrued research and development expenses

 

$

3,418

 

 

$

2,661

 

Accrued compensation and benefits

 

 

1,909

 

 

 

3,860

 

Accrued legal, accounting and other professional fees

 

 

390

 

 

 

667

 

Accrued other

 

 

180

 

 

 

190

 

Accrued offering costs

 

 

97

 

 

 

 

Accrued property and equipment

 

 

47

 

 

 

 

Total accrued expenses and other current liabilities

 

$

6,041

 

 

$

7,378

 

 

7. Leases

In December 2020, the Company entered into a lease agreement for laboratory and office space located at 480 Arsenal Way, Watertown, Massachusetts (the “Arsenal Way Lease”). The lease commenced in April 2021, with a term of seven years and an option to extend the term for an additional five years. The Company delivered a letter of credit of $0.3 million to the landlord, which is included in restricted cash in the accompanying condensed consolidated balance sheets. Under the terms of the lease, the base rent is $1.0 million, subject to a 3% annual rent increase, plus an allocation of operating expenses and taxes. In May 2021, the Company subleased a portion of its Arsenal Way Lease to a subtenant. The sublease term expired in March 2023.

In August 2023, the Company entered into an operating lease agreement, denominated in Swedish Krona, for office and laboratory space located in Lund, Sweden. The term of the lease commenced in December 2023. The lease has an initial term of three years, with an option to extend the term for an additional three years.

The following table summarizes the presentation of the Company’s operating leases on its condensed consolidated balance sheets (in thousands):

Leases

 

Balance sheet classification

 

March 31,
2024

 

 

December 31,
2023

 

Assets:

 

 

 

 

 

 

 

 

Operating lease assets

 

Operating lease right-of-use assets

 

$

4,205

 

 

$

4,429

 

Total lease assets

 

 

 

$

4,205

 

 

$

4,429

 

Liabilities:

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

Operating lease liabilities

 

Operating lease liability, current

 

$

944

 

 

$

877

 

Noncurrent:

 

 

 

 

 

 

 

 

Operating lease liabilities

 

Operating lease liability, long-term

 

 

3,501

 

 

 

3,767

 

Total lease liabilities

 

 

 

$

4,445

 

 

$

4,644

 

 

10


 

 

The components of lease cost under ASC 842 included within research and development expenses and general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss were as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

Lease cost

 

2024

 

 

2023

 

Operating lease cost

 

$

317

 

 

$

286

 

Variable lease cost

 

 

129

 

 

 

95

 

Sublease income

 

 

 

 

 

(134

)

Total lease cost

 

$

446

 

 

$

247

 

 

As of March 31, 2024 and December 31, 2023, the weighted-average remaining lease term for operating leases was 4.0 years and 4.2 years, respectively, and the weighted-average discount rate was 8.30% and 8.30%, respectively. Cash paid for amounts included in the measurement of lease liabilities was $0.3 million for each of the three months ended March 31, 2024 and 2023.

Future minimum annual lease commitments under the Company’s non-cancelable operating leases as of March 31, 2024 were as follows (in thousands):

Fiscal Year

 

Amount

 

2024 (remaining 9 months)

 

$

946

 

2025

 

 

1,305

 

2026

 

 

1,339

 

2027

 

 

1,200

 

2028

 

 

404

 

Thereafter

 

 

 

Total lease payments

 

 

5,194

 

Less: interest

 

 

(749

)

Present value of operating lease liabilities

 

$

4,445

 

 

8. Stockholders' Equity

Prior to the IPO, the voting, dividend and liquidation rights of the holders of the Company’s common stock were subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock as set forth above and described in the Company’s final prospectus for the IPO filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on November 16, 2022.

In October 2022, the Board approved the amended and restated certificate of incorporation, which was filed upon the closing of the IPO and which authorized the Company to issue up to 10,000,000 shares of preferred stock, with a par value of $0.001. There are no shares of preferred stock issued or outstanding as of March 31, 2024.

As of March 31, 2024 and December 31, 2023, the Company’s Amended and Restated Certificate of Incorporation authorized the Company to issue 500,000,000 shares of common stock with a par value of $0.001.

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders (and written actions in lieu of meetings), and there are not any cumulative voting rights. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of shares of capital stock of the Company; however, the issuance of common stock may be subject to the vote of the holders of one or more series of preferred stock that may be required by terms of the Amended and Restated Certificate of Incorporation.

As of March 31, 2024 and December 31, 2023, the Company had reserved the following shares of common stock for the potential exercise of stock options, vesting of restricted stock units, as well as the remaining shares available for issuance under the 2022 Stock

11


 

Option Incentive Plan (the “2022 Plan”), the 2022 Employee Stock Purchase Plan (the “2022 ESPP”), and the 2023 Inducement Plan (the “Inducement Plan”):

 

March 31,
2024

 

 

December 31,
2023

 

Options to purchase common stock

 

 

4,273,473

 

 

 

3,117,042

 

Unvested restricted stock units

 

 

1,616,908

 

 

 

1,759,918

 

Remaining shares reserved for future issuance

 

 

2,330,788

 

 

 

2,107,745

 

Total

 

 

8,221,169

 

 

 

6,984,705

 

 

9. Stock-Based Compensation

Equity Incentive Plans

In October 2022, the Board adopted, and in November 2022 its stockholders approved, the 2022 Plan, which replaced the 2019 Plan and became effective immediately prior to and contingent upon the execution of the underwriting agreement related to the Company’s IPO. The 2022 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors, and consultants and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”) and other stock-based awards. In addition, the number of shares reserved and available for issuance under the 2022 Plan shall automatically increase beginning on January 1, 2023 and each January 1 thereafter, by five percent of the aggregate number of shares of common stock of all classes issued and outstanding on the immediately preceding December 31 or such lesser number of shares of common stock as determined by the compensation committee.

In October 2022, the Board adopted, and in November 2022 its stockholders approved, the 2022 ESPP, which became effective immediately prior to and contingent upon the execution of the underwriting agreement related to the Company’s IPO. The number of shares of common stock that may be issued under the 2022 ESPP shall cumulatively increase beginning on January 1, 2023 and each January 1 thereafter through January 1, 2032, by one percent of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the compensation committee. No shares of the Company's common stock have been issued and no stock-based compensation expense has been recognized related to the 2022 ESPP.

In June 2023, the Board adopted the Inducement Plan to facilitate the granting of equity awards as an inducement material to new employees joining the Company. The only persons eligible to receive awards under the Inducement Plan are individuals who are new employees and satisfy the standards for inducement grants under Nasdaq Listing Rule 5635(c)(4) or 5635(c)(3), as applicable. The terms of the Inducement Plan are identical to the terms of the 2022 Plan, except that no incentive stock options shall be awarded under the Inducement Plan.

Stock Options

The Company has granted stock options with service-based vesting conditions. Stock options typically vest over four years and have a maximum term of ten years. The Company typically grants stock options to employees and non-employees at exercise prices deemed by the Board to be equal to the fair value of the common stock at the time of grant.

The assumptions that the Company used in the Black-Scholes option-pricing model to determine the grant date fair value of stock options granted were as follows:

 

 

Three Months Ended March 31,

 

2024

 

2023

Risk-free interest rate range

 

3.93% - 4.33%

 

3.40% - 4.28%

Dividend yield

 

0.00%

 

0.00%

Expected life of options (years)

 

5.8 - 6.1

 

6.1

Volatility rate range

 

81.99% - 82.31%

 

83.05% - 83.55%

Fair value of common stock range

 

$3.54 - $6.19

 

$13.02 - $20.50

 

12


 

The following table summarizes the Company’s stock option activity:

 

Number of
Shares

 

 

Weighted-Average
Exercise Price

 

 

Weighted-Average
Remaining
Contractual Term
(in years)

 

 

Aggregate
Intrinsic Value
(in thousands)

 

Outstanding as of December 31, 2023

 

 

3,117,042

 

 

$

7.04

 

 

 

8.34

 

 

$

3,409

 

Granted

 

 

1,241,583

 

 

 

5.55

 

 

 

 

 

 

 

Exercised

 

 

(20,277

)

 

 

3.88

 

 

 

 

 

 

 

Forfeited or canceled

 

 

(64,875

)

 

 

4.76

 

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

4,273,473

 

 

$

6.65

 

 

 

8.65

 

 

$

9,431

 

Vested and expected to vest as of March 31, 2024

 

 

4,273,473

 

 

$

6.65

 

 

 

8.65

 

 

$

9,431

 

Vested and exercisable as of March 31, 2024

 

 

1,464,984

 

 

$

5.42

 

 

 

7.79

 

 

$

4,910

 

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the reporting period. The aggregate intrinsic value of options exercised during the three months ended March 31, 2024 and 2023 was de minimis.

The weighted-average grant date fair value of the Company’s stock options granted during the three months ended March 31, 2024 and 2023 was $4.03 and $13.54 per option, respectively. As of March 31, 2024, there was $14.3 million of unrecognized stock-based compensation expense related to stock option grants. The Company expects to recognize this amount over a weighted-average period of 2.9 years.

The total fair value of options vested during the three months ended March 31, 2024 and 2023 was $1.0 million and $0.4 million, respectively.

RSUs

The Company has granted RSUs with service vesting based conditions. Unvested shares of restricted common stock may not be sold or transferred by the holder. They are legally issued and outstanding. These restrictions lapse according to the time-based vesting of each award.

A summary of the RSU activity during the three months ended March 31, 2024 is as follows:

 

 

Restricted Stock Units

 

 

Weighted-Average
Grant Date Fair Value

 

Unvested at December 31, 2023

 

 

1,759,918

 

 

$

12.09

 

Vested

 

 

(143,010

)

 

 

12.55

 

Unvested at March 31, 2024

 

 

1,616,908

 

 

$

12.05

 

 

RSUs typically vest over four years. If and when an RSU vests, the Company will issue one share of common stock for each whole RSU that has vested, subject to satisfaction of the employee's tax withholding obligations. Upon vesting and settlement of RSUs, the Company may withhold the portion of those shares with a fair market value equal to the amount of the minimum statutory withholding taxes due. The withheld shares are accounted for as repurchases of common stock.

 

No RSUs were granted during the three months ended March 31, 2024. The weighted-average grant date fair value of the Company’s RSUs granted during the three months ended March 31, 2023 was $18.47 per RSU. As of March 31, 2024, there was $17.4 million of unrecognized stock-based compensation expense related to RSUs. The Company expects to recognize this amount over a weighted-average period of 2.1 years.

The total fair value of RSUs vested during the three months ended March 31, 2024 was $1.8 million. No RSUs vested during the three months ended March 31, 2023.

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Stock-Based Compensation Expense

Stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

General and administrative

 

$

2,666

 

 

$

2,020

 

Research and development

 

 

678

 

 

 

626

 

Total stock-based compensation expense

 

$

3,344

 

 

$

2,646

 

 

10. 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 March 31,

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

Net loss attributable to common stockholders—basic and diluted

 

$

(16,486

)

 

$

(12,756

)

Denominator:

 

 

 

 

 

 

Weighted-average common stock outstanding—basic and diluted

 

 

22,590,804

 

 

 

21,920,570

 

Net loss per share—basic and diluted

 

$

(0.73

)

 

$

(0.58

)

 

The Company’s potentially dilutive securities, which include stock options and RSUs, 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 shares from the computation of diluted net loss per share attributable to common stockholders as of March 31, 2024 and 2023 because including them would have had an anti-dilutive effect:

 

March 31,

 

 

2024

 

 

2023

 

Options to purchase common stock

 

 

4,273,473

 

 

 

3,287,857

 

Unvested restricted stock units

 

 

1,616,908

 

 

 

1,797,904

 

 

11. Commitments and Contingencies

Leases

The Company’s commitments under its operating leases are described in Note 7.

License Agreement

In January 2021, the Company entered into a license agreement and stock issuance agreement with Eli Lilly and Company (“Lilly”) (collectively, the “Lilly Agreement”), pursuant to which the Company has been granted an exclusive, royalty-bearing sublicensable license to certain patents owned or controlled by Lilly, with world-wide rights to commercially develop, manufacture, use, distribute and sell therapeutic products containing the compound prexasertib. The license from Lilly comprises three families of patent filings all relating to ACR-368. Additionally, pursuant to the Lilly Agreement, the Company received ACR-368 drug substance and drug product to be used in future research.

As initial consideration for the license, the Company made a one-time, non-creditable, non-refundable upfront payment of $5.0 million. As additional consideration for the license, the Company is required to pay Lilly aggregate development and commercial milestone payments of up to $168.0 million, of which $5.0 million is due prior to a new drug application.

The Company is also obligated to pay a tiered percentage royalty on annual net sales ranging from single-digit up to a maximum of 10%, subject to certain specified reductions. Royalties are payable by the Company on a licensed product-by-licensed product and country-by-country basis until the later of the expiration of the last valid claim covering the licensed product in such country, expiration of all applicable regulatory exclusivities in such country for such licensed product and the tenth anniversary of the first commercial sale

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of such licensed product in such country, provided, that the Company’s obligation to pay royalties for a given licensed product in a given country will expire earlier upon achievement of certain sales thresholds by generic products in such country.

As of March 31, 2024, no milestone payments or royalties have been incurred related to the Lilly Agreement.

Companion Diagnostic Agreement

In June 2022, the Company entered into a companion diagnostic agreement (the “Akoya Agreement”) with Akoya Biosciences, Inc. (“Akoya”), pursuant to which the Company has engaged Akoya to co-develop, validate, and commercialize the Company’s proprietary ACR-368 OncoSignature test, the companion diagnostic that will be used to identify patients with cancer most likely to respond to ACR-368. Subject to the terms of the Akoya Agreement, as subsequently amended, the Company paid Akoya a one-time, non-refundable, non-creditable upfront payment in the amount of $0.6 million. The Company is obligated to pay Akoya up to an aggregate of $17.3 million upon the achievement of specified development milestones. Through March 31, 2024, the Company has made aggregate payments of $8.3 million to Akoya. No milestones were achieved during the three months ended March 31, 2024. During the three months ended March 31, 2023, the Company recorded research and development expenses of $1.5 million related to the achievement of milestones.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with each of its directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or services 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. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not currently aware of any indemnification claims and has not accrued any liabilities related to such obligations in its financial statements as of March 31, 2024 and December 31, 2023.

Legal Proceedings

From time to time, in the ordinary course of business, the Company is subject to litigation and regulatory examinations as well as information gathering requests, inquiries and investigations. The Company is not currently party to any material legal proceedings and is not aware of any pending or threatened legal proceedings that could have an adverse effect on the Company's business, operating results or financial condition.

Other Contracts

The Company enters into contracts in the normal course of business with various third parties for preclinical research studies, clinical trials, testing, manufacturing and other services. These contracts generally provide for termination upon notice and are cancelable without significant penalty or payment, and do not contain any minimum purchase commitments.

12. Employee Benefit Plans

Effective January 1, 2019, the Company adopted a 401(k) Plan for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits. Since inception of the 401(k) Plan and through the three months ended March 31, 2024, the Company has not made any contributions to the 401(k) Plan.

13. Subsequent Events

Akoya Milestone Achievement

In April 2024, the Company incurred three additional development milestones under the Akoya Agreement for a total of $1.8 million.

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PIPE Securities Purchase Agreement

On April 8, 2024, the Company entered into the PIPE Purchase Agreement for a private placement with certain institutional and accredited investors. Pursuant to the PIPE Purchase Agreement, the Company agreed to issue and sell to the PIPE investors an aggregate of (i) 8,235,000 shares of the Company’s common stock at a purchase price of $8.50 per share, and (ii) pre-funded warrants (“Pre-Funded Warrants”) to purchase up to an aggregate of 7,060,000 shares of common stock at a purchase price of $8.499 per Pre-Funded Warrant, which represents the per share purchase price of the common stock less the $0.001 per share exercise price for each Pre-Funded Warrant. The Pre-Funded Warrants will be exercisable at any time after the date of issuance and will not expire.

The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 4.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise. The holders of Pre-Funded Warrants may increase or decrease such percentage by providing at least 61 days’ prior notice to the Company, but not in excess of 19.99% in the case of an increase.

The aggregate gross proceeds from the PIPE, which closed on April 11, 2024, were $130.0 million, before deducting the placement agent fee and other offering expenses and excluding any proceeds the Company may receive upon exercise of the Pre-Funded Warrants.

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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 unaudited condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 28, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, 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 “Special Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Acrivon,” the “Company,” “we,” “us,” and “our” refer to Acrivon Therapeutics, Inc. and its subsidiaries.

Overview

We are a clinical stage biopharmaceutical company discovering and developing next-generation precision oncology medicines that we match to patients whose tumors are predicted to be sensitive to each specific medicine by utilizing our proprietary, machine learning-enabled proteomics-based platform, AP3. Previously approved precision oncology treatments, such as kinase inhibitors, have transformed the cancer treatment landscape, and while the therapeutic benefit of these agents has provided significant benefit to patients, these precision oncology treatments unfortunately only address the less than 10% of patients with cancers that harbor certain easily-identifiable genetic mutations. In diseases outside oncology, e.g. autoimmune, inflammatory, fibrotic, and metabolic disorders, recurrent mutations in individual patients that can be linked to disease pathogenesis are exceedingly rare. Accordingly, genetics-based precision medicine approaches to treat only the patients that benefit from a particular therapeutic has been even more challenging in such diseases.

Our approach is designed to overcome the limitations of genomics-based patient selection methods. We do this by using AP3 to discover and develop our pipeline of innovative oncology drug candidates. The AP3 platform is engineered to measure compound-specific effects on the entire tumor cell protein signaling network and drug-induced resistance mechanisms in an unbiased manner and is modality and disease agnostic. These distinctive capabilities enable AP3’s direct application for drug design optimization for monotherapy activity, the identification of rational drug combinations, and the creation of drug-specific proprietary OncoSignature companion diagnostics that are used to identify the patients most likely to benefit from our drug candidates.

We are currently advancing our lead candidate, ACR-368 (also called prexasertib), a selective small molecule inhibitor targeting CHK1 and CHK2 with sub single-digit nM and single-digit nM potency, respectively, in a potentially registrational Phase 2 trial across multiple solid tumor types. We are continuing enrollment and dosing of patients in this multi-center trial based on OncoSignature-predicted sensitivity to ACR-368 in patients with locally advanced or metastatic, recurrent platinum-resistant ovarian cancer, as well as endometrial adenocarcinoma or urothelial cancer, two tumor types predicted to be sensitive to ACR-368 through OncoSignature screening and not previously evaluated in past clinical trials.

Our ACR-368 OncoSignature test, which has not yet obtained regulatory approval, has been extensively evaluated in preclinical studies, including in two separate, blinded, prospectively-designed studies on pretreatment tumor biopsies collected from patients with ovarian cancer treated with ACR-368 in past Phase 2 clinical trials conducted by Eli Lilly and Company, or Lilly, and at the National Cancer Institute providing evidence of robust enrichment of responders through our method.

In November 2023, we announced initial clinical observations from the ongoing Phase 2 trial. Consistent with the overall favorable tolerability profile previously observed in multiple past single-arm trials conducted at recommended Phase 2 dose (RP2D), drug-related adverse events were primarily reversible, manageable hematological toxicities, including neutropenia and thrombocytopenia. In the limited number of patients evaluated by imaging to date, preliminary evidence of clinical activity was observed in OncoSignature-positive patients across all three tumor types treated with single agent ACR-368 at RP2D. Consistent with AP3-predicted tumor sensitivity to the combination of ACR-368 and low dose gemcitabine (LDG) in OncoSignature-negative patients, early imaging-based evidence of clinical activity across all three tumor types was also observed in patients treated with ACR-368 at RP2D and LDG during the dose escalation phase.

In April 2024, we presented initial positive clinical data from the ongoing registrational-intent Phase 2 ACR-368 clinical trials, which provided initial, prospective validation of the OncoSignature test’s ability to identify ovarian and endometrial patients sensitive to ACR-368 monotherapy in the ongoing clinical trial, with clear segregation of RECIST responders in the OncoSignature-positive (50% confirmed objective response rate, or ORR, in 10 patients) versus OncoSignature-negative (0% ORR in 16 patients) arms (p-value=0.0038).

17


 

On May 8, 2023, ACR-368 was granted two Fast Track designations from the U.S. Food and Drug Administration for the investigation of ACR-368 monotherapy for patients with OncoSignature-positive platinum-resistant ovarian cancer and endometrial cancer. On November 16, 2023, the ACR-368 OncoSignature test was granted Breakthrough Device Designation for the identification of ovarian cancer patients who may benefit from treatment with ACR-368. This designation reflects the FDA’s determination that the device is reasonably expected to provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions.

In addition to ACR-368, we are also leveraging our proprietary AP3 precision medicine platform to rationally design and develop internally-discovered co-crystallography-driven, preclinical stage pipeline programs. These include ACR-2316, a potent, selective WEE1/PKMYT1 inhibitor designed using AP3 for superior single-agent activity as demonstrated in preclinical studies against clinically relevant comparators, and a potential first-in-class cell cycle program for an undisclosed target initiated following the same AP3 approach. ACR-2316 is being rapidly advanced in IND-enabling studies, and, in April 2024, we announced new preclinical data for ACR-2316, including accelerated timelines, with IND filing now expected in Q3 2024 and the initiation of a clinical trial anticipated in Q4 2024.

Since our inception in 2018, we have devoted substantially all of our resources toward conducting discovery and research activities, organizing and staffing our company, business planning, acquiring and internally discovering drug candidates, establishing and protecting our intellectual property portfolio, developing and progressing ACR-368 and the ACR-368 OncoSignature, preparing for and conducting preclinical studies and clinical trials, establishing arrangements with third parties for the manufacture of ACR-368, the ACR-368 OncoSignature and component materials, advancing our internal co-crystallography-driven, AP3-enabled preclinical programs, conducting preclinical studies for ACR-2316, and initiating IND-enabling studies for ACR-2316, as well as raising capital. We do not have any drug candidates approved for sale and have not generated any revenue from drug sales.

Since inception, we have funded our operations primarily with proceeds from the sales of shares of our convertible preferred stock, the issuance of convertible notes, and our initial public offering, or IPO, and concurrent private placement. Upon the closing of our IPO on November 17, 2022, only common stock remains issued and outstanding. In addition, on April 8, 2024, we entered into a Private Investment in Public Equity, or PIPE, securities purchase agreement, or the PIPE Purchase Agreement, for a private placement with certain institutional and accredited investors, or the April 2024 Private Placement. Pursuant to the PIPE Purchase Agreement, we agreed to issue and sell to the PIPE investors an aggregate of (i) 8,235,000 shares of our common stock, and (ii) pre-funded warrants to purchase up to an aggregate of 7,060,000 shares of our common stock. We received $130.0 million in aggregate gross proceeds from the PIPE, before deducting the placement agent fee and other offering expenses and excluding any proceeds we may receive upon exercise of the Pre-Funded Warrants.

We have incurred operating losses since inception. Our net losses for the three months ended March 31, 2024 and 2023 were $16.5 million and $12.8 million, respectively. As of March 31, 2024, we had an accumulated deficit of $132.9 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future, particularly if and as we:

continue to conduct preclinical studies and clinical trials for ACR-368;
initiate and conduct additional preclinical studies and clinical trials for ACR-368;
continue to discover and develop additional drug candidates, including ACR-2316, and drug-tailored OncoSignature tests;
acquire or in-license other drug candidates and technologies;
maintain, expand, and protect our intellectual property portfolio;
hire additional clinical and scientific personnel;
further develop and refine the manufacturing processes for ACR-368, the ACR-368 OncoSignature, ACR-2316, or any future drug candidates;
seek regulatory approvals and pursue commercialization for any drug candidates that successfully complete clinical trials; and
add operational, financial, and management information systems and personnel, including personnel to support our drug development and planned future commercialization efforts, as well as to support our obligations as a public reporting company.

We are incurring and expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other expenses that we did not incur as a private company. Furthermore,

18


 

we will not generate revenue from drug sales until we successfully complete clinical development and obtain regulatory approval for a drug candidate. In addition, if we obtain regulatory approval for a drug candidate and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support drug sales, marketing, manufacturing and distribution activities. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our planned clinical studies and our expenditures on other research and development activities.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time that we can generate significant revenue from drug sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. If we are unable to raise capital as needed, this could have a negative impact on our financial condition and ability to pursue our business strategies including requiring us to delay, reduce or eliminate drug development or future commercialization efforts. The amount and timing of our future funding requirements will depend on many factors including the successful advancement of ACR-368, the ACR-368 OncoSignature, ACR-2316, or any future drug candidates. Our ability to raise additional funds may also be adversely impacted by potential worsening global economic conditions, and disruptions to, and volatility in the credit and financial markets in the United States and worldwide, such as those resulting from conflicts in the Middle East and the war in Ukraine. There can be no assurances that the current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

As of March 31, 2024, we had cash, cash equivalents and investments of $110.0 million. We believe that our existing cash, cash equivalents and investments as of March 31, 2024, together with the gross proceeds of $130.0 million raised from the April 2024 Private Placement, will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2026. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See the section titled “—Liquidity and Capital Resources.”

Companion Diagnostic Agreement

In June 2022, we entered into a companion diagnostic agreement with Akoya Biosciences, Inc., or Akoya, pursuant to which we agreed to co-develop, validate, and commercialize our proprietary ACR-368 OncoSignature test, the companion diagnostic that will be used to identify patients with cancer most likely to respond to ACR-368.

Pursuant to the agreement, we paid Akoya a one-time, non-refundable, non-creditable upfront payment in the amount of $0.6 million. We are obligated to pay Akoya up to an aggregate of $17.3 million upon the achievement of specified development milestones. As of May 14, 2024, development milestones totaling $10.1 million have been achieved by Akoya under the agreement. Other than certain specified pass-through costs, each party is responsible for its own costs associated with the development of the companion diagnostic. Akoya will procure and manufacture necessary supplies to perform the ACR-368 OncoSignature test to support our clinical development and commercial requirements, in accordance with a supply agreement to be mutually agreed upon by the parties. We may terminate the agreement at our convenience, subject to the payment of a termination fee in the amount of $1.0 million.

Components of Results of Operations

Revenue

To date, we have not generated any revenue, and we do not expect to generate any revenue in the foreseeable future from drug sales. We may in the future generate revenue from payments received under collaboration agreements, which could potentially include (but not be limited to) payments of upfront fees, license fees, milestone-based payments and reimbursements for research and development efforts.

Operating Expenses

Research and Development

The majority of our expenses have been research and development expenses, which consist primarily of costs incurred in connection with our research and development activities, including our drug discovery efforts and the development of ACR-368 and the ACR-368 OncoSignature. We expense research and development costs as incurred, which include:

direct cost for conducting internal research and development to generate preclinical validation data for ACR-368 including the ACR-368 OncoSignature, and for our internal preclinical drug discovery programs, including ACR-2316;
the cost to obtain and maintain licenses to intellectual property, such as those with Lilly and related future payments should certain milestones be achieved;

19


 

external research and development expenses incurred under agreements with CROs, as well as investigative sites and consultants that conduct our clinical trials and other scientific development services;
costs related to manufacturing material for our clinical trials, including fees paid to contract manufacturing organizations, or CMOs;
manufacturing scale-up expenses and the cost of acquiring and manufacturing clinical trial materials;
employee-related expenses, including salaries, bonuses, benefits, stock-based compensation, and other related costs for those employees involved in research and development efforts;
costs of outside consultants, including their fees, stock-based compensation, and related travel expenses;
expenses to acquire technologies, such as intellectual property, to be used in research and development;
upfront and maintenance fees incurred under license, acquisition, and other third-party agreements;
costs related to regulatory activities, including filing fees paid to regulatory agencies and compliance with regulatory requirements; and
facilities, depreciation, and other expenses, which include direct and allocated expenses for rent, maintenance of facilities, and equipment and software.

Research and development costs are expensed as incurred. We recognize external development costs as related goods are delivered or services are performed. Significant judgments and estimates are made in determining the accrued expense balances at the end of any reporting period.

We record direct costs for our early stage, discovery, and development drug candidates at the program level. Other costs inclusive of personnel, facilities, and supplies are not allocated at the program level.

Our external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our process development, manufacturing, and clinical development activities. Our direct external research and development expenses also include fees incurred under license and intellectual property purchase agreements. We track these external research and development costs on a program-by-program basis once we have identified a drug candidate.

Our indirect research and development costs are primarily personnel-related costs, facilities, which is offset by a portion of our allocable sublease rent income, and other costs. Employees and infrastructure are not directly tied to any one program and are deployed across our programs. As such, we do not track these costs on a specific program basis.

The successful development of our ACR-368 and ACR-368 OncoSignature test or any other future drug candidates, including ACR-2316, is highly uncertain. We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of ACR-368 and manufacturing processes and conduct discovery and research activities for our clinical programs and continue preclinical development of ACR-2316 through IND-enabling studies.

We cannot determine with certainty the timing of initiation, the duration, or the completion costs of current or future clinical trials of our drug candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which drug candidates to pursue and how much funding to direct to each drug candidate on an ongoing basis in response to the results of ongoing and future clinical trials, regulatory developments and our ongoing assessments as to each drug candidate’s commercial potential. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly with our ongoing clinical trials. We anticipate that our expenses will increase substantially, particularly due to the numerous risks and uncertainties associated with developing drug candidates, including the uncertainty of:

the scope, rate of progress and expenses of our ongoing research activities and clinical trials and other research and development activities;
confirming the appropriate safety profile established in past clinical trials;
successful enrollment in and completion of clinical trials;
whether our drug candidates show efficacy with an increased ORR through patient responder identification in our clinical trials;
receipt of marketing approvals from applicable regulatory authorities;

20


 

establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our drug candidates;
the extent to which we establish additional collaboration or license agreements;
commercializing drug candidates, if and when approved, whether alone or in collaboration with others; and
continued acceptable safety profile of the products following any regulatory approval.

Any changes in the outcome of any of these variables with respect to the development of our drug candidates in clinical development could mean a significant change in the costs and timing associated with the development of these drug candidates. We may never succeed in achieving regulatory approval for any of our drug candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some drug candidates or focus on others. For example, if the U.S. Food and Drug Administration, European Medicines Agency or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that drug candidate.

General and Administrative

General and administrative expenses consist primarily of employee-related costs, including salaries, bonuses, benefits, and stock-based compensation expenses for personnel in executive, finance, accounting, human resources and other administrative functions. Other significant general and administrative expenses include legal fees relating to patent, intellectual property and corporate matters, fees paid for accounting, audit, consulting and other professional services, and expenses for rent, insurance and other operating costs. An allocated portion of sublease rent income is recorded as an offset to general and administrative expenses.

We anticipate that our general and administrative expenses will continue to increase in the future as we increase our headcount to support our continued research activities and development of our drug candidates. We also anticipate that we will continue to 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), Net

Interest Income

Interest income consists of interest income earned on cash equivalents and investments and amortization of premiums and accretion of discounts to maturity for available-for-sale debt securities.

Other Expense, Net