Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis together with our financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that involve risks and uncertainties. For a complete discussion of forward-looking statements, see the section above entitled “Special Note Regarding Forward Looking Statements.” Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Item 1A. Risk Factors.”
Additionally, our discussion and analysis below are focused on our financial results and liquidity and capital resources for the years ended December 31, 2024 and 2023, including year-over-year comparisons of our financial performance and condition for these years. Discussion and analysis of the year ended December 31, 2022 specifically, as well as the year-over-year comparison of our financial performance and condition for the years ended December 31, 2023 and 2022, are located in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 8, 2024.
Overview
We are an innovative clinical-stage biopharmaceutical company developing tumor-activated immunotherapies for cancer. Our proprietary technology has enabled the development of two distinct bispecific platforms: Tumor Activated T Cell Engagers (TRACTr) and Tumor Activated Immunomodulators (TRACIr). The TRACTr platform produces T cell engagers (TCEs) with a tumor antigen-binding domain and a CD3 T cell binding domain, while the TRACIr platform produces bispecifics with a tumor antigen-binding domain and a costimulatory CD28 binding domain. The goal of both platforms is to provide cancer patients with safe and effective therapeutics that direct and guide their immune system to eradicate tumors while minimizing safety concerns. Our initial focus is on developing a novel class of TRACTr therapeutics designed to target clinically validated TCE drug targets, but overcome liabilities associated with prior generations of TCEs. While TCE therapeutics have displayed potent anti-tumor activity in hematological cancers, developing TCEs to treat solid tumors has faced challenges due to the limitations of prior TCE technologies, namely (i) on-target healthy tissue immune activation that contributes to cytokine release syndrome (CRS) and healthy tissue toxicity and (ii) poor pharmacokinetics (PK) leading to short half-life. Our first clinical candidate, JANX007, is a prostate-specific membrane antigen or PSMA-TRACTr and is being investigated
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in a Phase 1 clinical trial in adult subjects with metastatic castration-resistant prostate cancer (mCRPC). In December 2024 we announced updated interim clinical data for JANX007 which displayed meaningful and prolonged PSA drops, encouraging anti-tumor activity, a favorable safety profile including CRS and treatment-related adverse events (TRAEs) primarily limited to Cycle 1 and lower grades, and PK consistent with the TRACTr mechanism-of-action. Our second clinical candidate, JANX008, is an epidermal growth factor receptor or EGFR-TRACTr and is being studied in a Phase 1 clinical trial for the treatment of multiple solid cancers including colorectal carcinoma, squamous cell carcinoma of the head and neck, non-small cell lung cancer, renal cell carcinoma, small cell lung cancer, pancreatic ductal adenocarcinoma and triple-negative breast cancer. The first patient for this trial was dosed in April 2023 and in February 2024 we announced positive early data for JANX008 that displayed anti-tumor activity in multiple tumor types with low-grade CRS and predominantly low-grade TRAEs. We are also generating a number of unnamed TRACTr and TRACIr programs for potential future development, some of which are at development candidate stage or later. We are currently assessing priorities in our preclinical pipeline.
We were incorporated in June 2017. To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, business development, raising capital, developing and optimizing our technology platform, identifying potential product candidates, undertaking research and development for our lead programs, establishing and enhancing our intellectual property portfolio and providing general and administrative support for these operations. All of our product candidates and research programs other than JANX007 and JANX008 are in preclinical development, and none have been approved for commercial sale. We have never generated any revenue from product sales and have incurred net losses each year since we commenced operations. We have funded our operations primarily with the net proceeds from the issuance of convertible promissory notes, the issuance of convertible preferred stock, the exercise of common stock options, proceeds from our initial public offering (IPO), the issuance of common stock and pre-funded common stock warrants in public and/or underwritten offerings and amounts received under a collaboration agreement with Merck Sharp & Dohme Corp. (Merck).
We have incurred operating losses since our inception and have not yet generated any product revenue. Our net losses were $69.0 million and $58.3 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $237.8 million.
Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on a variety of factors including the timing and scope of our clinical and preclinical studies and our expenditures on other research and development activities and the timing of any revenue recognition under our collaboration agreement with Merck. We expect our expenses and operating losses will increase substantially and that we will continue to incur significant losses for the foreseeable future as we conduct our ongoing and planned research and development activities and conduct preclinical studies and clinical trials, hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company.
We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates, which will not be for many years, if ever. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially grants, collaborations, licenses or other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates or to our platform technologies that we would otherwise prefer to develop and market ourselves. Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments, will be sufficient to meet our anticipated operating expenses and capital expenditure requirements through at least the next 12 months, following the date of this Annual Report.
Our Research Collaboration with Merck
In December 2020, we entered into a research collaboration and exclusive license agreement with Merck to develop TRACTr product candidates that are distinct from those in our internally developed pipeline (the Merck Agreement). Merck has the right to select up to two collaboration targets (each a Collaboration Target) related to next generation T cell engager immunotherapies for the treatment of cancer. Merck selected the first Collaboration Target upon execution of the agreement and selected the second Collaboration Target in May 2022. Merck received an exclusive worldwide license for each selected target and intellectual property from the collaboration. In return, we are eligible to receive up to $500.5 million per target in upfront and milestone payments, plus royalties on sales
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of the products derived from the collaboration. Merck provided research funding under the collaboration through August 2024, after which our research services for both collaboration targets were completed.
Risks and Uncertainties
Global economic and business activities continue to face widespread macroeconomic uncertainties, including those associated with public health crises, bank failures, inflation and monetary supply shifts, recession risks and potential disruptions from the Russia-Ukraine conflict, the war in the Middle East and related sanctions. For example, in 2023, the Federal Deposit Insurance Corporation took control and was appointed receiver of certain financial institutions. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition. Inflation generally affects us by increasing our salaries and fees paid to third-party contract service providers. We have considered potential impacts arising from the risks and uncertainties as described above and have not experienced any material disruption to our operations to date.
Support Services Agreement with Avalon BioVentures, Inc. (formerly COI Pharmaceuticals, Inc.)
In January 2021, we entered into a Support Services Agreement (the 2021 Support Services Agreement) with Avalon BioVentures, Inc. (Avalon) that outlines the terms of services provided by Avalon to us, as well as the fees charged for such services. Avalon is a shared service company that provides certain back-office and administrative and research and development support services, including facilities support, to the portfolio companies of Avalon Ventures, an entity that beneficially owned greater than 5% of our outstanding capital stock until November 2024. The amounts paid to Avalon include support service fees or mark-ups of up to 5%. The 2021 Support Services Agreement terminated on December 31, 2024.
Financial Operations Overview
Revenues
To date, we have not generated any revenues from the commercial sale of any products, and we do not expect to generate revenues from the commercial sale of any products for the foreseeable future, if ever. We recognized $10.6 million and $8.1 million of revenue under the Merck Agreement for the years ended December 31, 2024 and 2023, respectively.
Research and Development
To date, our research and development expenses have related primarily to direct and indirect expenses in connection with the development of our TRACTr and TRACIr platforms, discovery efforts and preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Our direct research and development expenses include:
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external research and development expenses incurred under agreements with CROs and consultants to conduct our preclinical and clinical studies;
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license fees; and
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laboratory equipment, materials and supplies.
Our indirect research and development expenses include:
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salaries and employee-related costs, including recruiting fees and stock-based compensation for those individuals involved in research and development efforts;
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maintenance of facilities and equipment, software license fees, depreciation; and
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allocated facilities and equipment-related expenses, which include rent, utilities, insurance, and office supplies.
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We anticipate that our research and development expenses will substantially increase for the foreseeable future as we continue the development of our TRACTr and TRACIr platforms and the discovery and development of product candidates under our TRACTr and TRACIr platforms.
We cannot determine with certainty the timing of initiation, the duration or the completion costs of clinical trials and preclinical studies of product candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and 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 product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
General and Administrative
General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant general and administrative expenses include facility-related costs, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities; legal fees relating to intellectual property and corporate matters; professional fees for accounting, tax and consulting services; insurance costs; and other operating costs. We anticipate that our general and administrative expenses will increase for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any of our product candidates receive marketing approval, commercialization activities. We also anticipate increased expenses associated with operating as a public company, including expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs.
Other Income
Other income consists of interest income on our cash and cash equivalents and short-term investments.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023 (in thousands)
Year Ended December 31,
Operating expenses:
Collaboration Revenue
Collaboration revenues were $10.6 million and $8.1 million for the years ended December 31, 2024 and 2023, respectively. The increase of $2.5 million was primarily due to the achievement of a developmental milestone related to the First Collaboration Target under the Merck Agreement in June 2024 offset by a decrease in full-time equivalent hours incurred in the performance of research services required under the Merck Agreement.
Research and Development Expense
The following table summarizes our direct and indirect research and development expenses for the years ended December 31, 2024 and 2023 (in thousands):
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Year Ended December 31,
Direct costs:
IND applications for JANX007 and JANX008 were cleared by the U.S. Food and Drug Administration (FDA) in May 2022 and January 2023, respectively. As a result, we have separated direct costs for the development of JANX007 and JANX008 from preclinical stage programs and other direct unallocated costs for the years ended December 31, 2024 and 2023. We will further separate direct costs related to our other programs as future IND applications are cleared by the FDA.
Research and development expenses were $68.4 million and $54.9 million for the years ended December 31, 2024 and 2023, respectively. The increase of $13.5 million was primarily due to increases in direct costs related to the development of JANX007 of $7.8 million, direct costs related to the development of JANX008 of $1.1 million and indirect costs of $5.3 million, offset by decreases in preclinical stage programs and other direct unallocated costs of $0.7 million.
General and Administrative Expense
General and administrative expenses were $41.0 million and $26.1 million for the years ended December 31, 2024 and 2023, respectively. The increase of $14.9 million was primarily due to increases in stock-based compensation of $11.2 million, consulting and professional fees of $2.2 million and other general and administrative expenses of $1.5 million.
Other Income
Other income was $29.9 million and $14.7 million for the years ended December 31, 2024 and 2023, respectively. The increase of $15.2 million was due to an increased cash and cash equivalents balance resulting in increased interest income.
Liquidity and Capital Resources
We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses and negative cash flows for the foreseeable future. As of December 31, 2024, we had cash, cash equivalents, restricted cash and short-term investments of $1.0 billion. Inclusive in this amount is $0.8 million of restricted cash that is not available for current use.
In May 2023, we entered into an ATM Equity OfferingSM Sales Agreement (Sale Agreement) with BofA Securities, Inc. (BofA) to sell shares of our common stock, from time to time, through an “at the market offering” program having an aggregate offering price of up to $150.0 million through which BofA would act as sales agent. In February 2024, we delivered written notice to BofA that we were suspending and terminating the prospectus related to the shares of our common stock issuable pursuant to the terms of the Sale Agreement. In May 2024, we filed a shelf registration statement on Form S-3ASR which included a new prospectus which covers the offering, issuance and sale of up to a maximum aggregate offering price of $150.0 million of our common stock under the Sale Agreement. As of December 31, 2024, $150.0 million of common stock remained available for sale under the Sale Agreement.
In July 2023, we closed an underwritten offering of 4,153,717 shares of our common stock and pre-funded warrants to purchase 583,483 shares of common stock at an exercise price of $0.001 per share. The shares of common stock were sold at a price of $12.46 per share and the pre-funded common stock warrants were sold at a price of $12.459 per pre-funded common stock warrant, resulting in gross proceeds of $59.0 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $2.5 million, resulting in net proceeds of $56.5 million.
In March 2024, we closed an underwritten offering of 5,397,301 shares of our common stock and pre-funded warrants to purchase 1,935,483 shares of common stock at an exercise price of $0.001 per share. The shares of
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common stock were sold at a price of $46.50 per share and the pre-funded common stock warrants were sold at a price of $46.499 per pre-funded common stock warrant, resulting in gross proceeds of $341.0 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $20.9 million, resulting in net proceeds of $320.1 million.
The registration statement on Form S-3ASR that we filed in May 2024 provides us with the ability to offer an unlimited amount of certain securities, including shares of our common stock, from time to time. The specific terms of any offering under the shelf registration statement are established at the time of such offering.
In December 2024, we closed an underwritten offering of 6,150,793 shares of our common stock and pre-funded warrants to purchase 238,095 shares of common stock at an exercise price of $0.001 per share. The shares of common stock were sold at a price of $63.00 per share and the pre-funded common stock warrants were sold at a price of $62.999 per pre-funded common stock warrant, resulting in gross proceeds of $402.5 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $24.6 million, resulting in net proceeds of $377.9 million.
The following summarizes our cash flows for the periods indicated (in thousands):
Year Ended December 31,
Net cash provided by (used in):
Operating Activities
Net cash used in operating activities of $43.8 million for the year ended December 31, 2024 was primarily due to our net loss of $69.0 million and a change in operating assets and liabilities and other non-cash charges of $7.8 million, adjusted for $33.0 million of stock-based compensation expense. Net cash used in operating activities of $50.6 million for the year ended December 31, 2023 was primarily due to our net loss of $58.3 million and a change in operating assets and liabilities and other non-cash charges of $12.3 million, adjusted for $20.0 million of stock-based compensation expense.
Investing Activities
Net cash used in investing activities of $258.0 million for the year ended December 31, 2024 was primarily due to $257.7 million of net purchases of short-term investments and by our purchase of property and equipment, primarily consisting of laboratory equipment of $0.3 million. Net cash used in investing activities of $41.2 million for the year ended December 31, 2023 was primarily due to $39.3 million of net purchases of short-term investments and by our purchase of property and equipment, primarily consisting of laboratory equipment of $1.9 million.
Financing Activities
Net cash provided by financing activities of $713.2 million for the year ended December 31, 2024 was primarily due to proceeds from the issuance of common stock and pre-funded common stock warrants, net of issuance costs, of $698.3 million, and exercises of common stock options and from shares issued under our 2021 Employee Stock Purchase Plan (ESPP) of $14.9 million. Net cash provided by financing activities of $59.5 million for the year ended December 31, 2023 was primarily due to proceeds from the issuance of common stock and pre-funded common stock warrants, net of issuance costs, of $56.5 million, and exercises of common stock options and from shares issued under our ESPP of $3.0 million.
Funding Requirements
Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments, will be sufficient to meet our anticipated operating expenses and capital expenditure requirements through at least the next 12 months, following the date of this Annual Report. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.
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Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.
Our future capital requirements will depend on many factors, including:
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the initiation, trial design, progress, timing, costs and results of drug discovery, preclinical studies and clinical trials of our product candidates, and in particular the clinical trials for JANX007 and JANX008;
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the number and characteristics of clinical programs that we pursue;
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the outcome, timing and costs of seeking FDA, European Commission and any other comparable regulatory approvals for any future drug candidates;
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the costs of manufacturing our product candidates;
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the costs associated with hiring additional personnel and consultants as our preclinical, manufacturing and clinical activities increase;
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the receipt of marketing approval and revenue received from any commercial sales of any of our product candidates, if approved;
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the cost of commercialization activities for any of our product candidates, if approved, including marketing, sales and distribution costs;
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the ability to establish and maintain strategic collaboration, licensing or other arrangements and the financial terms of such agreements;
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the extent to which we in-license or acquire other products and technologies;
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the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
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our implementation of additional internal systems and infrastructure, including operational, financial and management information systems;
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our costs associated with expanding our facilities or building out our laboratory space;
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the effects of the disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from geopolitical and macroeconomic conditions, including the military conflict in Ukraine and Russia, the war in the Middle East, epidemics and bank failures; and
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the costs of operating as a public company.
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potentially grants, collaborations, licenses or other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar 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 and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Contractual Obligations and Commitments
In April 2021, we entered into a cell line license agreement (Cell Line License Agreement) with WuXi Biologics (Hong Kong) Limited (WuXi Biologics). According to the terms of the Cell Line License Agreement, if we do not engage WuXi Biologics or its affiliates to manufacture the therapeutic products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (WuXi Biologics Licensed Products) for our commercial supplies, we are required to make royalty payments to WuXi Biologics in an amount equal to a low single-digit percentage of specified portions of net sales of WuXi Biologics Licensed Products manufactured by a third-party manufacturer. We have the right (but not the obligation) to buy out our remaining
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royalty obligations with respect to each WuXi Biologics Licensed Product by paying WuXi Biologics a one-time payment in an amount ranging from low single digit million dollars to a maximum of $15.0 million (Buyout Option). The royalty obligations will remain in effect during the term of the Cell Line License Agreement so long as we have not exercised the Buyout Option. See the section within Item 1 of Part I of this Annual Report on Form 10-K titled "License Agreement with WuXi Biologics (Hong Kong) Limited" for additional information.
In October 2021, we entered into a noncancelable agreement to lease office and laboratory space in San Diego, California (Torrey Plaza Lease) with aggregate payments of approximately $38.0 million over the 126-month term of the lease. The Torrey Plaza Lease commenced in July 2022. See Note 3 to our audited financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
We enter into contracts in the normal course of business with various third parties for preclinical and clinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts provide for termination upon notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to estimates to complete the performance obligations and the estimated transaction price for collaboration revenues, accruals for research and development expenses and estimates used in valuing our equity awards for stock-based compensation expense. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 1 to our financial statements included elsewhere in this Annual Report, we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.
Collaboration Revenue
We determined that our collaboration with Merck is a contract with a customer. We recognize revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration we are entitled to receive in exchange for such product or service. To determine revenue recognition for our contracts with customers, we follow a five-step approach: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control of the product or service.
A customer is a party that has entered into a contract with us, where the purpose of the contract is to obtain a product or a service that is an output of our ordinary activities in exchange for consideration. To be considered a contract, (i) the contract must be approved (in writing, orally, or in accordance with other customary business practices), (ii) each party’s rights regarding the product or the service to be transferred can be identified, (iii) the payment terms for the product or the service to be transferred can be identified, (iv) the contract must have commercial substance (that is, the risk, timing or amount of future cash flows is expected to change as a result of the contract), and (v) it is probable that we will collect substantially all of the consideration to which we are entitled to receive in exchange for the transfer of the product or the service.
A performance obligation is defined as a promise to transfer a product or a service to a customer. We identify each promise to transfer a product or a service (or a bundle of products or services, or a series of products and services that are substantially the same and have the same pattern of transfer) that is distinct. A product or a service is distinct if both (i) the customer can benefit from the product or the service either on its own or together with other resources that are readily available to the customer and (ii) our promise to transfer the product or the service to the customer is separately identifiable from other promises in the contract. Each distinct promise to transfer a product or a service is a unit of accounting for revenue recognition. If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation. When an entity grants a customer the option to acquire additional goods or services, that
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option is a separate performance obligation only if it provides a material right to the customer that the customer would not receive without entering into the contract. Under our existing collaboration agreement with Merck, due to the early stage of the licensed technology, the license of such technology was combined with the additional promises associated with each of the targets in the agreement as one combined performance obligation. Furthermore, as it relates to the option to select an additional collaboration target, we determined that the option did not represent a material right. The option instead represents a customer option to purchase additional goods or services and was therefore accounted for as a separate contract.
The transaction price is the amount of consideration we are entitled to receive in exchange for the transfer of control of a product or a service to a customer. To determine the transaction price, we consider the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer. If a significant financing component exists, the transaction price is adjusted for the time value of money. If an element of variability exists, we must estimate the consideration we expect to receive and use that amount as the basis for recognizing revenue as the product or the service is transferred to the customer. There are two methods for determining the amount of variable consideration: (i) the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts, and (ii) the mostly likely amount method, which identifies the single most likely amount in a range of possible consideration amounts.
With respect to variable consideration relating to development and regulatory milestone payments, if it is probable that a significant revenue reversal would not occur, the associated payment value is included in the transaction price. For development and regulatory milestones that are uncertain in nature and highly dependent on factors outside of our control, the aggregate consideration is determined to be fully constrained and is not included in the transaction price until the underlying events occur or the associated approvals are received. At the end of each reporting period, we re-evaluate the probability of achievement of each milestone and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect the reported amount of revenues in the period of adjustment.
For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
If a contract has multiple performance obligations, we allocate the transaction price to each distinct performance obligation in an amount that reflects the consideration we are entitled to receive in exchange for satisfying each distinct performance obligation. For each distinct performance obligation, revenue is recognized when (or as) we transfer control of the product or the service applicable to such performance obligation. To date, for collaboration arrangements that represent a single performance obligation, the revenues are recognized over time based on actual Full Time Equivalent employees (FTEs) utilized as a percentage of total FTEs expected to be utilized over the expected term of the research services. We apply judgment in the total estimated FTEs anticipated over the contract. Estimates are based on input from key research personnel and expectations of FTEs necessary to complete the planned activities within the scope of the agreement and availability of internal FTEs to complete such activities.
In those instances where we first receive consideration in advance of satisfying its performance obligation, we classify such consideration as deferred revenue until (or as) we satisfy such performance obligation. In those instances where we first satisfy our performance obligation prior to our receipt of consideration, the consideration is recorded as accounts receivable.
We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that would be recognized is one year or less, or if the amount of the asset is immaterial. Otherwise, such costs are capitalized and amortized to research and development expense ratably in conjunction with the underlying revenue recognition. No incremental costs of obtaining a contract have been incurred to date.
Accrued Clinical Trial and Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. The significant estimates in our accrued clinical trial and research and
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development expenses include the costs incurred for services performed by our vendors in connection with clinical trial and research and development activities for which we have not yet been invoiced.
We base our expenses related to clinical trial and research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct clinical trials and research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical trial and research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Advance payments for goods and services that will be used in future clinical trial or research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
Stock-Based Compensation Expense
Stock-based compensation expense represents the grant date fair value of equity awards, consisting of stock options, restricted stock units and employee stock purchase plan rights, recognized on a straight-line basis over the requisite service period for stock options and restricted stock units and over the respective offering period for employee stock purchase plan rights. The grant date fair value of the equity awards is estimated using the Black-Scholes option pricing model. The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment. See Note 4 to our financial statements included elsewhere in this Annual Report for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock option grants. Equity award forfeitures are recognized as they occur.
Recent Accounting Pronouncements
See Note 1 to our audited financial statements appearing in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest rate risk
We hold certain financial instruments for which a change in prevailing interest rates may cause the principal amount of the marketable securities to fluctuate. Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments. We invest our excess cash primarily in U.S. Treasury securities, U.S. agency bonds, corporate debt securities and commercial paper. The primary objectives of our investment activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our marketable securities without significantly increasing risk. Additionally, we established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity. We believe that should a 10.0% change in interest rates were to have occurred on December 31, 2024, this change would not have had a material effect on the fair value of our investment portfolio as of that date. Any changes would only be realized if we sold the investments prior to maturity.
Foreign currency exchange risk
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we do contract with vendors that are located outside of the United States and may be subject to fluctuations in foreign currency rates. We may enter into additional contracts with vendors located outside of the United States in the future, which may increase our foreign currency exchange risk. We believe that should a 10.0% change in foreign currency exchange rates were to have occurred on December 31, 2024, this change would not have had a material effect on our financial statements.
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Inflation
Inflation generally affects us by increasing our cost of labor and preclinical and clinical development costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the year ended December 31, 2024.
Item 8. Financial Statements and Supplementary Data.
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 110
Balance Sheets 112
Statements of Operations and Comprehensive Loss 113
Statements of Stockholders’ Equity 114
Statements of Cash Flows 115
Notes to Financial Statements 116
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Janux Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Janux Therapeutics, Inc. (the Company) as of December 31, 2024 and 2023, the related statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Clinical Trial Expenses
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
San Diego, California
February 27, 2025
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Janux Therapeutics, Inc.
Balance Sheets
(in thousands, except share and par value data)
December 31,
Current assets:
Prepaid expenses and other current assets 8,493 5,213
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of deferred revenue — 1,705
Current portion of operating lease liabilities 1,749 1,517
Operating lease liabilities, net of current portion 21,276 23,025
Commitments and contingencies (Note 3)
Stockholders’ equity:
Accumulated other comprehensive income 2,163 665
See accompanying notes.
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Janux Therapeutics, Inc.
Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
Year EndedDecember 31,
Operating expenses:
Other income:
Other comprehensive gain (loss):
Net loss per common share, basic and diluted $ (1.28 ) $ (1.32 ) $ (1.52 )
See accompanying notes.
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Statements of Stockholders’ Equity
(in thousands, except share data)
Shares Amount Capital Income (Loss) Deficit Equity
Exercise of common stock options 7,405 — 1 — — 1
Shares issued under employee stock purchase plan 54,299 — 499 — — 499
Unrealized loss on available-for-sale securities, net — — — (1,265 ) — (1,265 )
Exercise of pre-funded common stock warrants 80,257 — — — — —
Shares issued under employee stock purchase plan 90,574 — 772 — — 772
Unrealized gain on available-for-sale securities, net — — — 2,200 — 2,200
Issuance of common stock upon vesting of restricted stock units 2,500 — — — — —
Shares issued under employee stock purchase plan 99,061 — 792 — — 792
Vesting of restricted shares 10,319 — 20 — — 20
Unrealized gain on available-for-sale securities, net — — — 1,498 — 1,498
See accompanying notes.
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Janux Therapeutics, Inc.
Statements of Cash Flows
(in thousands)
Year EndedDecember 31,
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discounts on investments, net (10,585 ) (7,688 ) (2,183 )
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (3,280 ) 210 (3,369 )
Operating lease right-of-use assets and liabilities, net 35 678 3,289
Cash flows from investing activities
Purchases of property and equipment (359 ) (1,850 ) (6,445 )
Cash flows from financing activities
Supplemental disclosure of noncash investing and financing activities
Unpaid property and equipment $ 6 $ 132 $ 109
Unpaid issuance costs $ 347 $ — $ —
Vesting of restricted common stock $ 20 $ 149 $ 1,034
Operating lease liabilities arising from right-of-use assets $ — $ — $ 23,422
See accompanying notes.
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Janux Therapeutics, Inc.
Notes to Financial Statements
1. Organization and Summary of Significant Accounting Policies
Organization
Janux Therapeutics, Inc. (the “Company”) was incorporated in the State of Delaware in June 2017 and is based in San Diego, California. The Company is a clinical-stage biopharmaceutical company developing a broad pipeline of novel immunotherapies by applying its proprietary technology to its Tumor Activated T Cell Engager (“TRACTr”) and Tumor Activated Immunomodulator (“TRACIr”) platforms to better treat patients suffering from cancer.
Liquidity and Capital Resources
From its inception through December 31, 2024, the Company has devoted substantially all its efforts to organizing and staffing, business planning, raising capital and developing its TRACTr and TRACIr therapeutic platforms and assets. The Company has incurred net losses and negative cash flows from operations since inception and had an accumulated deficit of $237.8 million as of December 31, 2024. The Company has a limited operating history, has not generated any product revenue, and the sales and income potential of its business is unproven. To date the Company has funded its operations primarily with the net proceeds from the issuance of convertible promissory notes, the issuance of convertible preferred stock, the issuance of common stock in its initial public offering (“IPO”), the issuance of common stock and pre-funded common stock warrants in underwritten offerings, the exercise of common stock options, and amounts received under a collaboration agreement. The Company expects to incur substantial operating losses for the next several years and will need to obtain additional financing in order to continue its research and development activities, initiate and complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity or debt financings or other sources. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects. There can be no assurance that such financing will be available or will be at terms acceptable to the Company, especially in light of public health crises, financial conditions within the banking industry, including the effects of failures of financial institutions and liquidity levels, as well as changes in interest rates and the inflationary macro environment.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty. Management is required to perform an analysis over its ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern (step 1). If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt (step 2). Management believes the Company has sufficient capital to fund its operations for at least 12 months from the issuance date of these financial statements.
Use of Estimates
The Company’s financial statements are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to estimates to complete the performance obligations and the estimated transaction price for collaboration revenue, accruals for clinical trials and other research and development arrangements, stock-based compensation and fair value measurements. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. The Company continues to use the best information available to update its accounting estimates. Actual results may differ materially and adversely from these estimates.
Fair Value Measurements
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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Level 1: Observable inputs such as quoted prices in active markets.
Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments. The fair value of assets classified within Level 1 is based on quoted prices in active markets as provided by the Company’s investment managers. The fair value of short-term investments classified within Level 2 is based on standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers. The Company validates the quoted market prices provided by its investment managers by comparing the investment managers’ assessment of the fair values of the Company’s investment portfolio balance against the fair values of the Company’s investment portfolio balance obtained from an independent source. The Company has no financial liabilities recorded at fair value on a recurring basis. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.
The following tables summarize the Company’s financial instruments measured at fair value on a recurring basis (in thousands):
Fair Value Measurements at Reporting Date Using
Assets:
Cash equivalents:
Short-term investments:
Restricted cash:
Money market account 816 816 — —
Total restricted cash 816 816 — —
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Fair Value Measurements at Reporting Date Using
Assets:
Cash equivalents:
Short-term investments:
Corporate debt securities 1,999 — 1,999 —
Restricted cash:
Money market account 816 816 — —
Total restricted cash 816 816 — —
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Cash and cash equivalents include cash in readily available checking accounts and money market funds.
Restricted Cash
Restricted cash consists of a money market account securing a standby letter of credit issued in connection with the Company’s Torrey Plaza operating lease (as defined and described in Note 3).
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the accompanying balance sheets that sum to the amounts shown in the statements of cash flows (in thousands):
December 31,
Total cash and cash equivalents and restricted cash $ 431,421 $ 20,021
Short-Term Investments
Short-term investments consist of U.S. Treasury securities, U.S. agency bonds, corporate debt securities and commercial paper, all of which are highly rated by Moody’s, S&P, and Fitch. The Company has classified these investments as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies, and therefore has classified all investment securities as current assets. Those investments with maturity dates of three months or less at the date of purchase are presented as cash equivalents in the accompanying balance sheets. Short-term investments are carried at fair value with the unrealized gains and losses included in accumulated other comprehensive income (loss) as a component of stockholders’ equity until realized. Any premium or discount arising at purchase is amortized or accreted to interest income as an adjustment to yield using the straight-line method over the life of the instrument. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. Realized gains and losses are calculated using the specific identification method and recorded as interest income.
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The following tables summarize short-term investments (in thousands):
Amortized Unrealized Estimated
Cost Gains Losses Fair Value
Amortized Unrealized Estimated
Cost Gains Losses Fair Value
Corporate debt securities 1,999 — — 1,999
The amortized cost and estimated fair value in the tables above exclude $5.4 million and $2.2 million of accrued interest receivable as of December 31, 2024 and 2023, respectively. Accrued interest receivable is included in prepaid expenses and other current assets in the accompanying balance sheets.
Contractual maturities of available-for-sale debt securities are as follows (in thousands):
Due in 1 Year or Less Due Between 1 and 3 Years
Corporate debt securities — 161,997
Due in 1 Year or Less Due Between 1 and 3 Years
Asset-backed securities 5,055 —
Corporate debt securities 1,999 —
As of December 31, 2024, 14 out of 65 of our available-for-sale debt securities were in an aggregate gross unrealized loss position. The Company relies on both qualitative and quantitative factors to determine whether the unrealized loss for each available-for-sale debt security at any balance sheet date is due to a credit loss. Qualitative factors may include a credit downgrade, severity of the decline in fair value below amortized cost and other adverse conditions related specifically to the security, as well as the intent to sell the security, or whether the Company will “more likely than not” be required to sell the security before recovery of its amortized cost basis. The Company considers the decline in market value for the securities to be primarily attributable to current economic conditions and interest rate adjustments, rather than credit-related factors and does not intend to sell any securities prior to maturity. No allowance for credit losses has been recorded as of December 31, 2024 or December 31, 2023.
There were no available-for-sale debt securities in a continuous unrealized loss position for 12 months or longer at December 31, 2024.
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The following table summarizes our available-for-sale debt securities in an aggregate gross unrealized loss position at December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
Less Than 12 Months 12 Months or Longer Total
U.S. Treasury securities $ 5,892 $ (14 ) $ — $ — $ 5,892 $ (14 )
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments. The Company invests its cash reserves in money market funds or available-for-sale debt securities in accordance with its investment policy. The Company’s investment policy includes guidelines on acceptable investment securities, limits interest-bearing security investments to certain types of debt and money market instruments issued by the U.S. government and institutions with investment grade credit ratings and places restrictions on maturities and concentration by asset class and issuer in order to maintain appropriate diversification. In accordance with the Company’s policies, the Company monitors exposure with its counterparties. The Company also maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such account and management believes that the Company is not exposed to significant credit risk.
The Company is also subject to credit risk from its accounts receivable. The Company generally does not perform evaluations of customers’ financial condition and generally does not require collateral. For the years ended December 31, 2024, 2023 and 2022, all of the Company’s revenue related to a single customer.
Property and Equipment, Net
Property and equipment, net consists of laboratory equipment, furniture and fixtures and computer equipment and software. Property and equipment is stated at cost and depreciated over the estimated useful lives of the assets (generally five years) using the straight-line method. Repairs and maintenance costs are charged to expense as incurred.
An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Impairment losses recognized through December 31, 2024 were not material.
Deferred Revenue
When the Company is entitled to bill its customers and receive payment from its customers in advance of its obligation to provide services or transfer goods to its customers, the Company includes the amounts in deferred revenue on its balance sheets. For further discussion, refer to the Company’s revenue recognition policy below.
Leases
The Company determines if a contract contains a lease at the inception of the contract and evaluates each lease agreement to determine whether the lease is an operating or finance lease. For leases where the Company is the lessee, right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Liabilities from operating leases are included in current portion of operating lease liabilities, and operating lease liabilities, net of current portion on the accompanying balance sheets. The Company does not have any financing leases. Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company does not have material short-term lease costs.
Lease liabilities are measured at the present value of the lease payments not yet paid discounted using the discount rate for the lease established at the lease commencement date. To determine the present value, the implicit rate is used when readily determinable. For those leases where the implicit rate is not provided, the Company determines an incremental borrowing rate (“IBR”) based on the information available at the lease commencement date in determining the present value of lease payments. The IBR is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. ROU assets are measured as the present value of the lease payments and also include any prepaid lease payments made and any other indirect costs incurred and exclude any lease incentives received. Lease terms may include the
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impact of options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term. The Company’s operating leases are subject to additional variable charges, including common area maintenance, property taxes, property insurance and other variable costs. Given the variable nature of such costs, they are recognized as expense as incurred. The Company has elected the practical expedient to account for the lease and non-lease components, such as common area maintenance charges, as a single lease component for the Company's facilities leases. The Company has elected to recognize lease incentives, such as tenant improvement allowances, at the lease commencement date as a reduction to the ROU asset and lease liabilities balance until paid to it by the lessor to the extent that the lease provides a specified fixed or maximum level of reimbursement and the Company is reasonably certain to incur reimbursable costs at least equaling such amounts.
Revenue Recognition
The Company recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration the Company is entitled to receive in exchange for such product or service. In doing so, the Company follows a five-step approach: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control of the product or service. The Company considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard.
A customer is a party that has entered into a contract with the Company, where the purpose of the contract is to obtain a product or a service that is an output of the Company’s ordinary activities in exchange for consideration. To be considered a contract, (i) the contract must be approved (in writing, orally, or in accordance with other customary business practices), (ii) each party’s rights regarding the product or the service to be transferred can be identified, (iii) the payment terms for the product or the service to be transferred can be identified, (iv) the contract must have commercial substance (that is, the risk, timing or amount of future cash flows is expected to change as a result of the contract), and (v) it is probable that the Company will collect substantially all of the consideration to which it is entitled to receive in exchange for the transfer of the product or the service.
A performance obligation is defined as a promise to transfer a product or a service to a customer. The Company identifies each promise to transfer a product or a service (or a bundle of products or services, or a series of products and services that are substantially the same and have the same pattern of transfer) that is distinct. A product or a service is distinct if both (i) the customer can benefit from the product or the service either on its own or together with other resources that are readily available to the customer and (ii) the Company’s promise to transfer the product or the service to the customer is separately identifiable from other promises in the contract. Each distinct promise to transfer a product or a service is a unit of accounting for revenue recognition. If a promise to transfer a product or a service is not separately identifiable from other promises in the contract, such promises should be combined into a single performance obligation.
The transaction price is the amount of consideration the Company is entitled to receive in exchange for the transfer of control of a product or a service to a customer. To determine the transaction price, the Company considers the existence of any significant financing component, the effects of any variable elements, noncash considerations and consideration payable to the customer. If a significant financing component exists, the transaction price is adjusted for the time value of money. If an element of variability exists, the Company must estimate the consideration it expects to receive and uses that amount as the basis for recognizing revenue as the product or the service is transferred to the customer. There are two methods for determining the amount of variable consideration: (i) the expected value method, which is the sum of probability-weighted amounts in a range of possible consideration amounts, and (ii) the mostly likely amount method, which identifies the single most likely amount in a range of possible consideration amounts.
With respect to variable consideration relating to development and regulatory milestone payments, if it is probable that a significant revenue reversal would not occur, the associated payment value is included in the transaction price. For development and regulatory milestones that are uncertain in nature and highly dependent on factors outside of our control, the aggregate consideration is determined to be fully constrained and is not included in the transaction price until the underlying events occur or the associated approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of each milestone and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect the reported amount of revenues in the period of adjustment.
For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
If a contract has multiple performance obligations, the Company allocates the transaction price to each distinct performance obligation in an amount that reflects the consideration the Company is entitled to receive in exchange for satisfying each distinct performance obligation. For each distinct performance obligation, revenue is recognized when (or as) the Company transfers control of the product or the service applicable to such performance obligation.
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In those instances where the Company first receives consideration in advance of satisfying its performance obligation, the Company classifies such consideration as deferred revenue until (or as) the Company satisfies such performance obligation. In those instances where the Company first satisfies its performance obligation prior to its receipt of consideration, the consideration is recorded as accounts receivable.
The Company expenses incremental costs of obtaining and fulfilling a contract as and when incurred if the expected amortization period of the asset that would be recognized is one year or less, or if the amount of the asset is immaterial. Otherwise, such costs are capitalized as contract assets if they are incremental to the contract and amortized to expense proportionate to revenue recognition of the underlying contract.
Research and Development Expenses
All research and development costs are expensed in the period incurred. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and payments made in advance of performance are reflected in the accompanying balance sheets as prepaid expenses. The Company records accruals for estimated costs incurred for ongoing research and development activities. When evaluating the adequacy of the accrued expenses, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the prepaid or accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates.
Clinical Trial Expenses
The Company makes payments in connection with its clinical trials under contracts with contract research organizations that support conducting and managing clinical trials. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee, unit price or on a time and materials basis. A portion of the Company’s obligation to make payments under these contracts depends on factors such as the successful enrollment or treatment of patients or the completion of other clinical trial milestones.
Expenses related to clinical trials are accrued based on the progress of the clinical trials. The Company incorporates in the expenses representations from service providers regarding work performed, including actual level of patient enrollment, completion of patient studies and progress of the clinical trials. Other incidental costs related to patient enrollment or treatment are accrued when reasonably certain. If the amounts the Company is obligated to pay under clinical trial agreements are modified (for instance, as a result of changes in the clinical trial protocol or scope of work to be performed), the Company adjusts the accruals accordingly. Revisions to the contractual payment obligations are charged to expense in the period in which the facts that give rise to the revision become reasonably certain.
Patent Costs
Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.
Stock-Based Compensation
Stock-based compensation expense represents the grant date fair value of equity awards, consisting of stock options, restricted stock units and employee stock purchase plan rights, recognized on a straight-line basis over the requisite service period for stock options and restricted stock units, and over the respective offering period for employee stock purchase plan rights. The Company estimates the fair value of stock options and employee stock purchase plan rights using the Black-Scholes option pricing model. The fair value of restricted stock units is based on the closing price of the Company’s common stock as reported on The Nasdaq Global Market on the date of grant. The Company recognizes forfeitures for all awards as they occur.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their
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net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.
Comprehensive Loss
Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The only component of other comprehensive gain (loss) is unrealized gain (loss) on available-for-sale securities. Comprehensive losses have been reflected in the statements of operations and comprehensive loss and as a separate component in the statements of stockholders’ equity.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker ("CODM"), or decision-making group, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as one operating segment, which is engaged in the research and development of a broad pipeline of novel immunotherapies. The accounting policies of the novel immunotherapies segment are the same as those described in the summary of significant accounting policies. The measure of segment profit or loss is reported on the statement of operations and comprehensive loss as net loss. The Company monitors its cash and cash equivalents and short-term investments as reported on the Company’s balance sheets to determine funding for its research and development. In order to allocate resources and assess performance, the Company’s CODM, or President and Chief Executive Officer, regularly reviews scientific data from clinical and pre-clinical studies as well as forecasted expenses for clinical and pre-clinical programs and other projected operational expenses. No product revenue has been generated since inception and all assets are held in the United States. All revenue recognized to date has been derived from the Company’s existing collaboration agreement with Merck (as defined and described in Note 5).
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, including pre-funded common stock warrants that were issued in underwritten offerings (Note 4), without consideration for potentially dilutive securities. The pre-funded common stock warrants are included in the calculation of basic and diluted net loss per share as the exercise price of $0.001 per share is non-substantive and the shares are issuable for little or no consideration. The Company has excluded weighted-average unvested shares of 3,645 shares, 27,458 shares and 182,194 shares from the weighted-average number of shares of common stock outstanding for the years ended December 31, 2024, 2023 and 2022, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be anti-dilutive.
Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares):
As of December 31,
Restricted stock units outstanding 341,847 — —
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the
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accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The Company adopted ASU 2020-06 on January 1, 2024 and the adoption of the standard had no material impact on its financial statements and related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker. The standard is effective for the Company beginning in fiscal year 2024 and interim periods within fiscal year 2025, with early adoption permitted. The Company adopted ASU 2023-07 on January 1, 2025 and the adoption of the standard had no material impact on its financial statements and related disclosures.
Accounting Pronouncements Pending Adoption
In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company beginning in fiscal year 2025, with early adoption permitted. The Company does not expect to early adopt the new standard. The new standard is expected to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of ASU 2023-09 on the financial statements and related disclosures.
2. Balance Sheet Details
Prepaid expenses and other current assets consist of the following (in thousands):
As of December 31,
Prepaid research and development 2,354 2,318
Prepaid expenses and other current assets $ 8,493 $ 5,213
Property and equipment, net consist of the following (in thousands):
As of December 31,
Computer equipment and software 658 628
Assets not placed in service 6 43
Less: accumulated depreciation (4,952 ) (2,914 )
Property and equipment, net $ 4,864 $ 7,003
Accrued expenses consist of the following (in thousands):
As of December 31,
Accrued research and development $ 6,200 $ 3,535
3. Commitments and Contingencies
License Agreement with WuXi Biologics (Hong Kong) Limited
In April 2021, the Company entered into a cell line license agreement (“Cell Line License Agreement”) with WuXi Biologics (Hong Kong) Limited (“WuXi Biologics”), pursuant to which the Company received a non-exclusive, worldwide, sublicensable
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license under certain of WuXi Biologics’ patent rights, know-how and biological materials (“WuXi Biologics Licensed Technology”), to use the WuXi Biologics Licensed Technology to make, use, sell, offer for sale and import certain therapeutic products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (“WuXi Biologics Licensed Product”).
In consideration for the license, the Company paid WuXi Biologics a non-refundable, one-time license fee of $0.2 million upon WuXi Biologics’ achievement of a certain technical milestone. This one-time license fee was recognized as research and development expense when incurred since the WuXi Biologics Licensed Technology had no alternative future use. If the Company does not engage WuXi Biologics or its affiliates to manufacture the WuXi Biologics Licensed Products for its commercial supplies, the Company is required to make royalty payments to WuXi Biologics in an amount equal to a low single-digit percentage of specified portions of net sales of WuXi Biologics Licensed Products manufactured by a third-party manufacturer. The Company has the right (but not the obligation) to buy out its remaining royalty obligations with respect to each WuXi Biologics Licensed Product by paying WuXi Biologics a one-time payment in an amount ranging from low single digit million dollars to a maximum of $15.0 million depending on the development and commercialization stage of the WuXi Biologics Licensed Product (the “Buyout Option”), and upon such payment, the Company's license with respect to such WuXi Biologics Licensed Product will become fully paid-up, irrevocable, and perpetual. The royalty obligations will remain in effect during the term of the Cell Line License Agreement so long as the Company has not exercised the Buyout Option.
The Cell Line License Agreement will continue indefinitely unless terminated (i) by the Company upon three months’ prior written notice and the Company’s payment of all amounts due to WuXi Biologics through the effective date of termination, (ii) by either party for the other party’s material breach that remains uncured for 30 days after written notice, and (iii) by WuXi Biologics if the Company fails to make a payment and such failure continues for 30 days after receiving notice of such failure.
Operating Leases
In October 2021, the Company entered into a lease agreement (the “Torrey Plaza Lease”) to lease office and laboratory space in San Diego, California. The Company determined this facilities lease was an operating lease at the inception of the lease contract. According to accounting standards, the Torrey Plaza Lease commenced on April 1, 2022 and has a term of 130 months from the commencement date. The Torrey Plaza Lease provides an option to extend the term of the lease for a period of 5 years beyond the initial term, which the Company is not reasonably certain to exercise and therefore was not considered in determining the ROU assets and lease liabilities balance.
As required under the terms of the Torrey Plaza Lease, in October 2021 the Company entered into a standby letter of credit, which is secured by a money market account in the amount of $0.8 million. The letter of credit is subject to draw down by the landlord upon certain events of breach or default by the Company. The letter of credit amount is subject to a 50% reduction subject to certain conditions on or following the date that is 54 months following the contractual lease commencement date.
Future minimum noncancelable operating lease payments as of December 31, 2024 are as follows (in thousands):
Total minimum lease payments 31,537
Less: Imputed interest (8,512 )
Total operating lease liabilities 23,025
Less: Current portion of operating lease liabilities (1,749 )
Operating lease liabilities, net of current portion $ 21,276
The Torrey Plaza lease has a remaining lease term of 8.1 years and a discount rate of 8% as of December 31, 2024. Operating lease expense included in the measurement of lease liabilities for years ended December 31, 2024, 2023 and 2022 was $3.4 million, $3.4 million and $2.8 million, respectively. Cash paid for amounts included in the measurement of lease liabilities for the years ended December 31, 2024, 2023 and 2022 was $3.4 million, $2.8 million and $0.2 million, respectively.
Contingencies
From time to time, the Company may be subject to claims or lawsuits arising in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of December 31, 2024, the Company is not currently party to any material legal proceedings.
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4. Stockholders’ Equity
Shelf Registration Statement
In May 2023, the Company entered into an ATM Equity OfferingSM Sales Agreement (“Sale Agreement”) with BofA Securities, Inc. (“BofA”) to sell shares of common stock, from time to time, through an “at the market offering” program having an aggregate offering price of up to $150.0 million through which BofA would act as sales agent. In February 2024, the Company delivered written notice to BofA that it was suspending and terminating the prospectus related to the shares of its common stock issuable pursuant to the terms of the Sale Agreement. In May 2024, the Company filed a shelf registration statement on Form S-3ASR which included a new prospectus which covers the offering, issuance and sale of up to a maximum aggregate offering price of $150.0 million of the Company’s common stock under the Sale Agreement. There was no activity from the Sale Agreement during the year ended December 31, 2024. As of December 31, 2024, $150.0 million of common stock remained available for sale under the Sale Agreement.
In July 2023, the Company closed an underwritten offering of 4,153,717 shares of its common stock and pre-funded warrants to purchase 583,483 shares of common stock at an exercise price of $0.001 per share. The shares of common stock were sold at a price of $12.46 per share and the pre-funded common stock warrants were sold at a price of $12.459 per pre-funded common stock warrant, resulting in gross proceeds of $59.0 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $2.5 million, resulting in net proceeds of $56.5 million. The pre-funded common stock warrants will not expire until exercised in full and are exercisable in cash or by means of a cashless exercise.
In March 2024, the Company closed an underwritten offering of 5,397,301 shares of its common stock and pre-funded warrants to purchase 1,935,483 shares of common stock at an exercise price of $0.001 per share. The shares of common stock were sold at a price of $46.50 per share and the pre-funded common stock warrants were sold at a price of $46.499 per pre-funded common stock warrant, resulting in gross proceeds of $341.0 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $20.9 million, resulting in net proceeds of $320.1 million. The pre-funded common stock warrants will not expire until exercised in full and are exercisable in cash or by means of a cashless exercise.
The registration statement on Form S-3ASR that the Company filed in May 2024 provides the Company with the ability to offer an unlimited amount of certain securities, including shares of its common stock, from time to time. The specific terms of any offering under the shelf registration statement are established at the time of such offering.
In December 2024, the Company closed an underwritten offering of 6,150,793 shares of its common stock and pre-funded warrants to purchase 238,095 shares of common stock at an exercise price of $0.001 per share. The shares of common stock were sold at a price of $63.00 per share and the pre-funded common stock warrants were sold at a price of $62.999 per pre-funded common stock warrant, resulting in gross proceeds of $402.5 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $24.6 million, resulting in net proceeds of $377.9 million.
The Company has assessed the pre-funded common stock warrants for appropriate equity or liability classification. The pre-funded common stock warrants are equity classified because they (i) are freestanding financial instruments that are legally detachable and separately exercisable from the equity instruments, (ii) are immediately exercisable, (iii) do not embody an obligation for the Company to repurchase its shares, (iv) permit the holders to receive a fixed number of shares of common stock upon exercise, (v) are indexed to the Company’s common stock and (vi) meet the equity classification criteria.
In addition, such pre-funded common stock warrants do not provide any guarantee of value or return and do not provide the warrant holders with the option to settle any unexercised warrants for cash outside of the Company’s control. The pre-funded common stock warrants also include a separate provision whereby the exercisability of the warrants may be limited if, upon exercise, the warrant holder or any of its affiliates would beneficially own more than a certain percentage of the Company’s outstanding common stock. The Company valued the pre-funded common stock warrants at issuance, concluding that their sale price approximated their fair value. Accordingly, the pre-funded common stock warrants are accounted for as a component of additional paid-in capital at the time of issuance.
2017 Equity Incentive Plan
In August 2017, the Company adopted the Janux Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which provided for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock awards to its employees, members of its board of directors and consultants. The maximum term of options granted under the 2017 Plan is ten years and, in general, the options issued under the 2017 Plan vest over a four-year period from the vesting commencement date. The 2017 Plan allows for the early exercise of stock options, which may be subject to repurchase by the Company at the original exercise price. Upon the effectiveness of the 2021 Plan defined and described below, no further grants will be made under the 2017 Plan. Any outstanding awards granted under the 2017 Plan will remain subject to the terms of the 2017 Plan and applicable award agreements.
2021 Equity Incentive Plan
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In June 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan,” and together with the 2017 Plan the “Plans”). Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock awards, performance cash awards and other forms of stock awards to employees, directors and consultants. The maximum term of options granted under the 2021 Plan is ten years and, in general, the options issued under the 2021 Plan vest over a four-year period from the vesting commencement date. The 2021 Plan does not permit early exercises. Any future cancellations under the 2017 Plan will become available for future issuance under the 2021 Plan. In addition, the number of shares of common stock available for issuance under the 2021 Plan automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to 5% of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company’s board of directors. As of December 31, 2024, there were 10,867,540 shares authorized for issuance under the 2021 Plan, inclusive of shares added from 2017 Plan cancellations.
Stock Options
A summary of the Company’s stock option activity under its Plans is as follows (in thousands, except share, per share data and years):
The weighted-average grant date fair value of option grants for the years ended December 31, 2024, 2023 and 2022 was $11.30, $10.02 and $12.35, respectively. The total intrinsic value of stock options exercised for the years ended December 31, 2024, 2023 and 2022 was $45.6 million, $1.9 million and $0.1 million, respectively. As of December 31, 2024, total unrecognized stock-based compensation cost associated with option grants was $33.9 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.2 years.
The assumptions used in the Black-Scholes option pricing model to determine the fair value of stock option grants under the Plans were as follows:
Year Ended December 31,
Expected dividend yield — — —
Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities similar to the expected term of the awards.
Expected volatility. For options granted in the initial years following the Company’s IPO, given the Company’s limited historical stock price volatility data, the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available, including the Company’s historical volatility, weighted by years of available trading data within the expected term. The peer group was developed based on companies in the biotechnology industry. As sufficient historical data is now available for the Company’s stock price, the Company is currently applying and will continue to apply the volatility of its own stock price in determining volatility.
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Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have sufficient historical exercise behavior to provide a reasonable basis upon which to estimate the expected term, it determines the expected life assumption using the simplified method, for employees and nonemployee directors, which is an average of the contractual term of the option and its vesting period. The expected term for nonemployee options is generally the contractual term.
Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends and, therefore, used an expected dividend yield of zero.
Restricted Stock Units
A summary of the Company’s restricted stock unit (“RSU”) activity under the 2021 Plan is as follows:
Number ofRestricted Stock Units Weighted-Average Grant Date Fair Value per Share
Outstanding at December 31, 2023 — $ —
Forfeited or cancelled — $ —
RSU awards are share awards that, upon vesting, will deliver to the holder shares of the Company’s common stock. The grant-date fair value is recognized as compensation expense over the vesting period. As of December 31, 2024, total unrecognized stock-based compensation cost associated with RSUs was $19.3 million, which is expected to be recognized over a remaining weighted-average period of approximately 3.7 years. The Company did not have any RSU activity during the year ended December 31, 2023.
2021 Employee Stock Purchase Plan
In June 2021, the Company adopted the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective on June 10, 2021. The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to 15% of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP. The price of common stock purchased under the ESPP is equal to 85% of the lower of the fair market value of the common stock at the commencement date of each offering period or the relevant date of purchase. In addition, the number of shares of common stock available for issuance under the ESPP automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase and (ii) 932,000 shares; provided that before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). For the years ended December 31, 2024, 2023 and 2022, stock-based compensation expense related to the ESPP was $0.8 million, $0.9 million and $0.6 million, respectively. As of December 31, 2024, total unrecognized stock-based compensation expense related to the ESPP was $0.6 million, which is expected to be recognized over a remaining weighted-average period of approximately 1.3 years.
Stock-Based Compensation Expense
Stock-based compensation expense has been reported in the statements of operations and comprehensive loss as follows (in thousands):
Year Ended December 31,
Modification of Equity Awards
In July 2024, and in connection with the resignation of a former director, the board of directors approved the following modifications to the terms of the former director’s outstanding equity awards: (a) acceleration of the vesting of all unvested stock options and awards in full, effective as of the former director's resignation date; and (b) extension of the post-termination exercise period for outstanding options until the earlier of the third anniversary of such resignation date or the original expiration date of such
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options, subject to the Company’s ability to take any actions permitted under the 2021 Plan. The incremental stock-based compensation expense resulting from these modifications recognized during the year ended December 31, 2024 was $0.7 million.
In August 2024, and in connection with the resignation of a former executive officer, the compensation committee of the board of directors approved the following modifications to the terms of the former officer’s outstanding equity awards as defined within a transition and consulting agreement with the former officer (the “Transition Agreement”): (a) acceleration of the vesting of unvested stock options such that the number of options that would have vested through June 30, 2026, are vested and exercisable, with such acceleration deemed effective as of December 31, 2024, subject to service conditions described within the Transition Agreement; and (b) extension of the post-termination exercise period for outstanding options until the earlier of December 31, 2027 or the original expiration date of such options, subject to the Company’s ability to take any actions permitted under the Plans, as applicable. The incremental stock-based compensation expense resulting from these modifications recognized during the year ended December 31, 2024 was $8.7 million.
Unvested Stock Liabilities
A summary of the Company’s unvested shares and unvested stock liabilities is as follows (in thousands, except share data):
Balance at December 31, 2024 — $ — $ —
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance consists of the following:
December 31,
5. Research Collaboration and Exclusive License Agreement
In December 2020, the Company entered into a research collaboration and exclusive license agreement (the “Merck Agreement”), pursuant to which the Company granted Merck Sharp & Dohme Corp. (“Merck”) an exclusive, worldwide, royalty-bearing, sublicensable license to certain of its patent rights and know-how for up to two collaboration targets (“First Collaboration Target” and “Second Collaboration Target”, together the “Collaboration Targets”) related to next generation T cell engager immunotherapies for the treatment of cancer. In each case, once the Collaboration Targets are designated by Merck, they have the right to research, develop, make, have made, use, import, offer to sell, and sell compounds and any licensed products related thereto. Merck selected the First Collaboration Target upon execution of the Merck Agreement and selected the Second Collaboration Target in May 2022. Following the research term, Merck has the sole right to research, develop, manufacture, and commercialize the licensed compounds and products directed against the Collaboration Targets. Consideration in the Merck Agreement consists of (i) an $8.0 million non-refundable and non-creditable upfront fee, (ii) $8.0 million paid upon the selection of the Second Collaboration Target, (iii) research program funding (iv) development and regulatory milestones, (v) commercial milestones, and (vi) royalty payments. Under the Merck Agreement, the Company is eligible to receive up to an aggregate of $142.5 million per Collaboration Target in milestone payments ($285.0 million collectively for both Collaboration Targets), contingent on the achievement of certain regulatory and development milestones. Merck is also required to make milestone payments to the Company upon the successful completion of certain commercial milestones, in an aggregate amount not to exceed $350.0 million for each licensed product under either of the Collaboration Targets. The Merck Agreement provides that Merck is obligated to pay to the Company tiered royalty payments on a product-by-product and country-by-country basis, ranging from low single-digit to low teens percentage royalty rates on specified portions of annual net sales for licensed products under either of the Collaboration Targets that are commercialized. Such royalties are subject to reduction, on a
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product-by-product and country-by-country basis, for licensed products not covered by patent claims, or that require Merck to obtain a license to obtain a license to third-party intellectual property in order to commercialize the licensed products, or that are subject to compulsory licensing.
The Merck Agreement will terminate at the end of the calendar year in which the expiration of all royalty obligations occurs for all licensed products under the agreement. Merck has the unilateral right to terminate the Merck Agreement in its entirety or on a Collaboration Target by Collaboration Target basis at any time and for any reason upon prior written notice to the Company. Both parties have the right to terminate the agreement for an uncured material breach, certain illegal or unethical activities, and insolvency of the other party. Upon expiration of the agreement but not early termination thereof, and provided all payments due under the agreement have been made, Merck’s exclusive licenses under the agreement will become fully paid-up and perpetual.
The Company concluded that Merck represented a customer and has accounted for the initial units of account in accordance with FASB’s Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). As it relates to Merck's option to select a Second Collaboration Target, which was exercised in May 2022, the Company concluded that this option represented a customer option to purchase additional goods or services that is not a material right and, therefore, is accounted for as a separate contract and separate performance obligation to purchase the additional goods or services.
The Company identified its performance obligations under the Merck Agreement and each Collaboration Target as the grant to Merck of an exclusive license to certain of its intellectual property subject to certain conditions, its conduct of research services and the Company’s participation in a joint research committee. The Company determined that these performance obligations should be accounted for as one combined performance obligation for each Collaboration Target since they are not distinct. The Company also determined that the combined performance obligation for each Collaboration Target is transferred over the expected term of the conduct of the research services.
In accordance with ASC 606, the Company determined that the initial transaction price under the Merck Agreement for the First Collaboration Target is $11.4 million, consisting of the upfront, non-refundable and non-creditable payment of $8.0 million and the aggregate estimated reimbursable research program funding of $3.4 million. The Company determined that the initial transaction price under the Merck Agreement for the Second Collaboration Target is $12.0 million, consisting of the upfront, non-refundable and non-creditable payment of $8.0 million and the aggregate estimated reimbursable research program funding of $4.0 million. The performance obligations related to the Collaboration Targets were completed as of December 31, 2024.
In June 2024, a developmental milestone of $7.5 million related to the First Collaboration Target was achieved, at which time the Company recognized the associated revenue. All other future potential milestone payments are considered constrained as of December 31, 2024 as they are uncertain in nature and highly dependent on factors outside of the Company’s control until the underlying events occur or the associated approvals are received.
The Company recognized $10.6 million, $8.1 million and $8.6 million of revenue under the Merck Agreement for the years ended December 31, 2024, 2023 and 2022, respectively. The Company's performance obligations related to the Collaboration Targets were completed as of December 31, 2024.
6. Income Taxes
The Company has not recorded a current or deferred tax expense or benefit for the years ended December 31, 2024, 2023 or 2022. The net losses for the years ended December 31, 2024, 2023 and 2022 were generated solely in the United States.
A reconciliation of the Company’s income tax expense (benefit) to the amount computed by applying the federal statutory income tax rate is summarized as follows (in thousands):
Year Ended December 31,
State income taxes, net of federal tax benefit (3,437 ) (2,827 ) (3,754 )
Income tax expense (benefit) $ — $ — $ —
Significant components of the Company’s net deferred tax assets are summarized as follows (in thousands):
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December 31,
Deferred tax assets:
Research and development credit carryforwards 11,286 6,597
Deferred tax liabilities:
Total gross deferred tax liabilities (6,662 ) (7,645 )
Net deferred tax assets $ — $ —
Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined it is more likely than not that the assets will not be realized. Due to uncertainties surrounding the realizability of the deferred tax assets, the Company maintains a full valuation allowance against its deferred tax assets at December 31, 2024 and 2023. During the year ended December 31, 2024, the valuation allowance increased by $21.8 million.
At December 31, 2024, the Company had federal and state net operating loss ("NOL") carryforwards of $66.2 million and $167.6million, respectively. Federal NOL carryforwards totaling $0.5 million begin to expire in 2037, unless previously utilized, and federal NOL carryforwards of $65.7million generated after 2017, may be carried forward indefinitely but can only be utilized to offset 80% of future taxable income. State NOL carryforwards totaling $167.6 million begin to expire in 2037, unless previously utilized. In addition, the Company also has federal and state research and development ("R&D") credit carryforwards totaling $10.9million and $5.3 million respectively. The federal R&D credit carryforwards will begin to expire in 2037 unless previously utilized. The state R&D credit carryforwards do not expire.
Utilization of the Company's NOL and R&D credit carryforwards may be subject to substantial annual limitations in the event a cumulative ownership change has occurred, or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an "ownership change," as defined by Section 382 of the Code, results from a transaction, or series of transactions over a three-year period, resulting in an ownership change of more than 50% of the outstanding common stock of a company by certain stockholders or public groups. Such an ownership change may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company has not completed such an ownership change analysis pursuant to Section 382 of the Code and therefore has established a full valuation allowance as the realization of such deferred tax assets has not met the more likely than not threshold requirement. If ownership changes have occurred or occurs in the future, the amount of remaining tax attribute carryforwards available to offset taxable income and income tax expense in future years may be restricted or eliminated. If eliminated, the related asset would be removed from deferred tax assets with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company's effective tax rate.
The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination by tax authorities. Further, due to the existence of the valuation allowance, future changes in the Company's unrecognized tax benefits will not impact the effective tax rate.
The following table summarizes the changes to the Company’s gross unrecognized tax benefits for the years ended December 31, 2024, 2023 and 2022 (in thousands):
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Year Ended December 31,
Increases related to prior year tax positions — 126 —
Increases related to current year tax positions 1,642 990 763
The Company had no accrual for interest or penalties on the Company's balance sheets at December 31, 2024 or 2023, and has not recognized interest and/or penalties in the statement of operations and comprehensive loss for the years ended December 31, 2024, 2023 and 2022. As of December 31, 2024 and 2023, the Company had unrecognized tax benefits of $4.0 million and $2.4 million, respectively, which if recognized currently, should not impact the effective tax rate due to the Company maintaining a full valuation allowance. The Company does not expect that there will be a significant change in the unrecognized tax benefit over the next twelve months.
The Company is subject to taxation in the United States and various state jurisdictions. All of the Company's tax years are subject to examination by federal and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits. Further, the Company is not currently under examination by any federal, state or local tax authority.
7. 401(k) Plan
Effective April 2021, the Company adopted a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code available to eligible employees. Employee contributions are voluntary and determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. Under the plan, the Company makes a mandatory annual contribution of up to 3% of eligible employees’ compensation. Employer contributions for the years ended December 31, 2024, 2023 and 2022 were $0.4 million, $0.4 million and $0.2 million, respectively.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our management with the participation of our Chief Executive Officer (principal executive and financial officer), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer (principal executive and financial officer) concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organization of the Treadway Commission. Based on this assessment, management concluded that, as of December 31, 2024, our internal control over financial reporting was effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report, which is included herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Janux Therapeutics, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Janux Therapeutics Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Janux Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets of the Company as of December 31, 2024 and 2023, the related statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 27, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Diego, California
February 27, 2025
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Item 9B. Other Information.
Trading Arrangements
During the three months ended December 31, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement (as such terms are defined pursuant to Item 408(a) of Regulation S-K), except as follows:
On December 30, 2024, Byron Robinson, Ph.D., our Chief Strategy Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 238,000 shares of our common stock until August 31, 2025.
On December 30, 2024, Zachariah McIver, D.O., Ph.D., our Chief Medical Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 76,587 shares of our common stock until April 1, 2026.
On December 30, 2024, Tommy DiRaimondo, Ph.D., our Chief Scientific Officer, modified an existing Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c). The modified trading arrangement terminates on August 29, 2025 and provides for the sale of up to 91,100 shares of our common stock.
In addition, our officers (as defined in Rule 16a-1(f) under the Exchange Act) have entered into sell-to-cover arrangements adopted pursuant to Rule 10b5-1 authorizing the pre-arranged sale of shares to satisfy our tax withholding obligations arising exclusively from the vesting of restricted stock units. The amount of shares to be sold to satisfy our tax withholding obligations under these arrangements is dependent on future events which cannot be known at this time, including the future trading price of our shares. The expiration date relating to these arrangements is dependent on future events which cannot be known at this time, including the final vesting date of the applicable shares of restricted stock and the officer’s termination of service.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information required by this item and not set forth below will be set forth in the sections headed "Election of Directors" and "Executive Officers" contained in our definitive Proxy Statement to be filed with the Commission within 120 days after the conclusion of our year ended December 31, 2024 (the “Proxy Statement”) pursuant to General Instructions G(3) of Form 10-K and is incorporated herein by reference.
We have adopted a Code of Business Conduct and Ethics that applies to all officers, directors and employees, including our principal executive and financial officer and principal accounting officer. A current copy of the Code of Business Conduct and Ethics is available on the Corporate Governance section of our website at www.januxrx.com. If we make any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director that are required to be disclosed pursuant to SEC rules, we will promptly disclose the nature of the amendment or waiver on our website or in a current report on Form 8-K.
Item 11. Executive Compensation.
The information required by this item will be set forth in the sections headed "Executive and Director Compensation" and "Director Compensation" contained in our Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item will be set forth in the sections headed "Security Ownership of Certain Beneficial Owners and Management" and "Executive and Director Compensation" contained in our Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item will be set forth in the sections headed "Certain Related-Person Transactions" and "Information Regarding the Board of Directors and Corporate Governance" contained in our Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this item will be set forth in the section headed "Ratification of Selection of Independent Registered Public Accounting Firm" contained in our Proxy Statement and is incorporated herein by reference.
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