OLMA US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s discussion and analysis (“MD&A”) of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of next generation targeted therapies for women’s cancers. Our team has spent the past decade characterizing the structure and function of the estrogen receptor, or ER, a key driver of breast cancer in approximately 75% of patients, in order to develop more potent, oral therapies that completely inactivate this signaling pathway. Our lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete ER antagonist, or CERAN, and a selective ER degrader, or SERD, which we believe will drive deeper, more durable responses than existing therapies. OP-1250, both as a monotherapy and in combination with inhibitors of cyclin-dependent kinase 4 and 6, or CDK4/6, demonstrated robust tumor shrinkage in several xenograft models, including a breast cancer brain metastasis model. In August 2020, we initiated an ongoing Phase 1/2 dose escalation and expansion trial evaluating OP-1250 for the treatment of recurrent, locally advanced or metastatic ER-positive, or ER+, human epidermal growth factor receptor 2-negative, or HER2-, breast cancer. We reported initial data from the Phase 1 dose escalation portion of this trial in November 2021, which provide proof-of-concept for OP-1250 as a monotherapy treatment for ER+/HER2- breast cancer. We own worldwide development and commercialization rights to OP-1250. We believe OP-1250’s oral formulation and dual mechanism of action directly address the limitations of current endocrine therapies, such as fulvestrant and tamoxifen, and position OP-1250 as a potential endocrine therapy of choice for the treatment of ER+ breast cancers. Our goal is to transform the standard of care for women living with cancers by developing more effective therapies that apply our deep understanding and collective expertise in endocrine-driven cancers, nuclear receptor activities and mechanisms of acquired resistance.

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, research and development activities, business planning, raising capital, establishing and maintaining our intellectual property portfolio, conducting nonclinical studies and clinical trials and providing general and administrative support for these operations.

We do not have any product candidates approved for commercial sale, and we have not generated any revenue from product sales. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual commercialization of one or more of our product candidates which we expect, if it ever occurs, will take a number of years. We also do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for nonclinical and clinical testing, as well as for commercial manufacturing if any of our product candidates obtain marketing approval. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.

Through December 31, 2021, we had received aggregate gross proceeds of $392.7 million from sales of our common stock, convertible preferred stock, issuance of convertible promissory notes since our inception, stock option exercises, and sale of stock through the employee stock purchase plan (“ESPP”). As of December 31, 2021, we had $287.3 million in cash, cash equivalents and marketable securities. In January 2020, we received proceeds of $3.0 million from the issuance of convertible promissory notes, or the 2020 Notes. From March 2020 through June 2020, we issued 10,801,277 shares of our Series B convertible preferred stock at a

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price of $4.712 per share for cash proceeds of $50.9 million, and 638,270 shares of our Series B convertible preferred stock upon conversion of the 2020 Notes (including accrued interest). In September 2020, we issued 7,904,135 shares of our Series C convertible preferred stock at a price of $11.063 per share for cash proceeds of $87.4 million. In November 2020, we completed the initial public offering of our common stock, in which we issued an aggregate of 12,650,000 shares of common stock, including 1,650,000 shares of common stock issued pursuant to the over-allotment option granted to the underwriters, at a price of $19.00 per share, for gross cash proceeds of $240.4 million, before underwriting discounts and commissions. We received approximately $220.6 million in net proceeds, after deducting underwriting discounts, commissions and offering expenses. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2024.

We have incurred significant operating losses since the commencement of our operations. Our net losses were $71.1 million, $22.1 million, and $4.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, and we expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidate, and as we continue to operate as a public company. Our net losses may fluctuate significantly from period to period, depending on the timing of expenditures on our research and development activities. As of December 31, 2021, we had an accumulated deficit of $104.2 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and other current liabilities.

We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:

● acquire or in-license other product candidates and technologies;

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● expand our operations in the United States and to other geographies; and

We also expect to increase the size of our administrative function to support the growth of our business. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We will require substantial additional funding to develop our product candidates and support our continuing operations. Until such time that we can generate significant revenue from product sales or other sources, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic and otherwise. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to have to delay, reduce or eliminate our product development or future commercialization efforts. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We cannot provide assurance that we will ever be profitable or generate positive cash flow from operating activities.

The COVID-19 pandemic continues to rapidly evolve. As a result of the COVID-19 pandemic, we experienced some delays in setting up our current Phase 1/2 clinical trial and in clinical site initiation, including delays in recruiting clinical site investigators and clinical site staff, which we may experience again in the future. The extent of the impact of the COVID-19 pandemic on our business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration of the outbreak and its impact on our development activities, planned clinical trial enrollment, future trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and with many of our employees working remotely. We continue to actively monitor the rapidly evolving situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. During 2021, although we modified our operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, our business, operations and development timelines were not material adversely affected. In October 2021, the Company re-opened its offices to administrative employees, however due to the resurgence of cases relating to the spread of the Delta and Omicron variants, the Company continued to limit access to its offices and may close its offices again in the future as the COVID-19 pandemic continues to evolve. The extent to which the COVID-19 pandemic may affect our business, operations and development timelines and plans in the future, including the resulting impact on our expenditures and capital needs, remains uncertain.

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Components of our results of operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future.

Operating expenses

Research and development

Research and development expenses account for a significant portion of our operating expenses and consist primarily of external and internal expenses incurred in connection with the discovery and development of our product candidates. To date, our research and development expenses have related primarily to discovery efforts and nonclinical and clinical development of our product candidate OP-1250. 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.

External expenses include:

● costs of funding research performed by third parties;

● facility costs including rent, depreciation and maintenance expenses.

Internal expenses include employee and personnel-related costs and expenses, including salaries, benefits and stock-based compensation expense for employees and personnel engaged in research and development functions.

We expense research and development expenses in the periods in which they are incurred. Costs for certain activities, such as manufacturing and nonclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or nonclinical program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or nonclinical programs.

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Research and development expenses to advance the development of our lead product candidate and nonclinical program were $51.1 million, $13.7 million and $3.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance OP-1250 or any other future product candidates we may develop into and through nonclinical studies and clinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for OP-1250 or any other future product candidates we may develop may be affected by a variety of factors including but not limited to: the safety and efficacy of our product candidates, early clinical data, investment in our clinical program, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our OP-1250 or any other future product candidates we may develop. Clinical and nonclinical 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 to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future nonclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast whether OP-1250 or any other future product candidates we may develop 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. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses. Our expenditures on current and future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of nonclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

● the timing and progress of nonclinical and clinical development activities;

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

● receipt of regulatory approvals from applicable regulatory authorities;

● our ability to establish licensing or collaboration arrangements;

● the performance of our future collaborators, if any;

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● obtaining and retaining key research and development personnel.

Any changes in the outcome of any of these factors could significantly impact the costs, timing and viability associated with the development of our product candidates.

General and administrative

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for personnel in executive, finance, accounting, business development, legal, human resource and administrative functions. General and administrative expenses also include costs not otherwise included in research and development expenses, including corporate facility costs, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, and professional fees for legal, patent and consulting services.

We expect that our general and administrative expenses will increase substantially in the foreseeable future as we increase our headcount to support the continued research and development of our programs and the growth of our business. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to ongoing consolidated financial statement audit and interim-period quarterly reviews, internal control over financial reporting compliance and audit, legal, other regulatory and compliance, director and officer insurance, investor and public relations and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Total other income (expense), net

Interest income, interest expense and other expense

Total other income (expense), net consists of interest income, interest expense, and other expense. Interest income primarily consists of interest income on our cash equivalents and marketable securities. Interest expense primarily consisted of interest on our convertible promissory notes, and a non-cash interest charge related to a beneficial conversion feature on a convertible note that was issued in January 2020. Other expense consists of miscellaneous expenses not related to operating activities.

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Results of operations

Comparison of the years ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:

​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Years Ended December 31, ​ ​

​ ​ ​ (in thousands)

Operating expenses: ​ ​ ​

Other income (expense), net: ​ ​ ​

Interest expense ​ — ​ (653) 653

Other expense ​ ​ (47) ​ ​ — ​ (47)

Total other income (expense), net ​ 395 ​ (593) 988

​

Research and development expenses

Research and development expenses for the year ended December 31, 2021 were $51.1 million, compared to $13.7 million for the year ended December 31, 2020. The increase of $37.4 million was primarily due to increased spending in (i) advancing the clinical study for our lead product candidate OP-1250 and the associated contract manufacturing costs, (ii) nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount, and an increase in non-cash stock-based compensation of $7.4 million recognized during the year ended December 31, 2021.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2021 were $20.4 million compared to $7.8 million for the year ended December 31, 2020. The increase of $12.6 million was primarily due to increased spending in (i) personnel-related costs due to higher headcount, (ii) public company-related expenses, and (iii) other corporate costs and an increase in non-cash stock-based compensation expenses of $5.5 million recognized during the year ended December 31, 2021.

Other income (expense), net

Other income (expense), net for the year ended December 31, 2021 was $0.4 million, compared to $0.6 million expense for the year ended December 31, 2020. The increase of $1.0 million was primarily due to non-cash interest charge incurred in connection with convertible notes issued in January 2020 that was not repeated in 2021, and an increase in interest income from our marketable securities in the year ended December 31, 2021.

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Comparison of the years ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31, ​ ​ ​

​ ​ (in thousands)

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Other (expense) income: ​ ​ ​ ​

Interest income ​ 60 ​ 7 ​ 53

Interest expense ​ (653) ​ — ​ (653)

Total other income (expense), net ​ (593) ​ 7 ​ (600)

​

Research and development expenses

Research and development expenses for the year ended December 31, 2020 were $13.7 million, compared to $3.9 million for the year ended December 31, 2019. The increase of $9.8 million was primarily due to increased spending in (i) advancing our lead product candidate OP-1250 clinical study and the associated contract manufacturing costs, (ii) other nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount, and an increase in non-cash stock-based compensation of $2.0 million recognized during the year ended December 31, 2020.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2020 were $7.8 million compared to $0.4 million for the year ended December 31, 2019. The increase of $7.4 million was primarily due to increased salary expense associated with our expanded executive team, fees paid to outside consultants in connection with our initial public offering and operating as a public company, and an increase in non-cash stock-based compensation of $1.1 million recognized during the year ended December 31, 2020.

Other income (expense), net

Other income (expense), net for the year ended December 31, 2020 was $(0.6) million, which primarily consisted of a non-cash interest charge incurred in connection with convertible notes issued in January 2020.

Liquidity and capital resources

Sources of liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net losses were $71.1 million, $22.1 million, and $4.3 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, we had $287.3 million in cash, cash equivalents and marketable securities and an accumulated deficit of $104.2 million. We had no debt outstanding as of December 31, 2021. Through December 31, 2021, we had received aggregate gross proceeds of $392.7 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes, stock option exercises, and the sale of stock through the ESPP.

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We expect to incur significant expenses and operating losses for the foreseeable future as we advance the nonclinical and clinical development of OP-1250. We expect that our research and development and general and administrative costs will increase in connection with conducting additional nonclinical studies and clinical trials for our current and future research programs and product candidates, contracting with CMOs to support nonclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

Our primary uses of cash are to fund our research and development activities, including with respect to OP-1250 and other nonclinical programs, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital and providing general and administrative support for these operations.

We currently have no financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years.

Future funding and material cash requirements

To date, we have not generated any revenue from product sales. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if at all, that will occur. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for our product candidates, we expect to incur significant commercialization expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we have incurred and expect to continue to incur additional costs associated with operating as a public company. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts.

We expect our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into 2024 at which point we would need to obtain substantial additional funding in connection with our continuing operations.

The following table presents our material cash requirements for future periods:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Material cash requirements due by period

​ Less than 1 More than 1 ​

(in thousands) ​ year ​ year ​ Total

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our future capital requirements will depend on many factors, including:

● the scope, prioritization and number of our research and development programs;

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

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Identifying potential product candidates and conducting nonclinical studies and clinical trials is a time- consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidate, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of a product candidate that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt 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, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. 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 product candidates that we would otherwise prefer to develop and market ourselves.

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Cash flows

The following table shows a summary of our cash flows for each of the periods presented:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Net cash used in operating activities ​ $ (50,690) ​ $ (19,866) ​ $ (3,081)

Net cash used in investing activities ​ (275,438) ​ (56) ​ —

Net cash provided by financing activities ​ 1,391 ​ 358,403 ​ —

Operating activities

Net cash used in operating activities during the year ended December 31, 2021 consisted primarily of our net loss of $71.1 million, partially offset by non-cash charges of $16.6 million and a net increase of $3.8 million in net operating assets and liabilities. The net loss consisted primarily of $51.1 million in research and development expenses and $20.4 million in general and administrative expenses. The non-cash charges consisted primarily of stock-based compensation of $15.9 million, depreciation and amortization expenses of $0.4 million, and non-cash lease expense of $0.2 million, net of cash payments of $1.0 million. The change in operating assets and liabilities was primarily due to a net increase of $0.1 million in other assets and prepaid expenses and other current assets related to advanced payments for corporate insurance and subscriptions and licenses, and a decrease of $0.7 million in accounts payable, partially offset by an increase of $4.6 million in accrued liabilities, primarily as a result of timing of receipts of invoices.

Net cash used in operating activities during the year ended December 31, 2020 consisted primarily of our net loss of $22.1 million, partially offset by non-cash charges of $3.8 million and a net change of $1.5 million in net operating assets and liabilities. The net loss consisted primarily of $13.7 million in research and development expenses and $7.8 million in general and administrative expenses. The non-cash charges consisted primarily of stock-based compensation of $3.1 million and non-cash interest expense of $0.6 million related to our 2020 Convertible Notes. The change in operating assets and liabilities was primarily due to an increase of $3.6 million in prepaid expenses and other current assets related to advanced payments for corporate insurance and research and development activities, an increase of $0.5 million in other assets, and a decrease of $0.2 million in accounts payable, partially offset by an increase of $2.8 million in invoices and accrued liabilities, primarily as a result of timing of invoice payment.

Net cash used in operating activities during the year ended December 31, 2019 consisted primarily of our net loss of $4.3 million, partially offset by an increase in accounts payable of $1.2 million. The net loss primarily consisted of $3.9 million in research and development expenses and $0.4 million in general and administrative expenses. The increase in accounts payable and other current liabilities was due to the timing of the posting of the invoices and the overall increase in research and development expenses in the year ended 2019.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2021 was predominately due to purchases of marketable securities which was financed through the proceeds from the IPO and convertible preferred stock sale, and purchases of equipment, partially offset by the maturities of marketable securities.

Net cash used in investing activities during the year ended December 31, 2020 consisted of nominal purchases of equipment.

There were no cash flows from investing activities during the years ended December 31, 2019.

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Financing activities

Net cash provided by financing activities during the year ended December 31, 2021 consisted of $0.7 million and $0.7 million in net proceeds from the sale of our common stock under the 2020 ESPP and the exercise of stock options, respectively.

Net cash provided by financing activities during the year ended December 31, 2020 consisted primarily of $220.6 million, $85.8 million, and $50.6 million in net proceeds from our initial public offering, sale and issuance of our Series C and B convertible preferred stock, and $3.0 million in proceeds from the sale and issuance of our convertible promissory notes, respectively. These cash inflows were partially offset by cash outflows of $2.3 million for the repurchase of Series A convertible preferred stock.

There were no cash flows from financing activities during the year ended December 31, 2019.

Critical accounting estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and the disclosure of our contingent liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements elsewhere in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our audited consolidated financial statements.

Accrued research and development expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing purchase orders and open contracts, 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 services when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements 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 research and development expenses include the costs incurred for services performed by CROs and CMOs among others, in connection with research and development activities for which we have not yet been invoiced.

We contract with CROs and CMOs to conduct clinical and manufacturing and other research and development services on our behalf. We base our expenses related to CROs and CMOs on our estimates of the services received and efforts expended pursuant to quotes and contracts with them. 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 CROs or CMOs will exceed the level of services provided and result in a prepayment of the 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

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adjust the accrual or amount of prepaid expense accordingly. Non-refundable advance payments for goods and services that will be used in future 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, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may 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.

Emerging growth company status

Until December 31, 2021, we were an “emerging growth company” as defined in the JOBS Act, and therefore, we were able to take advantage of certain exemptions from various public company reporting requirements, including, the exemption from the requirement to obtain an attestation report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act, less extensive disclosure about our executive compensation arrangements, and no requirement for stockholder non-binding advisory votes on executive compensation or golden parachute arrangements. Effective December 31, 2021, we are deemed a “large accelerated filer” as our public float as of June 30, 2021 was greater than $700 million, and thus we are no longer classified as an “emerging growth company”. As such, we conducted an Internal Control over Financial Reporting (“ICFR”) assessment for the year ended December 31, 2021, and have included management’s report in this Annual Report.

Recently issued accounting pronouncements

See Note 2 to our consolidated financial statements contained in this Annual Report for a description of recent accounting pronouncements applicable to our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest rate risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. As of December 31, 2021 and 2020, we had cash, cash equivalents and marketable securities of $287.3 million and $338.5 million, respectively. We generally hold our cash in interest-bearing bank accounts and money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. An immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash, cash equivalents and marketable securities.

Financial institution risk

Substantially all of our cash is held with a single financial institution. Due to its size, this financial institution represents a minimal credit risk. Cash amounts held at financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000.

Foreign currency exchange risk

Our expenses are generally denominated in U.S. dollars. To date, we have not had any significant foreign currency transactions, and we do not have a formal hedging program with respect to foreign currency. A 10.0% increase or decrease in current exchange rates would not have a material effect on our financial results.

Effects of inflation

Inflation generally affects us by increasing our cost of labor and research and development costs. We do not believe that inflation has had a material effect on our results of operations during the periods presented.

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Item 8. Consolidated Financial Statements and Supplementary Data.

Olema Pharmaceuticals, Inc.

Index to consolidated financial statements

​ Page

Report of Independent Registered Public Accounting Firm (PCAOB ID 42) 139

Consolidated Balance Sheets 141

Consolidated Statements of Operations and Comprehensive Loss 142

Consolidated Statements of Cash Flows 144

Notes to Consolidated Financial Statements 145

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Olema Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Olema Pharmaceuticals, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, 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, 2021, 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 28, 2022 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.

Adoption of ASU No.2016-02

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2021 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.

Critical Audit Matters

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 consolidated 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

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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 Accrual

​

/s/ Ernst & Young LLP

We have served as the Company‘s auditor since 2020.

Iselin, New Jersey

February 28, 2022

​

​

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Olema Pharmaceuticals, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ December 31, ​ ​ December 31,

Assets ​ ​ ​ ​ ​ ​

Current assets: ​ ​ ​ ​ ​ ​

Marketable securities ​ ​ 273,438 ​ ​ —

Prepaid expenses and other current assets ​ 3,435 ​ 3,588

Property and equipment, net ​ 1,474 ​ 75

Operating lease right-of-use assets ​ ​ 3,246 ​ ​ —

​ ​ ​ ​ ​ ​ ​

Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​

Current liabilities: ​ ​ ​ ​ ​ ​

Accounts payable ​ $ 23 ​ $ 719

Operating lease liabilities, current ​ ​ 931 ​ ​ —

Other current liabilities ​ ​ 8,065 ​ 3,866

Total current liabilities ​ ​ 9,019 ​ 4,585

Operating lease liabilities, net of current portion ​ ​ 2,358 ​ ​ —

Commitments and contingencies (Note 14) ​ ​ ​ ​ ​ ​

Stockholders’ equity: ​ ​ ​ ​ ​ ​

Accumulated other comprehensive loss ​ ​ (149) ​ ​ —

Total liabilities and stockholders’ equity ​ $ 295,945 ​ $ 342,722

​

See accompanying notes to the consolidated financial statements.

​

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Olema Pharmaceuticals, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Amounts in thousands, except share and per share amounts)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Other income (expense): ​ ​ ​ ​

Interest expense ​ — ​ (653) ​ —

Other expense ​ ​ (47) ​ ​ — ​ ​ —

Total other income (expense), net ​ 395 ​ (593) ​ 7

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Other comprehensive loss: ​ ​ ​ ​ ​ ​ ​ ​ ​

Net unrealized loss on marketable securities ​ ​ (149) ​ ​ — ​ ​ —

​

See accompanying notes to the consolidated financial statements.

​

​

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Olema Pharmaceuticals, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Amounts in thousands, except share amounts)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​

​ ​ Convertible ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total

​ Shares Amount Shares Amount Capital Loss ​ ​ Deficit Equity (Deficit)

Net loss and comprehensive loss — ​ — — ​ — ​ — ​ — ​ ​ (4,316) ​ (4,316)

Exercise of stock options ​ — ​ ​ — ​ 246,046 ​ ​ — ​ ​ 151 ​ ​ — ​ ​ — ​ ​ 151

ESPP expense ​ — ​ ​ — ​ — ​ ​ — ​ ​ 30 ​ ​ — ​ ​ — ​ ​ 30

Exercise of stock options ​ — ​ ​ — ​ 126,937 ​ ​ — ​ ​ 670 ​ ​ — ​ ​ — ​ ​ 670

ESPP expense ​ — ​ ​ — ​ — ​ ​ — ​ ​ 233 ​ ​ — ​ ​ — ​ ​ 233

Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (71,096) ​ ​ (71,096)

See accompanying notes to the consolidated financial statements.

​

​

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Olema Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(Amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​

Depreciation and amortization expense ​ 163 ​ 11 ​ 9

Non-cash interest expense ​ — ​ 641 ​ —

Non-cash lease expense ​ ​ 1,224 ​ ​ — ​ ​ —

Stock-based compensation expense, including ESPP expense ​ 15,913 ​ 3,108 ​ —

Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​

Prepaid expenses and other current assets ​ (40) ​ (3,553) ​ 58

Other assets ​ ​ (30) ​ ​ (507) ​ ​ —

Operating lease liabilities ​ ​ (988) ​ ​ — ​ ​ —

Cash flows from investing activities: ​ ​ ​ ​ ​ ​

Purchase of equipment ​ (1,575) ​ (56) ​ —

Maturities of marketable securities ​ ​ 213,104 ​ ​ — ​ ​ —

Purchases of marketable securities ​ ​ (486,967) ​ ​ — ​ ​ —

Net cash used in investing activities ​ (275,438) ​ (56) ​ —

Cash flows from financing activities: ​ ​ ​ ​ ​ ​

Proceeds from exercise of stock options ​ ​ 670 ​ ​ 641 ​ ​ —

Proceeds from issuance of common stock under the ESPP plan ​ ​ 721 ​ ​ — ​ ​ —

Proceeds from the issuance of convertible notes ​ — ​ 3,000 ​ —

Proceeds from the settlement of non-recourse notes ​ ​ — ​ ​ 88 ​ ​ —

Net cash provided by financing activities ​ 1,391 ​ 358,403 ​ —

Cash and cash equivalents at beginning of period ​ 338,549 ​ 68 ​ 3,149

Cash and cash equivalents at end of period $ 13,812 ​ $ 338,549 ​ $ 68

Deferred offering costs included in other current liabilities ​ $ — ​ $ 70 ​ $ —

Vesting of early exercised stock options ​ $ 372 ​ $ 41 ​ $ —

​

See accompanying notes to the consolidated financial statements.

​

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Olema Pharmaceuticals, Inc.

Notes to consolidated financial statements

1. Nature of the Business and Basis of Presentation

Olema Pharmaceuticals Inc. (“Olema” or the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of next-generation targeted therapies for women’s cancers. The Company is initially focused on developing therapies for the treatment of breast cancer. The Company’s wholly owned, lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete estrogen receptor (“ER”) antagonist (“CERAN”) and a selective ER degrader (“SERD”). The Company is currently evaluating OP-1250 in a Phase 1/2 dose escalation and expansion trial for the treatment of recurrent, locally advanced or metastatic estrogen receptor-positive (“ER+”), human epidermal growth factor receptor 2-negative (“HER2-”) breast cancer.

The Company is located in San Francisco, California and was incorporated in Delaware on August 7, 2006 under the legal name of CombiThera, Inc. and on March 25, 2009 was renamed Olema Pharmaceuticals, Inc. The Company’s principal operations are based in San Francisco, California, and it operates in one business segment and therefore has only one reportable segment. The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of COVID-19, the ability to secure additional capital to fund operations and commercial success of its product candidates. OP-1250 and any future product candidates the Company may develop will require extensive nonclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Initial Public Offering

In November 2020, the Company completed its initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company issued and sold 12,650,000 shares of its common stock, at a price to the public of $19.00 per share. As a result of the IPO, the Company received $220.6 million in net proceeds, after deducting underwriting discounts and commissions and offering costs of $19.8 million.

Upon the closing of the IPO, 23,765,075 shares of outstanding convertible preferred stock were automatically converted into 23,765,075 shares of common stock with the related carrying value of $148.3 million reclassified to common stock and additional paid-in capital. In connection with the IPO, the Company amended and restated its amended and restated certificate of incorporation to change the authorized capital stock to 490,000,000 shares designated as common stock and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001per share.

Liquidity

The Company had $287.3 million of cash, cash equivalents and marketable securities at December 31, 2021, which management believes is sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the filing date of these consolidated financial statements.

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Impact of COVID-19

The extent of the impact of the COVID-19 pandemic on the Company’s business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration of the outbreak and its impact on the Company’s development activities, planned clinical trial enrollment, future trial sites, clinical research organizations (“CROs”), third-party manufacturers, and other third parties with whom the Company does business, as well as its impact on regulatory authorities and the Company’s key scientific and management personnel. During 2021, although the Company modified its operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, its business, operations and development timelines were not material adversely affected. In October 2021, the Company re-opened its offices to administrative employees, however due to the resurgence of cases relating to the spread of the Delta and Omicron variants, the Company continued to limit access to its offices and may close its offices again in the future as the COVID-19 pandemic continues to evolve. The extent to which the COVID-19 pandemic may affect the Company’s business, operations and development timelines and plans in the future, including the resulting impact on its expenditures and capital needs, remains uncertain.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding financial reporting, and the instructions to Form 10-K and Article 10 of Regulation S-X. These consolidated financial statements include the accounts of Olema Pharmaceuticals, Inc. and its wholly owned subsidiary, Olema Oncology Australia Pty Ltd incorporated on January 6, 2021. All intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

The accompanying consolidated financial statements are prepared in accordance with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Significant areas that require management’s estimates include accruals of research and development expenses, including accrual of research contract costs, share-based compensation assumptions, and fair value of common stock and convertible preferred stock prior to the IPO. On an ongoing basis, the Company evaluates its estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash deposits are all in reputable financial institutions in the United States and as of December 31, 2021 and 2020, cash and cash equivalents consisted of cash on deposit with U.S. banks, including the Company’s bank account for its Australia subsidiary, denominated in U.S. dollars and Australian dollars and investments in interest bearing money market funds.

Marketable Securities

All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such designation as of each balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a

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component of comprehensive loss. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other expense. The cost of securities sold is based on the specific-identification method. Interest earned on marketable securities is included in interest income.

The Company periodically assesses its available-for-sale marketable securities for other-than-temporary impairment. For debt securities in an unrealized loss position, the Company first considers its intent to sell, or whether it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis. If either of these criteria are met, the amortized cost basis of such debt securities is written down to fair value through other expense.

For debt securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the decline in the fair value of such debt securities has resulted from credit losses or other factors. The Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the securities, among other factors. If this assessment indicates that a credit loss may exist, the Company then compares the present value of cash flows expected to be collected from such securities to their amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded through other expense, limited by the amount that the fair value is less than the amortized cost basis. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive loss. The Company has not recorded any impairments for its marketable securities.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, and marketable securities. The Company invests in a variety of financial instruments and, by its policy, limits these financial instruments to high credit quality securities issued by the U.S. government, U.S. government-sponsored agencies and highly rated banks and corporations, subject to certain concentration limits. The Company’s cash, cash equivalents, and marketable securities are held by financial institutions in the United States that management believes are of high credit quality. Amounts on deposit with individual banking institutions may at times exceed the limits insured by the Federal Deposit Insurance Corporation (“FDIC”); however, the Company has not experienced any losses on such deposits.

The Company’s future results of operations involve a number of other risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s current and potential future product candidates, uncertainty of market acceptance of the Company’s product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals or sole-source suppliers.

The Company’s product candidates require approvals from the U.S. Food and Drug Administration (“FDA”) and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company were denied approval, approval was delayed or the Company was unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new lease accounting guidance in Accounting Standard Update (“ASU”) 2016-02, Leases, and in July 2018 issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and ASU 2018-11, Leases(Topic 842): Targeted Improvements (the foregoing ASUs collectively referred to as “Topic 842”). Under the new guidance, lessees are required to

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recognize for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of operations and comprehensive loss.

At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease, the Company (i) identifies lease and non-lease components, (ii) determines the consideration in the contract, (iii) determines whether the lease is an operating or finance lease; and (iv) recognizes lease ROU assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses the incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

Most leases include options to renew and, or terminate the lease, which can impact the lease term. The exercise of these options is at the Company’s discretion. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company has operating leases for its manufacturing, research and development and office facilities. Fixed lease payments on operating leases are recognized over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed are recognized as incurred. Fixed and variable lease expense on operating leases is recognized within operating expenses within our consolidated statements of operations and comprehensive loss.

The Company elected to not apply the recognition requirements of Topic 842 to short-term leases with terms of 12 months or less. Additional information and disclosures required by Topic 842 are contained in Note 13 “Lease”.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop product candidates. These costs are recorded within research and development expenses in the consolidated statements of operations and comprehensive loss and include personnel expenses, stock-based compensation expenses, allocated general and administrative expenses, and external costs including fees paid to consultants, CROs and contract manufacturing organizations (“CMOs”), in connection with nonclinical studies and clinical trials, and other related clinical trial fees, such as for investigator fees, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed.

Research Contract Costs and Accruals

The Company has from time to time entered into various research and development and other agreements with commercial firms, researchers, universities and others for provisions of goods and services. These agreements are generally cancelable, and the related costs are recorded as research and development expenses as incurred.

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The Company records accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation, and insignificant for all periods presented. Depreciation is computed using the straight-line method over the estimated useful lives. The useful lives of equipment are as follows:

​

​ ​ ​

​ Estimated Useful Lives

Lab equipment 5 – 7 years

Computer equipment 5 years

​

When assets are sold or retired, the cost and related accumulated depreciation are removed from the balance sheets, with any resulting gain or loss recorded in operating expenses in the statements of operations and comprehensive loss. Costs of repairs and maintenance are expensed as incurred.

Income Taxes

Income taxes are computed using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements. In estimating future tax consequences, the Company considers all expected future events other than enactment of changes in tax laws or rates. A valuation allowance is recorded, if necessary, to reduce net deferred tax assets to their realizable values if management does not believe it is more likely than not that the net deferred tax assets will be realized. As of December 31, 2021 and 2020, the Company has recorded full valuation allowance against its net deferred tax assets.

The Company had no unrecognized tax benefits for the years ended December 31, 2021 and 2020, respectively. The Company may be subject to U.S. Federal, state, and local tax examinations by tax authorities for years before 2021, which may include adjustments to carry-forward attributes (see Note 11, “Income Taxes”).

The Company’s policy is to recognize interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax positions.

Common Stock Valuation

Due to the absence of an active market for the Company’s common stock prior to its IPO, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. In determining the fair value of options granted prior to the IPO, the Company estimated fair value of its common stock as of each measurement date. Significant changes to the

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key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date.

Follow the Company’s initial public offering, the fair market value of its common stock is determined based on the closing price of its common stock as reported by the Nasdaq Global Select Market on the date of grant.

Comprehensive Loss

Comprehensive loss includes net loss and other comprehensive loss for each period presented. Other comprehensive loss represents net unrealized loss on marketable securities.

Stock-Based Compensation

All stock-based compensation cost, including grants of stock options and restricted stock awards issued under the Company’s equity incentive plans and ESPP, is measured at the grant date based on the estimated fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company recognizes stock compensation in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”). The Company’s determination of the fair value of stock options with time-based vesting on the date of grant utilizes the Black-Scholes option-pricing model. The Company estimates volatility using stock prices of peer companies and its historical data, risk-free rates using the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term, and dividend yield using the Company’s expectations and historical data. The Company uses the simplified method to calculate the expected term of employee stock option grants. Under the simplified method, the expected term is estimated to be the mid-point between the vesting date and the contractual term of the option. For awards with graded vesting, in which specified tranches of the options vest on different dates, the Company uses a single weighted average expected life to value the entire award, which is equal to the average of the weighted average vesting period of the award and the contractual term of the award. Equity instruments issued to nonemployees are recorded at their fair value on the grant date and without subsequent remeasurement. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest, including awards with graded vesting. As part of the requirements of ASC 718, the Company has elected to account for forfeitures of stock option grants as they occur.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss per common share by the weighted average number of common shares outstanding for the period without consideration of common stock equivalents. Diluted net loss per common share is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities, and by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, including unvested early exercised options, unvested restricted stock awards, contingently issuable common stock related to the 2020 Employee Stock Purchase Plan (the “ESPP”), and convertible preferred stock are considered potential dilutive common shares. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reported a net loss, such losses were not allocated to such securities. In periods in which the Company reported a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for all periods presented.

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Recent Accounting Pronouncements

The Company lost its status as an emerging growth company on December 31, 2021, when it qualified as a large accelerated filer based on its market capitalization as of June 30, 2021, according to Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a result, the Company adopted all accounting pronouncements formerly deferred under the extended transition period available for emerging growth companies according to public company standards at December 31, 2021. The adoption dates for the new accounting pronouncements disclosed below have been presented as such. Where allowable, the Company has early adopted certain standards as described below.

Recently Adopted Accounting Pronouncements

The Company adopted ASU No. 2016-02, Leases, Topic 842, or ASU 842 as of January 1, 2021 and recorded adoption entries during the fourth quarter of 2021 using the modified retrospective approach as required. The Company elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit on the date of adoption. The Company elected to combine lease components (for example fixed rent payments) with non-lease components (for example, common-area maintenance costs) on the Company’s research and development and office facilities asset classes. The Company also elected the “package of practical expedients”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. Lastly, the Company elected the hindsight expedient to determine the lease terms for existing leases. The election of the hindsight expedient did not have a significant impact on the calculation of the expected lease term.

Upon the adoption of ASU 842 as of January 1, 2021 (recorded in the fourth quarter of 2021), the Company recorded operating lease right-of-use assets of $1.0 million, including the derecognition of prepaid rent of $0.1 million, with the corresponding operating lease liabilities of $0.9 million. There was no material impact to the opening balance of accumulated deficit upon the adoption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326), or ASU 2016-13: Measurement of Credit Losses on Financial Instruments. This standard requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of current expected credit losses (“CECL”) is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. This standard is effective for public companies who are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those years. These standards require using a modified retrospective approach with the cumulative effect recognized as an adjustment to retained earnings. The Company adopted the new guidance under ASU 2016-13 as of January 1, 2021 at December 31, 2021. The adoption did not have an impact on the Company’s consolidated financial position or results of operations.

In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, or ASU 2018-15. ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, Intangibles—Goodwill and Other—Internal Use Software (ASC 350-40), to determine which implementation costs to capitalize as assets or expense as incurred. The internal-use software guidance in ASC 350-40 requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred. A customer’s accounting for the hosting component of the arrangement is not affected by this guidance. The amendments in ASU No. 2018-15 are effective for fiscal years beginning after December 15,

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2019 for public entities. For all other entities, the guidance is effective for annual reporting periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021. Early adoption permitted. The Company early adopted this guidance effective on January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, or ASU 2018-18. This standard provides guidance on the interaction between Revenue Recognition (Topic 606) and Collaborative Arrangements (Topic 808) by aligning the unit of account guidance between the two topics and clarifying whether certain transactions between collaborative participants should be accounted for as revenue under Topic 606. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance effective on January 1, 2021. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

​

3. Fair Value Measurement

The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(in thousands) Level 1 ​ Level 2 ​ Level 3 ​ Total

Financial Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Money market funds ​ ​ 6,523 ​ ​ — ​ ​ — ​ ​ 6,523

Corporate bonds ​ ​ — ​ ​ 3,001 ​ ​ — ​ ​ 3,001

U.S. government treasury bills ​ ​ 23,915 ​ ​ — ​ ​ — ​ ​ 23,915

Government-sponsored enterprise securities ​ — ​ ​ 60,601 ​ ​ — ​ ​ 60,601

​

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Gross Gross ​ ​

​ ​ Amortized ​ Unrealized ​ Unrealized ​ Estimated

(in thousands) Cost ​ Gains ​ Losses ​ Fair Value

Financial Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and cash equivalents ​ $ 13,812 ​ $ — ​ $ — ​ $ 13,812

​

The Company considers its marketable securities with maturities beyond one year as current assets, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of marketable securities to be available-for-sale.

The Company periodically reviews its available-for-sale marketable investments for other-than-temporary impairment. The Company considers factors such as the duration, severity and the reason for the decline in value, the potential recovery period and its intent to sell. For debt securities, the Company also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. During the year ended December 31, 2021, the Company did not recognize any other-than-temporary impairment loss. There was no allowance for losses on available-for-sale debt securities, which were attributable to credit risk for the year ended December 31, 2021.

As of December 31, 2021, all of the Company’s cash and cash equivalents consisted of cash on deposit with U.S. banks, including the Company’s bank account for its Australia subsidiary, denominated in U. S. dollars and Australian dollars.

4. Property and Equipment, net

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

Computer equipment ​ ​ 59 ​ ​ 47

Property and equipment, gross ​ ​ 1,698 ​ ​ 137

Less: Accumulated depreciation (224) ​ ​ (62)

Property and equipment, net $ 1,474 ​ $ 75

​

​

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5. Prepaid Expenses and Other Current Assets

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

Prepaid clinical trial costs ​ $ 916 ​ $ 1,148

Prepaid subscriptions and licenses ​ ​ 291 ​ ​ —

Prepaid research contracts ​ ​ 239 ​ ​ 432

Prepaid rent ​ ​ — ​ ​ 196

​

​

​

​

6. Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

Accrued R&D related costs ​ $ 2,645 ​ $ 609

Accrued employee bonuses ​ ​ 3,752 ​ ​ 1,222

Accrued professional fees ​ ​ 1,011 ​ ​ 577

Early exercise of unvested stock options ​ ​ 206 ​ ​ 578

Accrued payroll related costs ​ ​ 191 ​ ​ 444

Accrued taxes ​ ​ 88 ​ ​ 198

​

​

7. Convertible Notes

On March 17, 2020, then outstanding convertible promissory notes were settled with 2,545,277 shares of Series B convertible preferred stock at $4.712 per share for gross proceeds of approximately $12.0 million. As of December 31, 2021 and 2020, there were no convertible notes outstanding. Refer to Note 5 “Convertible Notes” included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 17, 2021 with the SEC.

8. Convertible Preferred Stock

Upon the closing of the Company’s IPO, each then outstanding share of convertible preferred stock was converted into one share of common stock. As of December 31, 2021 and 2020, there was no convertible preferred stock outstanding. Refer to Note 6 “Convertible Preferred Stock” included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed on March 17, 2021 with the SEC.

​

​

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9. Common Stock

As of each of the balance sheet dates below, the Company had reserved shares of common stock for issuance in connection with the following:

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

10. Stock-Based Compensation

In 2014, the Company’s Board of Directors and stockholders approved and adopted the 2014 Stock Plan (the “2014 Plan”). The 2014 Plan was intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2014 Plan permitted the grant of options and restricted stock awards (including restricted stock purchase rights and restricted stock bonus awards). The maximum aggregate number of shares that may be subject to awards and sold under the 2014 Plan as of December 31, 2019 was 717,360 shares, which was subsequently increased to 4,842,180 in September 2020.The 2014 Plan was terminated on the date the 2020 Equity Incentive Plan (the “2020 Plan”), which is described below, became effective, and no additional awards will be made pursuant to the 2014 Plan. However, any outstanding awards granted under the 2014 Plan will remain outstanding, subject to the terms of the 2014 Plan award agreements, until such outstanding options are exercised or until any awards terminate or expire by their terms.

In 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Plan. The 2020 Plan is intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The maximum number of shares of common stock that may be issued under the 2020 Plan will not exceed 6,494,510 shares of the Company’s common stock, which is the sum of (i) 2,152,080 new shares, plus (ii) an additional number of shares not to exceed 4,342,430 shares, consisting of any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the Company’s 2014 Plan that, on or after the 2020 Plan becomes effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2021 and continuing through January 1, 2030, in an amount equal to the lesser of (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year. The maximum number of shares of the common stock that may be issued on the exercise of incentive stock options under the 2020 Plan is 19,483,530 shares. The 2020 Plan permits the grant of options restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

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The exercise price for each option and stock appreciation right is established in the discretion of the Board, provided that the exercise price of a stock option will not be less than 100% of the fair market value of the Company’s common stock on the date of grant. Specific vesting for stock options and stock appreciation rights is service related and determined in each award agreement, where stock options and stock appreciation rights are fully vested at the grant date or follow a graded vesting schedule. Stock options and stock appreciation rights granted under the Plan generally expire ten years after the date of grant.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company lacks company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies in addition to its own historical volatility. For options with service- based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is 0% since the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used to determine the estimated grant-date fair value of stock options granted to employees and directors under the 2020 Plan were as follows, presented as a weighted average:

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

Risk-free interest rate ​ 0.95% ​ 0.51%

Expected term (in years) ​ ​ 5.97 ​ ​ 6.00

Expected volatility ​ ​ 77.55% ​ ​ 76.69%

Expected dividend yield — ​ ​ —

​

Stock Option Activity

The following table summarizes the stock option activity under the 2014 Plan and the 2020 Plan:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​

​ ​ ​ ​ Weighted ​ Average ​ ​ ​

​ ​ ​ ​ Average ​ Remaining ​ ​ ​

​ ​ Number of ​ Exercise ​ Contractual ​ Aggregate

​ ​ Shares ​ Price ​ Term ​ Intrinsic Value

​ ​ ​ ​ ​ ​ (in years) ​ (in thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(1) Exercised amount includes vesting of early exercised options.

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The weighted-average grant-date fair value per share of options granted during the year ended December 31, 2021, 2020, and 2019 was $21.87, $7.26, and $0, respectively. For the years ended December 31, 2021, 2020, and 2019, there were 1,286,729, 426,739 and 2,941 shares vested, respectively. The weighted-average grant date fair value per share of options vested during the year ended December 31, 2021 was $7.48. The total fair value of options vested during the year ended December 31, 2021, 2020, and 2019 was $10.9 million, $1.7 million, and $1,000, respectively. The aggregate intrinsic value of options exercised was $0.73 million, $0.1 million, and $0 for the years ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021, the total unrecognized compensation expense related to unvested options was $43.8 million, which the Company expects to recognize over an estimated weighted average period of 2.8 years.

Early Exercise of Stock Options

In September 2020, one employee and one non-employee paid $0.6 million to early exercise 135,525 options with exercise prices ranging from $4.406 per share to $4.824 per share. As of December 31, 2021, 88,927 of such shares had vested with the remaining shares vesting over their respective terms. The terms of the 2014 Plan permit certain option holders to exercise options before their options are vested, subject to certain limitations. The early exercised options are subject to the same vesting provisions in the original stock option awards. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the price paid by the purchaser. Such shares are not deemed to be outstanding for accounting purposes until they vest and are therefore excluded from shares outstanding and from basic and diluted net loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature. A liability is recognized related to the cash proceeds of the unvested options and is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. Accordingly, the Company has recorded the unvested portion of the exercise proceeds of $0.2 million in other current liabilities as of December 31, 2021.

Restricted Stock Awards

In June 2020, the Company granted to certain employees 789,095 shares of restricted common stock (the “RSAs”) under the 2014 Plan as consideration for services with a deemed value of $2.40 per share, or $1.9 million. The following table summarizes the restricted stock activity under the Plan during the year ended December 31, 2021:

​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ Number of Shares ​ Grant Date Fair Value

Granted ​ ​ — ​ ​ —

Forfeited ​ ​ — ​ ​ —

​

The total grant date fair value of the RSAs vested during the year ended December 31, 2021, was $0.6 million. As of December 31, 2021, the total unrecognized compensation expense related to unvested RSAs was $1.2 million, which the Company expects to recognize over an estimated weighted average period of 2.5 years.

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Stock-Based Compensation Expense

Stock-based compensation expense related to awards granted under the 2014 Plan, including the RSAs, the 2020 Plan and the 2020 ESPP was classified in the consolidated statements of operations and comprehensive loss as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Research and development $ 9,346 $ 1,970 $ —

General and administrative 6,567 ​ ​ 1,108 ​ ​ —

​

2020 Employee Stock Purchase Plan

In 2020, the Company’s board of directors and stockholders approved and adopted the 2020 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective immediately prior to the date of the underwriting agreement related to the IPO. 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 the common stock purchased under the ESPP is equal to the lesser of (i) 85% of the fair market value of a share of the Company’s common stock on the first day of an offering; or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. Each offering period is not to exceed 27 months and will include one or more purchase periods (each a “Purchase Period”) as approved by the Company’s board of directors in the offering. The current offering period will consist of two (2) six-month purchase periods (each a “Purchase Period”) during which payroll deductions of the participants are accumulated under the ESPP. The last business day of each Purchase Period is referred to as the “Purchase Date.” The first Purchase Period commenced on November 18, 2020 with a purchase date of May 15, 2021. The second Purchase Period commenced on May 16, 2021 and had a purchase date of November 15, 2021. A total of 430,416 shares of common stock were initially reserved for issuance pursuant to the ESPP.

The ESPP is a compensatory plan as defined by the authoritative guidance for stock-based compensation. The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock offered under the ESPP. The valuation methodology is similar to the stock options. Stock-based compensation expense related to the ESPP was $0.2 million and less than $0.1 million for the years ended December 31, 2021 and 2020, respectively.

11. Income Taxes

The reconciliation of the Federal statutory income tax benefit (provision) to the Company’s effective income tax provision is as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ ​ December 31,

Federal statutory income tax ​ $ 14,930 ​ $ 4,760

State income taxes, net of federal tax benefit ​ 25 ​ (1)

Permanent differences in non-tax-deductible executive compensation ​ (1,092) ​ —

Other permanent items ​ ​ (105) ​ ​ (135)

Other deferred items ​ ​ 158 ​ ​ 13

Provision for income taxes ​ $ — ​ $ —

​

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Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred income tax assets and liabilities at December 31, 2021 and 2020 were comprised of the following (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ As of December 31,

Deferred tax assets: ​ ​

Net operating loss carryforwards ​ $ 17,889 ​ $ 6,168

Total deferred tax assets ​ $ 21,378 ​ $ 7,246

Deferred tax liabilities: ​ ​

Fixed assets ​ $ (310) ​ $ (15)

Total deferred tax liabilities ​ ​ (310) ​ ​ (15)

Net deferred tax assets ​ $ — ​ $ —

​

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical operating results and the uncertainty of the economic conditions, the Company has recorded a valuation allowance of $21.1 million and $7.2 million at December 31, 2021 and 2020, respectively. The change in the valuation allowance for the year end December 31, 2021 was an increase of $13.8 million.

At December 31, 2021 and 2020, the Company had Federal net operating losses (NOLs) of approximately $81.8 million and $26.1 million, and state NOLs of $10.4 million and $9.8 million, respectively. As a result of the Tax Act, as modified by the CARES Act, for U.S. income tax purposes, NOLs generated in tax years beginning before January 1, 2018 can still be carried forward for up to 20 years, but net operating losses generated for tax years beginning after December 31, 2017 carryforward indefinitely and can be used to offset taxable income, but the deductibility of such Federal NOLs may be limited to 80% of current year taxable income for tax years beginning on or after December 31, 2021. Of the total Federal net operating loss of $81.8 million, $3.3 million will begin to expire in 2032 and $78.4 million will not expire. The state NOL carryover of $10.4 million will begin to expire in 2032.

Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an ownership change analysis pursuant to IRC Section 382. If ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of remaining tax attribute carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company’s deferred tax assets associated with such tax attributes could be significantly reduced upon realization of an ownership change within the meaning of IRC Section 382 that has occurred or may occur in the future. Any adjustment to the Company’s tax attributes as a result of an ownership change will result in a corresponding decrease to the valuation allowance recorded against the Company’s deferred tax assets.

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The Company’s valuation allowance increased during the years ended December 31, 2021 and 2020 due primarily to the generation of net operating losses, as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ December 31,

Valuation allowance at beginning of year ​ $ 7,231 ​ $ 2,708

Increase recorded to provision for income taxes ​ 13,837 ​ 4,523

Valuation allowance at end of year ​ $ 21,068 ​ $ 7,231

​

The Company has not incurred any material interest or penalties as of the current reporting date with respect to income tax matters. The Company does not expect that there will be unrecognized tax benefits within 12 months of the reporting date. The Company is subject to U.S. Federal and state income taxes. The Federal and state income tax returns for tax years prior to 2021 may remain open to examination as carry-forward attributes generated prior may be adjusted upon examination.

The unrecognized tax benefit amounts are not reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance.

12. Net Loss Per Common Share

Net Loss Per Common Share

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

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​

Denominator: ​ ​ ​

​

The potentially dilutive shares that were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented are as follows:

​

​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Years Ended December 31,

Employee stock purchase plan contingently issuable ​ ​ 17,110 ​ 5,602 ​ —

​

Included in the potentially dilutive options to purchase common stock noted above for 2019 are 211,621 shares issued upon exercise of options under non-recourse notes receivable during 2015 (see Note 10, “Stock-Based Compensation”). The Company determined the purchase of the stock to be non-substantive, and as such, the

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shares subject to the promissory notes will not be deemed outstanding until such time as the promissory notes have been repaid. Accordingly, the Company has excluded these shares from the calculation of basic and diluted net loss per share for the year ended December 31, 2019. As of December 31, 2020, all outstanding principal and accrued interest relating to the Non-Recourse Notes were settled in full by the two noteholders, and as a result, the Company issued 211,621 shares of common stock to the noteholders and included these shares in the basic and diluted net loss per share for year ended December 31, 2020. As of December 31, 2021, included in the potentially dilutive options to purchase common stock are 46,598 unvested stock options that were early exercised by an employee and a non-employee in September 2020 (see Note 10, “Stock-Based Compensation”). The Company determined the early exercises to be non-substantive as the shares were subject to repurchase rights. Accordingly, the Company has excluded these shares from the calculation of basic and diluted net loss per share for the year ended December 31, 2021.

​

13. Lease

Management Services Agreements

The Company leases certain of its facilities under non-cancellable operating leases expiring at various dates through 2026. On June 1, 2013, the Company entered into a management services agreement with MandalMed, Inc. (“MandalMed”) (the “MandalMed Services Agreement”) to lease approximately 5,762 square feet of space for the use laboratory benches, lab equipment, office space, and administrative and facilities services. The Company subsequently entered into several amendments to extend the lease term to November 2020. On November 3, 2020, the Company entered into the sixth amendment to the MandalMed Services Agreement to extend the term to December 31, 2021. As part of the sixth amendment, the Company leased additional space of approximately 2,130 square feet (the “Additional Space”) for a three year period commencing on December 1, 2020 and ending on November 30, 2023.

On August 27, 2020, the Company entered into a lease agreement with 512 2nd Street LLC to lease approximately 3,500 square feet of office space in San Francisco, California (the “Office Space Lease Agreement”). The Office Space Lease Agreement is for a period of two years commencing on September 1, 2020 and ending August 31, 2022. According to the terms of the Office Space Lease Agreement, the Company paid a $0.1 million security deposit and is required to pay monthly rent and common area charges.