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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that 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 certain factors, including those discussed below and as set forth under “Risk Factors.” Please also refer to the section under the heading “Forward-Looking Statements.”

OVERVIEW

We are a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to advancing new medicines for patients battling cancer. Our pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/MEK inhibition and FAK inhibition.

Our most advanced product candidates, avutometinib (VS-6766) and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, but not limited to low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), colorectal cancer (“CRC”), pancreatic cancer, and melanoma. We believe that avutometinib may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies.

On August 10, 2020, we and Secura Bio, Inc. (“Secura”) signed an Asset Purchase Agreement (“Secura APA”) and on September 30, 2020, the transaction closed. Pursuant to the Secura APA, we sold our exclusive worldwide license for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib. Refer to Note 13. License, collaboration and commercial agreements in our consolidated financial statements located in this Annual Report on Form 10-K for a detailed description of the terms and conditions of the Secura APA. With the transition of the duvelisib program to Secura, we are focusing our efforts on our lead product candidates, avutometinib and defactinib.

Our operations to date have been organizing and staffing our company, business planning, raising capital, identifying and acquiring potential product candidates, undertaking preclinical studies and clinical trials for our product candidates and initiating U.S. commercial operations following the approval of COPIKTRA through our ownership period ending in September 2020. We have financed our operations to date primarily through public offerings of our common stock, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules Capital, Inc. (“Hercules”) in March 2017, as amended, the upfront payments and milestone payments under our license and collaboration agreements with Sanofi, CSPC Pharmaceutical Group Limited (“CSPC”), and Yakult Honsha Co., Ltd. (“Yakult”), the upfront payment and milestone payments received under the Secura APA, the issuance of the 2018 Notes (defined herein) in October 2018, the proceeds in connection with the private investment in public equity (the “PIPE”), and our loan and security agreement executed with Oxford Finance LLC (“Oxford”) in March 2022. Additionally, from our U.S. commercial launch of COPIKTRA on September 24, 2018, through our ownership period ending in September 2020, we financed a portion of our operations through product revenue.

As of December 31, 2022, we had an accumulated deficit of $737.5 million. Our net loss was $73.8 million, $71.2 million, and $67.7 million, for the years ended December 31, 2022, 2021, and 2020, respectively. We expect to incur significant expenses and may continue to incur operating losses for the foreseeable future as a result of the continued research and development of avutometinib and defactinib. As of December 31, 2022, we had cash, cash equivalents, and investments of $87.9 million. We expect our existing cash resources, $30.0 million gross proceeds from our Series B Preferred Stock issuance in January 2023, and expected $15.0 million debt drawdown through our loan and security agreement with Oxford expected in March 2023 will be sufficient to fund our planned operations through at least 12 months from the date of issuance of these consolidated financial statements. See Note

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16. Subsequent events located in this Annual Report on Form 10-K for further discussion of the Series B Preferred Stock issuance.

We expect to finance the future development costs of our clinical product portfolio with our existing cash, cash equivalents and investments, through future milestones and royalties received pursuant to the Secura APA, through our loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to, collaboration agreements, future offerings of our equity, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If we fail to obtain additional future capital, we may be unable to complete our planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.

COVID-19 pandemic

The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. We have been carefully monitoring the COVID-19 pandemic and its impact on our operations. Our corporate headquarters remains open and we have adopted a hybrid work program allowing our employees the option to primarily work from home. Shortages in personnel in clinics and hospitals have caused some United States sites to institute limits on new clinical trials which could impact our ability to open new sites for our clinical trials. In addition, clinics in Europe and the United States continue to have delays in startup activities due to the ongoing pandemic and the increase in COVID-19 variant infections. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, new variants, the actions taken to contain it or treat its impact and the economic impact on local, regional, national, and international markets.

For additional information on the various risks posed by the COVID-19 pandemic, please read Item 1A. Risk Factors included within.

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FINANCIAL OPERATIONS OVERVIEW

Revenue

From our U.S. commercial launch of COPIKTRA on September 24, 2018 through our ownership period ending in September 2020 product revenue, net represented the gross sales of COPIKTRA in the United States less provisions for product sales allowances and accruals. These provisions included trade allowances, rebates, chargebacks and discounts, product returns and other incentives. We sold COPIKTRA to a limited number of specialty pharmacies and specialty distributors. The provisions for product sales and allowances fluctuated based on the mix of sales to either specialty pharmacy or specialty distributor customers. See “Critical Accounting Policies and Significant Judgements and Estimates” below and Note 2. Significant Accounting Policies located within the notes to the financial statements included within for more information on the components of net U.S. product sales of COPIKTRA.

License and collaboration revenue to date has been generated through our license and collaboration agreements for the development and commercialization of duvelisib with Sanofi in the Sanofi Territory, CSPC in China, and Yakult in Japan. The terms of these agreements contain multiple deliverables which may include (i) licenses, (ii) research and development activities, and (iii) the manufacture of finished drug product, active pharmaceutical ingredient (“API”), or development materials for a partner, which are reimbursed at a contractually determined rate. Payments to us may include (i) up‐front license fees, (ii) payments for research and development activities, (iii) payments for the manufacture of finished drug product, API or development materials, (iv) payments based upon the achievement of certain milestones, and (v) royalties on product sales.

Sale of licenses and related assets revenue to date have been generated through our sale of our duvelisib license and related assets to Secura. The sale included intellectual property related to duvelisib in oncology indications, certain existing duvelisib inventory, certain manufacturing equipment and, claims and rights under certain contracts pertaining to duvelisib including net contract prepaid balances.

Costs of sales - product

Cost of sales - product consisted of costs of COPIKTRA on which product revenue was recognized, royalties owed to Healthcare Royalty Partners (“HCR”) and Infinity we incurred as a result of such sales of COPIKTRA, and certain period costs. Certain of the costs of COPIKTRA units recognized as revenue during 2020 were expensed prior to the September 2018 FDA marketing approval and, therefore, are not included in cost of sales during 2020. There were no cost of sales – product in 2022 and 2021.

Costs of sales - sale of COPIKTRA license and related assets

Cost of sales - sale of COPIKTRA license and related assets represent assets delivered to Secura as part of the sale pursuant to the Secura APA. This included our intangible assets, certain duvelisib inventory, net duvelisib contract prepaid balances, and manufacturing equipment. There were no cost of sales –sale of COPIKTRA license and related assets in 2022 and 2021.

Research and development expenses

Research and development expenses consist of costs associated with our research activities, including the development of our product candidates. Research and development expenses include product/ product candidate and/or project-specific costs, as well as unallocated costs. We allocate the expenses related to external research and development services, such as contract research organizations (“CROs”), clinical sites, manufacturing organizations and consultants, by project and/or product candidate. We use our employee and infrastructure resources in a cross-functional manner across multiple research and development projects. Our project costing methodology does not allocate personnel, infrastructure and other indirect costs to specific clinical programs or projects.

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Product/ product candidate/ project specific costs include:

● license fees.

Unallocated costs include:

The table below summarizes our direct research and development expenses for our product/ product candidates/ projects and our unallocated research and development costs for the years ended December 31, 2022, 2021, and 2020:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

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

Product/ product candidate / project specific costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Avutometinib + other combinations ​ ​ 2,373 ​ ​ 416 ​ ​ — ​

Unallocated costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Stock-based compensation expense ​ ​ 1,766 ​ ​ 2,099 ​ ​ 1,935 ​

Costs for certain development activities, such as clinical trial expenses, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, and information provided us by our vendors on their actual costs incurred or level of effort expended. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as prepaid expenses and other current assets or accrued expenses.

Our research and development expenses may increase significantly in future periods as we undertake costlier development activities for our existing and future product candidates, including larger and later-stage clinical trials.

The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete

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development of our product candidates or the period, if any, in which material net cash inflows from our product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

● clinical trial results;

● the potential benefits of our product candidates over other therapies;

● the terms and timing of regulatory approvals; and

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

Selling, general, and administrative expenses

Selling, general, and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation expense, in our executive, finance, legal, information technology, commercial, communication, human resources, and business development functions. Other selling, general, and administrative expenses include allocated facility costs, commercial costs, professional fees for legal, patent, investor and public relations, consulting, insurance premiums, audit, tax, and other public company costs.

Other income, other expense, interest income and interest expense

Other income for the year ended December 31, 2022 was comprised of a gain on the sale of fixed assets and changes in foreign currency exchange rates. There was no other income or other expense for the year ended December 31, 2021. Other expense for the year ended December 31, 2020, consists entirely of the mark-to-market adjustment of the bifurcated make-whole interest provision derivative liability related to the 2019 Notes.

Interest income reflects interest earned on our cash, cash equivalents and available-for-sale securities.

Interest expense reflects interest expense due on our Loan Agreement with Oxford, our term loan facility executed with Hercules and the Notes, as well as non-cash interest related to the amortization of debt discount and issuance costs.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued and prepaid research and development expenses, leases, stock-based compensation, revenue recognition, and collaborative agreements, described in greater detail below. We base our estimates on our limited 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. Actual results may differ from these estimates under different assumptions or conditions.

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Our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. However, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

Revenue recognition

We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services in accordance with Accounting Standards Codification (“ASC”) Topic 606 Revenue from Contracts with Customers (ASC 606).

Product revenue, net

Product Revenue, Net – From September 24, 2018 (the date of our U.S. commercial launch of COPIKTRA) through September 30, 2020 (the date we sold COPIKTRA to Secura), we sold COPIKTRA to a limited number of specialty pharmacies and specialty distributors in the United States. We recognized revenue on sales of COPIKTRA when a customer obtains control of the product, which occurs at a point in time (typically upon delivery). Product revenues are recorded at the wholesale acquisition costs, net of applicable reserves for variable consideration. Components of variable consideration include trade discounts and allowances, Third-Party Payer chargebacks and discounts, government rebates, other incentives, such as voluntary co-pay assistance, product returns, and other allowances that are offered within contracts between us and customers, payors, and other indirect customers relating to our sale of COPIKTRA. These reserves, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable or a current liability. These estimates take into consideration a range of possible outcomes based upon relevant factors such as customer contract terms, information received from third parties regarding the anticipated payor mix for COPIKTRA, known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which it is entitled with respect to sales made.

The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under contracts will not occur in a future period. Our analyses contemplate the application of the constraint in accordance with ASC 606. For the year ended December 31, 2020, we determined a material reversal of revenue would not occur in a future period for variable consideration, and the transaction price was not reduced further. There was not any product revenue, net recorded for the years ended December 31, 2022 and 2021. Actual amounts of consideration ultimately received could differ from our estimates. However, as of December 31, 2022, we do not have any reserve balances associated with product revenue, net.

Licenses and sales of intellectual property

Licenses of Intellectual Property - We may enter into collaboration and licensing arrangements for research and development, manufacturing, and commercialization activities with collaboration partners for the development and commercialization of our product candidates, which have components within the scope of ASC 606. The arrangements generally contain multiple elements or deliverables, which may include (i) licenses, or options to obtain licenses, to our intellectual property or sale of our license, (ii) research and development activities performed for the collaboration partner, (iii) participation on joint steering committees, and (iv) the manufacturing of commercial, clinical or preclinical material. Payments pursuant to these arrangements typically include non-refundable, upfront payments, milestone payments upon the achievement of significant development events, research and development reimbursements, sales milestones, and royalties on product sales. The amount of variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period. The contracts into which we enter generally do not include significant financing components.

In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our collaboration and license agreements, we perform the following steps: (i) identification of the promised goods or services in the contract within the scope of ASC 606; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the

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transaction price to the performance obligations; and (v) recognition of revenue when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must use significant judgment to determine: a) the number of performance obligations based on the determination under step (ii) above; b) the transaction price under step (iii) above; c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above; and d) the measure of progress in step (v) above. We use judgment to determine whether milestones or other variable consideration, except for royalties on license arrangements, should be included in the transaction price.

For sales of license and intellectual property, that include sale-based royalties, including milestone payments based on a level of sales, we evaluate whether the royalties and sales-based milestones are considered probable of being achieved and estimate the amount of royalties to include over the contractual term using the expected value method and estimate the sales-based milestones using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated royalty and milestone value is included in the transaction price. Royalties and sales-based milestones for territories for which there is not regulatory approval are not considered probable until such regulatory approval is achieved. We evaluate factors such as whether consideration is outside of our control, timeline for when the uncertainty will be resolved and historical sales of COPIKTRA if applicable. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and amount of royalty revenue to be received and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. At December 31, 2022, we determined $0.1 million of future potential royalties, we expect to receive pursuant to the Secura APA, were not constrained and have been recorded in the transaction price. As the consideration for future royalties is conditional, we recorded a corresponding contract asset for the expected future royalties. Portions of the contract asset are reclassified to accounts receivable when the right to consideration becomes unconditional.

Refer to Note 2. Significant Accounting Policies, Note 6. Product revenue reserves and allowances and Note 13. License, collaboration and commercial agreements to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of revenue.

Collaborative Arrangements

Collaborative Arrangements: Contracts are considered to be collaborative arrangements pursuant to GAAP when they satisfy the following criteria defined in ASC Topic 808, Collaborative Arrangements (ASC 808): (i) the parties to the contract must actively participate in the joint operating activity and (ii) the joint operating activity must expose the parties to the possibility of significant risk and rewards, based on whether or not the activity is successful. Payments received from or made to a partner that are the result of a collaborative relationship with a partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction or increase to research and development expense, respectively.

Accrued and prepaid research and development expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses. This process involves reviewing contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our 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 fees paid to CROs in connection with research and development activities for which we have not yet been invoiced.

We base our expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services

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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 adjust the accrual or prepaid accordingly. 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 could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Refer to Note 2. Significant Accounting Policies, and Note 4. Accrued expenses to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of accrued research and development expenses.

Stock-based compensation

For service-based awards, we recognize stock-based compensation expense for stock options, and restricted stock units (“RSUs”) issued to employees, directors and consultants based on the grant date fair value of the awards on a straight-line basis over the requisite service period. In addition, we issue shares under our employee stock purchase plan (“ESPP”) to employees. The fair value of our stock options and ESPP grants is estimated at the date of grant using the Black-Scholes option pricing model.

We have also granted performance-based RSUs and stock options with terms that allow the recipients to vest in a specific number of shares based upon the achievement of performance-based milestones as specified in the grants. Stock-based compensation expense associated with these performance-based RSUs and stock options is recognized if the performance condition is considered probable of achievement using management’s best estimates of the time to vesting for the achievement of the performance-based milestones. If the actual achievement of the performance-based milestones varies from our estimates, stock-based compensation expense could be materially different than what is recorded in the period. The cumulative effect on current and prior periods of a change in the estimated time to vesting for performance-based RSUs and stock options will be recognized as compensation cost in the period of the revision, and recorded as a change in estimate.

While the assumptions used to calculate and account for stock-based compensation awards represent management’s best estimates, these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if revisions are made to our underlying assumptions and estimates, our stock-based compensation expense could vary significantly from period to period.

During the year ended December 31, 2022, we recorded $6.0 million of stock-based compensation expense. As of December 31, 2022, there was approximately $6.6 million of unrecognized stock-based compensation related to stock options, which are expected to be recognized over a weighted-average period of 2.6 years. As of December 31, 2022, there was approximately $4.3 million of unrecognized stock-based compensation related to RSUs, which are expected to be recognized over a weighted-average period of 2.8 years. See Note 2. Significant accounting policies and Note 8. Stock-based compensation to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of stock-based compensation.

Leases

Leases are accounted for in accordance with ASC Topic 842, Leases (“ASC 842”). This standard requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases.

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances within the arrangement. A lease is identified where an arrangement conveys the right to control the use of identified property, plant, and equipment for a period of time in exchange for consideration. Leases which are identified within the scope of ASC 842 and which have a term greater than one year are recognized on our consolidated balance sheets as right-of-use assets, lease liabilities and, if applicable, long-term

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lease liabilities. We have elected not to recognize leases with terms of one year or less on our consolidated balance sheets. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, we utilize our incremental borrowing rates to calculate the present value of lease payments. Incremental borrowing rates are the rates we incur to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. As of December 31, 2022, we have a right-of-use asset of $1.8 million and lease liability of $2.3 million which reflected on the consolidated balance sheets. See Note 2. Significant accounting policies and Note 6. Leases to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of leases.

RESULTS OF OPERATIONS

All financial information presented has been consolidated and includes the accounts of our wholly-owned subsidiaries, Verastem Securities Company and Verastem Europe GmbH. All intercompany balances and transactions have been eliminated in consolidation.

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​

Product revenue, net ​ ​ — ​ ​ — ​ ​ 15,232

License and collaboration revenue ​ ​ — ​ ​ — ​ ​ 2,912

Sale of COPIKTRA license and related assets ​ ​ 2,596 ​ ​ 1,447 ​ ​ 70,000

Transition services revenue ​ ​ — ​ ​ 606 ​ ​ 372

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Cost of sales - product ​ ​ — ​ ​ — ​ ​ 1,765

Cost of sales - intangible amortization ​ ​ — ​ ​ — ​ ​ 793

Other income (expense) ​ ​ 47 ​ ​ — ​ ​ (1,313)

Loss on debt extinguishment ​ ​ — ​ ​ — ​ ​ (1,580)

Income tax expense ​ ​ — ​ ​ — ​ ​ (194)

Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Sale of COPIKTRA license and related assets revenue. Sale of COPIKTRA license and related assets revenue for the year ended December 31, 2022 (the “2022 Period”) was $2.6 million compared to $1.4 million for the year ended December 31, 2021 (the “2021 Period”). Sale of COPIKTRA license and related assets revenue for the 2022 Period was comprised of one regulatory milestone for $2.5 million achieved by Secura’s sublicensee, CSPC, and $0.1 million related to royalties on COPIKTRA sales in the 2022 Period and future royalties expected to be received pursuant to the Secura APA that are not constrained. Sale of COPIKTRA license and related assets revenue for the 2021 Period primarily related to two regulatory milestones for $1.3 million achieved by Secura’s sublicensee and $0.2 million related to royalties we received and expected to be received pursuant to the Secura APA.

Transition services revenue. Transition services revenue for the 2022 Period was $0.0 million compared to $0.6 million for the 2021 Period. Transition services revenue was comprised of the revenue recognized for us providing certain support functions to Secura pursuant to the transition services agreement, which was entered into

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in connection with the Secura APA (“Secura TSA”). The services were provided at a mutually agreed upon rate. The services were substantially completed in 2021 and there will not be revenue recorded in the future pursuant to the Secura TSA.

Research and development expense. Research and development expense for the 2022 Period was $50.6 million compared to $39.3 million for the 2021 Period. The $11.3 million increase from the 2021 Period to the 2022 Period was primarily related to an increase of $4.1 million in drug substance and drug product costs, an increase of $4.1 million in CRO costs, an increase of $1.5 million in consulting costs, an increase of $0.9 million in investigator fees, an increase of $0.5 million in personnel related costs, including non-cash stock-based compensation, an increase of $0.4 million in clinical supply costs and an increase of $0.8 million in other costs. The increase was partially offset by a decrease of $1.0 million in investigator sponsored trial costs.

Selling, general and administrative expense.Selling, general and administrative expense for the 2022 Period was $25.0 million compared to $24.1 million for the 2021 Period. The increase of $0.9 million from the 2021 Period to the 2022 Period primarily resulted from an increase of $1.1 million of commercial operations costs, an increase of $0.4 million in personnel related costs, including non-cash stock-based compensation and an increase of $0.4 million of other costs. The increase was partially offset by a decrease of $1.0 million of consulting and professional fees.

Other Income. Other income for the 2022 Period was less than $0.1 million compared to $0.0 million in the 2021 Period. Other income for the 2022 Period was comprised of a gain on the sale of fixed assets and changes in foreign currency exchange rates.

Interest income. Interest income for the 2022 Period was $1.2 million compared to $0.2 million for the 2021 Period. The increase of $1.0 million in interest income was primarily driven by an increase in interest rates on debt securities.

Interest expense. Interest expense for the 2022 Period was $2.1 million compared to $10.0 million for the 2021 Period. The decrease of $7.9 million from the 2021 Period to the 2022 Period was primarily driven by $7.8 million of non-cash interest expense recorded in the 2021 Period upon conversion of the 2020 Notes into common stock in July 2021. In addition, as a result of the conversion, there were no interest charges recorded for the 2020 Notes in the 2022 Period. The decrease is partially offset by the interest expense recorded pursuant to the Loan Agreement entered into with Oxford.

LIQUIDITY AND CAPITAL RESOURCES

Sources of liquidity

We have financed our operations to date primarily through public and private offerings of our common stock, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments under our license and collaboration agreements with Sanofi, Yakult, and CSPC, the upfront payment under the Secura APA, the issuance of 2018 Notes in October 2018, the proceeds in connection with the PIPE, the Loan Agreement with Oxford, and issuance of our Series B Preferred Stock in January 2023. With the commercial launch of COPIKTRA in the United States in September 2018 through our ownership period ending in September 2020, we financed a portion of our operations through product revenue. As of September 30, 2020, we have sold our COPIKTRA license and no longer sell COPIKTRA in the United States. We expect to finance a portion of our business through potential future milestones and royalties received pursuant to the Secura APA.

As of December 31, 2022, we had $87.9 million in cash, cash equivalents, and investments. We primarily invest our cash, cash equivalents and investments in U.S. Government money market funds, government bonds, corporate bonds and commercial paper of publicly traded companies.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. On March 12, 2023, the Department of the Treasury, the Federal Reserve,

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and the FDIC announced that all depositors of SVB will be fully protected and have access to all their money starting March 13, 2023. As of March 13, 2023, our deposit balance at SVB was approximately $2 million. We are continually monitoring developments related to the recovery of uninsured funds at SVB.

Risks and uncertainties include those identified under Item 1A. Risk Factors, in this Annual Report on Form 10-K.

Cash flows

The following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

Net cash (used in) provided by: ​ ​ ​ ​ ​

Operating activities. The use of cash in operating activities in the 2022 Period and 2021 Period resulted primarily from our net losses adjusted for non-cash charges and changes in the components of working capital. Our cash outflow from net losses adjusted for non-cash charges was $67.6 million and $54.1 million for the 2022 Period and 2021 Period, respectively. Non-cash charges were primarily related to stock-based compensation expense in the 2022 Period and stock-based compensation expense and non-cash interest, net in the 2021 Period. Our cash inflow from operating activities due to changes in operating assets and liabilities was $3.9 million and $0.6 million for the 2022 Period and 2021 Period, respectively. Cash inflow due to changes in operating assets and liabilities for the 2022 Period was primarily driven by an increase of $2.6 million in accounts payable, an increase of $0.7 million in deferred liabilities, a decrease of $0.7 million of prepaid expenses, other current assets and other assets, and a decrease of $0.5 million in accounts receivable. The decrease in prepaid expenses, other current assets, and other assets is exclusive of the cash received from PanCAN. Cash inflow due to changes in operating assets and liabilities for the 2021 Period was primarily driven by an increase of $1.8 million in accrued expenses, an increase of $0.6 million in accounts payable, partially offset by an increase in $1.6 million in prepaid expenses, other current assets, and other assets. Cash used in operating activities was $63.7 million and $53.5 million for the 2022 Period and 2021 Period, respectively.

Investing activities. The cash provided by investing activities for the 2022 Period primarily relates to the net maturities of investments of $66.2 million. The cash provided by investing activities for the 2021 Period primarily relates to the net maturities of investments of $0.3 million, partially offset by purchases of fixed assets of $0.2 million.

Financing activities. The cash provided by financing activities for the 2022 Period primarily represents $27.4 million of net proceeds received under our at-the market equity offering program, $24.1 million of net proceeds received from the Loan Agreement with Oxford, and $0.3 million of proceeds received related to exercise of stock options and employee stock purchase plan. The cash provided by financing activities for the 2021 Period primarily represents $6.7 million in net proceeds received under our at-the-market equity offering program, and $1.1 million of proceeds received related to exercise of stock options and employee stock purchase plan. This is partially offset by $0.9 million of payments for settlement of restricted stock for tax withholdings.

On March 25, 2022 (the “Closing Date”) we entered into a loan and security agreement (the “Loan Agreement”), with Oxford as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”) pursuant to which the Lenders have agreed to lend us up to an aggregate principal amount of $150.0 million in a series of term loans (the “Term Loans”). The initial Term Loan of $25.0 million was funded at the Closing Date of the Loan Agreement, an additional $75.0 million will be available at our option upon achievement of certain milestones as outlined in Note 5. Debt to our consolidated financial statements included in this Annual Report on Form 10-K, and $50.0 million is subject to the Lenders’ sole

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discretion. In January 2023, we met the Term B Milestone as outlined in Note 5. Debt to our consolidated financial statements included in this Annual Report on Form 10-K and we expect to draw down an additional $15.0 million Term Loan in March 2023.

The Term Loans bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap. Interest is payable monthly in arrears on the first calendar day of each calendar month. Beginning (i) April 1, 2024, if the Term B Loan (as defined in Note 5. Debt to our consolidated financial statements included in this Annual Report on Form 10-K) is not made, (ii) April 1, 2025, if the Term B Loan is made, or (iii) April 1, 2026, if the Term B Loan is made and either (A) avutometinib has received FDA approval for the treatment of LGSOC or (B) COPIKTRA has received FDA approval for the treatment of peripheral T-cell lymphoma (“PTCL”), we shall repay the Term Loans in consecutive equal monthly payments of principal, together with applicable interest, in arrears. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on March 1, 2027. As we have drawn the Term B Milestone, principal repayments will not be required to commence until at least April 1, 2025.

We are required to make a final payment of 5.0% of the original principal amount of the Term Loans that were drawn, payable at maturity or upon any earlier acceleration or prepayment of the Term Loans. We may prepay all, but not less than all, of the Term Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount of the applicable Term Loan if prepaid on or before the first anniversary date of the funding date of such Term Loan, (ii) 2.0% of the principal amount of the applicable Term Loan if prepaid after the first anniversary and on or before the second anniversary of the funding date of such Term Loan, and (iii) 1.0% of the principal amount of the applicable Term Loan if prepaid after the second anniversary of the applicable funding date of such Term Loan. All Term Loans are subject to a facility fee of 0.5% of the principal amount.

The Loan Agreement contains no financial covenants. The Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warrants, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and a material adverse change. The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations. During the existence of an event of default, the Term Loans will accrue interest at a rate per annum equal to 5.0% above the otherwise applicable interest rate.

In connection with the Loan Agreement, we granted Oxford a security interest in all of our personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property.

In August 2021, we entered into a sales agreement with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which we can offer and sell up to $100.0 million of our common stock at the current market prices from time to time through Cantor as sales agent (“August 2021 ATM”). During the 2022 Period and 2021 Period, we sold 23,573,403 shares and 2,930,585 shares, respectively, under the August 2021 ATM for net proceeds of approximately $27.4 million, and $6.8 million, respectively (after deducting commissions and other offering expenses). As of December 31, 2022, we can issue an aggregate amount of $65.1 million of common stock under this program.

On October 17, 2018, we closed a registered direct public offering of $150.0 million aggregate principal amount of our 2018 issued 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”), for net proceeds of approximately $145.3 million. The 2018 Notes are governed by the terms of a base indenture for senior debt securities (the “Base Indenture”), as supplemented by the first supplemental indenture thereto (the “2018 Notes Supplemental Indenture” and together with the Base Indenture, the “2018 Indenture”), each dated October 17, 2018, by and between us and Wilmington Trust, National Association (“Wilmington”), as trustee. The 2018 Notes are senior unsecured obligations of us and bear interest at a rate of 5.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year. The 2018 Notes will mature on November 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms.

The 2018 Notes are convertible into shares of our common stock, par value $0.0001 per share, together, if applicable, with cash in lieu of any fractional share, at an initial conversion rate of 139.5771 shares of common

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stock per $1,000 principal amount of the 2018 Notes, which corresponds to an initial conversion price of approximately $7.16 per share of common stock. Upon conversion, converting noteholders will be entitled to receive accrued interest on their converted 2018 Notes.

We will have the right, exercisable at our option, to cause all 2018 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2018 Indenture) per share of our common stock equals or exceeds 130% of the conversion price, which equates to approximately $9.31 per share, on each of at least 20 “VWAP Trading Days” (as defined in the 2018 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date we first issued the 2018 Notes.

In the fourth quarter of 2019, we entered into privately negotiated agreements to exchange approximately $121.7 million aggregate principal amount of the 2018 Notes for (i) approximately $66.9 million aggregate principal amount of 5.00% Convertible Senior Second Lien Notes due 2048 (the “2019 Notes”), (ii) an aggregate of approximately $12.1 million in 2018 Notes principal repayment and (iii) accrued interest on the 2018 Notes through the exchange date. As of March 31, 2020, all 2019 Notes have converted into shares of common stock and are no longer outstanding.

On November 6, 2020, we entered into a privately negotiated agreement with an investor who is a holder of our 2018 Notes to exchange approximately $28.0 million aggregate principal amount of 2018 Notes for approximately $28.0 million aggregate principal amount of newly issued 5.00% Convertible Senior Notes due 2048 (the “2020 Notes”). The issuance of the 2020 Notes closed on November 13, 2020. The 2020 Notes were governed pursuant to the Base Indenture between us and Wilmington dated as of October 17, 2018 as supplemented by the second supplemental indenture thereto dated as of November 13, 2020 (the “2020 Notes Supplemental Indenture” and together with the Base Indenture, the “2020 Indenture”).

We had the right, exercisable at our option, to cause all 2020 Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the 2020 Indenture) per share of our common stock equals or exceeds 123.08% of the conversion price on each of at least 20 “VWAP Trading Days” (as defined in the 2020 Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date we first issued the 2020 Notes (“2020 Notes Mandatory Conversion Option”).

On July 1, 2021, we exercised our 2020 Notes Mandatory Conversion Option for the aggregate principal amount of $28.0 million of the 2020 Notes. On July 16, 2021, the aggregate principal of $28.0 million of 2020 Notes was converted into 8,615,384 shares of common stock. Upon conversion of the 2020 Notes, holders received a cash payment equal to the accrued and unpaid interest on the converted 2020 Notes. As a result, as of September 30, 2021, all 2020 Notes have converted into shares of common stock.

As of December 31, 2022 and 2021 there was $0.3 million aggregate principal amount outstanding of 2018 Notes.

Funding requirements

We expect to continue to incur significant expenses and may continue to incur operating losses. Refer to risk factor titled We have incurred significant losses since our inception. We may incur losses for the foreseeable future and may never achieve or maintain profitability within section Item 1A. Risk Factors for detailed activities which may drive our continued operating losses and expenses in future periods.

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

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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, licensing arrangements, and through future milestones and royalties received pursuant to the Secura APA. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. 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 additional 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 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 commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

On April 15, 2014, we entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts. The lease term commenced on April 15, 2014, and it was scheduled to expire on September 30, 2019. Effective February 15, 2018, we amended the lease agreement to relocate within the facility to another location consisting of 27,810 square feet of office space (the “Amended Lease Agreement”). The Amended Lease Agreement extends the expiration date of the lease from September 2019 through June 2025. Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $0.7 million, which increases during the lease term to $1.1 million for the last twelve-month period. As of December 31, 2022, the total future minimum lease payments under the agreement are $2.7 million through June 2025.

As discussed in Note 13. License, collaboration and commercial agreements to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we are party to several agreements to license intellectual property. The license agreements may require us to pay upfront license fees, ongoing annual license maintenance fees, milestone payments, minimum royalty payments, as well as reimbursement of certain patent costs incurred by the licensors, as applicable. As of December 31, 2022, we do not have any minimum contractual obligations in relation to these agreements because: there were no upfront license fees payable in future periods; no annual license maintenance fees; we cannot estimate if milestone and/or royalty payments will occur in future periods; and patent cost reimbursement costs are perpetual and the agreements are cancelable by us at any time upon prior written notice to the licensor.

TAX LOSS CARRYFORWARDS

As of December 31, 2022, we had federal and state net operating loss (“NOL”) carryforwards of $436.6 million and $203.3 million, respectively, which are available to reduce future taxable income. We also had federal and state tax credits of $5.6 million and $1.9 million, respectively, which may be used to offset future tax liabilities. The net operating loss and tax credit carryforwards will expire at various dates through 2042, except for $240.9 million of federal net operating loss carryforwards which may be carried forward indefinitely. Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax

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authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of our company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. At December 31, 2022, we recorded a 100% valuation allowance against our NOL and tax credit carryforwards of $133.9 million, as we believe it is more likely than not that the tax benefits will not be fully realized. In the future, if we determine that a portion or all of the tax benefits associated with our tax carryforwards will be realized, net income would increase in the period of determination.

Based on our analysis under Section 382 of the Internal Revenue Code and similar provisions under state law, we believe that our federal net operating loss carryforwards, our state net operating loss carryforwards, our Research and Development (“R&D”) credits and our Orphan Drug (“OD”) credits will be limited as of December 31, 2022. The portion of federal NOL, state NOL, R&D credits and OD credits that were determined to be limited by Section 382 have been written off as of December 31, 2022. The remaining unused carryforwards remain available for future periods. Due to our full valuation allowance the write off of NOLs, R&D credits, and OD credits did not have any impact to the statements of operation and comprehensive loss for the 2022 Period and 2021 Period.

RECENTLY ADOPTED ACCOUNTING STANDARDS

Refer to Note 2. Significant Accounting Policies to our consolidated financial statements located in this Annual Report on Form 10-K for recently adopted accounting standards.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents, and investments of $87.9 million and $100.3 million as of December 31, 2022 and 2021, respectively, consisting of cash, U.S. Government money market funds, government bonds, corporate bonds and commercial paper of publicly traded companies. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because most of our investments are interest bearing. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration of most of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio.

We contract with CROs and contract manufacturers globally, which may be denominated in foreign currencies. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of December 31, 2022, an immaterial amount of our total liabilities was denominated in currencies other than the functional currency.

As of December 31, 2022, we have borrowed $25.0 million under the Loan Agreement. The Loan Agreement bears interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap. Changes in interest rates can cause interest charges to fluctuate under the Loan Agreement. A 10% increase in current interest rates would have resulted in an immaterial increase in the amount of cash interest expense for the year ended December 31, 2022 due to the overall interest rate floor and cap.

Item 8. Consolidated Financial Statements and Supplementary Data

Our consolidated financial statements, together with the report of our independent registered public accounting firm (e.g., Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)), appear on pages F-1 through F-42 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

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

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Vice President, Finance evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Vice President, Finance concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as the process designed by, or under the supervision of, our Chief Executive Officer and our Vice President of Finance and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”), and includes those policies and procedures that:

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Vice President, Finance, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm, as allowed by the SEC.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the fiscal quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

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​

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

​

​

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Information regarding our directors, including the audit committee and audit committee financial experts, and executive officers and compliance with Section 16(a) of the Exchange Act will be included in our 2023 Proxy Statement and is incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics for all of our directors, officers, and employees as required by Nasdaq governance rules and as defined by applicable SEC rules. Stockholders may locate a copy of our Code of Business Conduct and Ethics on our website at www.verastem.com or request a copy without charge from:

Verastem, Inc.

Attention: Investor Relations

117 Kendrick St., Suite 500

Needham, MA 02494

We will post to our website any amendments to the Code of Business Conduct and Ethics and any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 of Form 10-K regarding executive compensation will be included in our 2023 Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 of Form 10-K regarding security ownership of certain beneficial owners and management will be included in our 2023 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 of Form 10-K regarding certain relationships and related transactions and director independence will be included in our 2023 Proxy Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 of Form 10-K regarding principal accountant fees and services will be included in our 2023 Proxy Statement and is incorporated herein by reference.

​

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Annual Report on Form 10-K:

(1) Consolidated Financial Statements

See Part II, Item 8 for the Financial Statements required to be included in this Annual Report on Form 10-K.

(2) Consolidated Financial Statement Schedules

All financial statement schedules are omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.

(3) Exhibits

Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the exhibits hereto and such listing is incorporated herein by reference.

Item 16. Form 10-K Summary

None.

​

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​

EXHIBIT INDEX

Exhibitnumber Description of exhibit

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

4.5* ​ Description of Securities

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

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​ ​

​ ​ ​

​ ​

​ ​

​ ​

​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​

​ ​ ​

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​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

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​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

21.1* ​ Subsidiaries of the Registrant

​ ​

23.1* ​ Consent of Ernst & Young LLP

​ ​

​ ​

​ ​ ​

​ ​ ​

​ ​ ​

​ ​ ​

101.INS* ​ Inline XBRL Instance Document

​ ​ ​

101.SCH* ​ Inline XBRL Taxonomy Extension Schema Document

​ ​ ​

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

​ ​ ​

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

​ ​ ​

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

​ ​ ​

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

​ ​ ​

* Filed herewith.

# Management contract or compensatory plan, contract or agreement.

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​

​

​

​

​

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this14th day of March 2023.

​

​ VERASTEM, INC.

​ By: /s/ Brian M. Stuglik

​ ​ Brian M. Stuglik

​ ​ Chief Executive Officer

​ ​ ​

​

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature Title Date

/s/ Brian M. Stuglik R.Ph ​ ​ ​ ​

​ ​ ​ ​ ​

/s/ Daniel Calkins ​ ​ ​ ​

​ ​ ​ ​ ​

/s/ PAUL BUNN, M.D. ​ ​ ​ ​

Paul Bunn, M.D. ​ Director ​ March 14, 2023

​ ​ ​ ​ ​

/s/ Robert Gagnon ​ ​ ​ ​

Robert Gagnon ​ Director ​ March 14, 2023

​ ​ ​ ​ ​

/s/ Anil Kapur ​ ​ ​ ​

Anil Kapur ​ Director ​ March 14, 2023

​ ​ ​ ​ ​

/s/ Michael Kauffman, M.D.,Ph.D. ​ ​ ​ ​

Michael Kauffman, M.D., Ph.D. ​ Director ​ March 14, 2023

​ ​ ​ ​

/s/ JOHN JOHNSON ​ ​ ​ ​

John Johnson ​ Director ​ March 14, 2023

​ ​ ​ ​

/s/ MICHELLE ROBERTSON ​ ​ ​ ​

Michelle Robertson ​ Director ​ March 14, 2023

​ ​ ​ ​ ​

/s/ Eric Rowinsky, M.D. ​ ​ ​ ​

Eric Rowinsky, M.D. ​ Director ​ March 14, 2023

​ ​ ​ ​ ​

/s/ LESLEY SOLOMON ​ ​ ​ ​

Lesley Solomon ​ Director ​ March 14, 2023

​ ​ ​ ​

​

​

​

​

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Verastem, Inc.

CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

Report of Independent Registered Public Accounting Firm F-2

Consolidated Financial Statements ​

Consolidated Balance Sheets F-4

Consolidated Statements of Operations and Comprehensive Loss F-5

Consolidated Statements of Stockholders’ Equity F-6

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-8

​

​

​

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

​

To the Stockholders and the Board of Directors of Verastem, Inc.

Opinion on the Financial Statements

​

We have audited the accompanying consolidated balance sheets of Verastem, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2022, 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 consolidated financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

​

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 Public Company Accounting Oversight Board (United States) (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

​

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.

​

Critical Audit Matter

​

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

​ ​

​ ​ Accrued and Prepaid Clinical Trial Expense

F-2

Table of Contents

​

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2011.

Boston, Massachusetts

March 14, 2023

​

​

​

​

F-3

Table of Contents

Verastem, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​

Assets ​ ​ ​ ​ ​ ​ ​

Current assets: ​ ​ ​ ​ ​ ​ ​

Accounts receivable, net ​ ​ 31 ​ ​ 516 ​

Prepaid expenses and other current assets ​ 4,945 ​ 4,968 ​

Property and equipment, net ​ 92 ​ 210 ​

Right-of-use asset, net ​ ​ 1,789 ​ ​ 2,302 ​

Restricted cash ​ ​ 241 ​ ​ 241 ​

Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ ​

Current liabilities: ​ ​ ​ ​ ​ ​ ​

Deferred liabilities ​ ​ 710 ​ ​ — ​

Lease liability, short-term ​ 794 ​ 667 ​

Convertible senior notes ​ ​ 275 ​ ​ — ​

Non-current liabilities: ​ ​ ​ ​ ​

Convertible senior notes ​ ​ — ​ ​ 249 ​

Long-term debt ​ ​ 24,526 ​ ​ — ​

Lease liability, long-term ​ ​ 1,470 ​ ​ 2,264 ​

Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​

Accumulated other comprehensive income/(loss) ​ — ​ 34 ​

Total liabilities and stockholders’ equity ​ $ 95,050 ​ $ 108,662 ​

See accompanying notes to the consolidated financial statements.

​

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Verastem, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31, ​

Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Product revenue, net ​ ​ — ​ ​ — ​ ​ 15,232 ​

License and collaboration revenue ​ ​ — ​ ​ — ​ ​ 2,912 ​

Sale of COPIKTRA license and related assets ​ ​ 2,596 ​ ​ 1,447 ​ ​ 70,000 ​

Transition services revenue ​ ​ — ​ ​ 606 ​ ​ 372 ​

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cost of sales - product ​ ​ — ​ ​ — ​ ​ 1,765 ​

Cost of sales - intangible amortization ​ ​ — ​ ​ — ​ ​ 793 ​

Other income (expense) ​ ​ 47 ​ ​ — ​ ​ (1,313) ​

Loss on debt extinguishment ​ ​ — ​ ​ — ​ ​ (1,580) ​

Income tax expense ​ ​ — ​ ​ — ​ ​ (194) ​

Net loss per share—basic and diluted ​ ​ (0.38) ​ ​ (0.41) ​ ​ (0.44) ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Unrealized gain (loss) on available-for-sale securities ​ (34) ​ (19) ​ 39 ​

See accompanying notes to the consolidated financial statements.

​

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Verastem, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

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

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

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ other ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ comprehensive ​ ​ ​ Total

​ Shares Amount ​ Shares Amount capital income deficit equity

Net loss ​ — ​ ​ — ​ — ​ — ​ — ​ — ​ (67,726) ​ (67,726) ​

Net loss ​ — ​ ​ — ​ — ​ — ​ ​ — ​ ​ — ​ ​ (71,200) ​ (71,200) ​

Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (73,812) ​ (73,812) ​

See accompanying notes to the consolidated financial statements.

​

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Verastem, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​

Amortization of acquired intangible asset ​ ​ — ​ ​ — ​ ​ 793

Loss on debt extinguishment ​ ​ — ​ ​ — ​ ​ 1,580

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

Accounts receivable, net ​ ​ 485 ​ ​ (277) ​ ​ 2,285

Inventory ​ ​ — ​ ​ — ​ ​ 3,096

Prepaid expenses, other current assets and other assets ​ 744 ​ (1,558) ​ 634

Accrued expenses and other liabilities ​ (638) ​ 1,796 ​ (4,999)

Deferred liabilities ​ ​ 710 ​ ​ — ​ ​ —

Other long-term liabilities ​ ​ — ​ ​ — ​ ​ (870)

Intangible assets & property, plant and equipment ​ ​ — ​ ​ — ​ ​ 19,465

Investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​

Purchases of property and equipment ​ — ​ (196) ​ (33)

Net cash provided by (used in) investing activities ​ 66,185 ​ 87 ​ (47,363)

Financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​

Proceeds from long-term debt, net ​ ​ 24,148 ​ ​ — ​ ​ —

Repayment of long-term debt, net ​ ​ — ​ ​ — ​ ​ (37,366)

Interest make-whole payments on the 2019 Notes ​ ​ — ​ ​ — ​ ​ (1,763)

Settlement of restricted stock for tax withholdings ​ ​ — ​ ​ (925) ​ ​ (285)

Proceeds from the issuance of common stock, net ​ ​ 27,354 ​ ​ 6,723 ​ ​ 106,059

Supplemental disclosure ​ ​ ​ ​ ​ ​ ​ ​ ​

Conversion of 2019 Notes into common stock ​ $ — ​ $ — ​ $ 57,414

Conversion of 2020 Notes into common stock ​ $ — ​ $ 28,000 ​ $ —

See accompanying notes to the consolidated financial statements.

​

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1. Nature of business

Verastem, Inc. (the “Company”) is a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to advancing new medicines for patients battling cancer. The Company’s pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/MEK inhibition and FAK inhibition.

The Company’s most advanced product candidates, avutometinib (VS-6766) and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), colorectal cancer (“CRC”), pancreatic cancer, and melanoma. The Company believes that avutometinib may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies.

On September 24, 2018, the Company’s first commercial product, COPIKTRA® (duvelisib), was approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of adult patients with certain hematologic cancers including relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma after at least two prior therapies and relapsed or refractory follicular lymphoma after at least two prior systemic therapies. On August 10, 2020, the Company and Secura Bio, Inc. (“Secura”) entered into an asset purchase agreement (“Secura APA”). Pursuant to the Secura APA, the Company sold to Secura its exclusive worldwide license, including certain related assets for the research, development, commercialization, and manufacture in oncology indications of products containing COPIKTRA (duvelisib). The transaction closed on September 30, 2020. Refer to Note 13. License, collaboration and commercial agreements for a detailed discussion of the Secura APA.

The consolidated financial statements include the accounts of Verastem Securities Company and Verastem Europe GmbH, wholly-owned subsidiaries of the Company. All financial information presented has been consolidated and includes the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The Company is subject to the risks associated with other life science companies, including, but not limited to, possible failure of preclinical testing or clinical trials, competitors developing new technological innovations, inability to obtain marketing approval of the Company’s product candidates, avutometinib and defactinib, market acceptance and commercial success of the Company’s product candidates, avutometinib and defactinib, following receipt of regulatory approval, and, protection of proprietary technology and the continued ability to obtain adequate financing to fund the Company’s future operations. If the Company does not obtain marketing approval and successfully commercialize its product candidates, avutometinib and defactinib, following regulatory approval, it will be unable to generate product revenue or achieve profitability and may need to raise additional capital.

The Company has historical losses from operations and anticipates that it may continue to incur operating losses as it continues the research and development of its product candidates. As of December 31, 2022, the Company had cash, cash equivalents, and investments of $87.9 million, and an accumulated deficit of $737.5 million. The Company expects its existing cash resources along with $30.0 million of gross proceeds raised through the Series B Preferred Stock issuance in January 2023, and expected $15.0 million debt drawdown through its loan and security agreement with Oxford Finance LLC (“Oxford”) expected in March 2023 will be sufficient to fund its planned operations through at least 12 months from the date of issuance of these consolidated financial statements. See Note 16. Subsequent events for detailed description of the Series B Preferred Stock issuance.

The Company expects to finance the future development costs of its clinical product portfolio with its existing cash, cash equivalents and investments, through potential future milestones and royalties received pursuant to the Secura APA, through the loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company fails to obtain additional future capital, it may be unable to complete its planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.

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2. Significant accounting policies

Basis of presentation

The accompanying financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) under the assumption that the Company will continue as a going concern for the next twelve months. Accordingly, they do not include any adjustments that might result from the uncertainty related to the Company’s ability to continue as a going concern.

Use of estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including estimates related to revenue recognition, including returns, rebates, and other pricing adjustments, accrued and prepaid clinical trial expense and other general accruals and stock-based compensation expense. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable. Actual results could differ from such estimates.

Segment and geographic information

Operating segments are defined as components of an enterprise about which separate discrete information is available and regularly reviewed by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment, which is the business of developing and commercializing drugs for the treatment of cancer. All material long-lived assets of the Company reside in the United States.

Proceeds from grants

During the year ended December 31, 2022, the Company was awarded the “Therapeutic Accelerator Award” grant from Pancreatic Cancer Network (“PanCAN”) for up to $3.8 million (the “PanCAN Grant”). In August 2022, PanCAN agreed to provide the Company with an additional $0.5 million for the collection and analysis of patient samples. The grant is expected to support a Phase 1b/2 clinical trial of GEMZAR (gemcitabine) and ABRAXANE (Nab-paclitaxel) in combination with avutometinib and defactinib entitled RAMP 205. The RAMP 205 trial will evaluate whether combining avutometinib (to target mutant KRAS which is mutated in more than 90% of pancreatic tumors) and defactinib (to reduce stromal density and adaptive resistance to avutometinib) to the standard GEMZAR/ABRAXANE regimen improves outcomes for patients with pancreatic cancer. The Company received $1.0 million of cash proceeds in July 2022 which was initially recorded as deferred liabilities on the balance sheet. The Company recognizes grants as contra research and development expense in the consolidated statement of operations and comprehensive loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. The Company recorded $0.3 million of the proceeds as a reduction of research and development expense during the year ended December 31, 2022. As of December 31, 2022, the Company recorded $0.7 million as deferred liabilities in the consolidated balance sheet related to the PanCAN Grant.

Cash, cash equivalents and restricted cash

The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist of a U.S. Government money market funds and corporate bonds and commercial paper of publicly traded companies. Cash equivalents are reported at fair value.

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

​ ​ ​ ​ ​ ​ ​

Total cash, cash equivalents and restricted cash ​ $ 75,789 ​ $ 21,493

​

Amounts included in restricted cash as of December 31, 2022 represent (i) cash received pursuant to the PanCAN Grant restricted for future expenditures for specific research and development activities and (ii) cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amounts of $0.6 million and $0.2 million, respectively. Amounts included in restricted cash as of December 31, 2021 represent cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amount of $0.2 million. Cash received pursuant to the PanCAN Grant is included in prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2022. The letters of credit are included in non-current restricted cash on the consolidated balance sheets as of December 31, 2022 and December 31, 2021.

Fair value of financial instruments

The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

​ ​ ​ ​

​

Items Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Description Total Level 1 Level 2 Level 3

Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Short-term investments ​ ​ 12,961 ​ ​ — ​ ​ 12,961 ​ ​ — ​

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Description ​ Total Level 1 Level 2 Level 3

Financial assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash equivalents ​ $ 19,302 ​ $ 19,302 ​ $ — ​ $ — ​

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The investments and cash equivalents have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of December 31, 2022 and 2021.

Fair Value of Financial Instruments

The fair value of the Company’s 2018 issued 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”) was approximately $0.3 million as of December 31, 2022, which equals the carrying value of the 2018 Notes as of December 31, 2022. The fair value of the 2018 Notes was approximately $0.3 million as of December 31, 2021, which differed from the carrying value of the 2018 Notes of $0.2 million as of December 31, 2021. The fair value of the 2018 Notes is influenced by the Company’s stock price, stock price volatility, and current market yields and was determined using Level 3 inputs.

The fair value of the Company’s long-term debt is determined using a discounted cash flow analysis with current applicable rates for similar instruments as of the consolidated balance sheet date. The carrying value of the Company’s long-term debt as of December 31, 2022, was approximately $24.5 million. The Company estimates that the fair value of its long-term debt was approximately $24.9 million as of December 31, 2022. There was no long-term debt outstanding as of December 31, 2021. The fair value of the Company’s long-term debt was determined using Level 3 inputs.

Investments

Investments and cash equivalents consist of investments in a U.S. Government money market funds, overnight repurchase agreements collateralized by government agency securities or U.S. Treasury securities, corporate bonds and commercial paper of publicly traded companies that are classified as available-for-sale pursuant to Accounting Standards Codification (ASC) Topic 320, Investments—Debt and Equity Securities. The Company classifies investments available to fund current operations as current assets on its consolidated balance sheets. Debt securities are carried at fair value with unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity, until such gains and losses are realized. The fair value of these securities is based on quoted prices for identical or similar assets. If a decline in the fair value is considered other-than-temporary, based on available evidence, the unrealized loss is transferred from other comprehensive loss to the consolidated statements of operations and comprehensive loss.

The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers the intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to year end. Realized gains and losses are determined using the specific identification method and are included in interest income in the consolidated statements of operations and comprehensive loss.

There were no realized gains or losses on investments for the years ended December 31, 2022, 2021 or 2020. There were two debt securities and three debt securities in an unrealized loss position as of December 31, 2022 and December 31, 2021, respectively. None of these investments had been in an unrealized loss position for more than 12 months as of December 31, 2022, or December 31, 2021. The fair value of these securities as of December 31, 2022, and December 31, 2021, was $6.0 million and $15.8 million, respectively, and the aggregate unrealized loss was immaterial. The Company considered the decline in the market value for these securities to be primarily attributable to current economic conditions. As it was not more likely than not that the Company would be

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required to sell these securities before the recovery of their amortized cost basis, which may be at maturity, the Company did not consider these investments to be other-than-temporarily impaired as of December 31, 2022, and December 31, 2021, respectively.

Cash, cash equivalents, restricted cash and investments consist of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Gross Gross ​ ​

​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair

​ Cost Gains Losses Value

Cash, cash equivalents & restricted cash: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and money market accounts ​ $ 74,794 ​ $ — ​ $ — ​ $ 74,794 ​

Investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Gross Gross ​ ​ ​

​ Amortized Unrealized Unrealized Fair ​

​ Cost Gains Losses Value

Cash, cash equivalents & restricted cash: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and money market accounts ​ $ 21,493 ​ $ — ​ $ — ​ $ 21,493 ​

Investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​