SEC Filing | Applied Therapeutics

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2024

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

For the transition period from ______________ to ______________

Commission File Number: 001-38898

Applied Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

81-3405262

(State or other jurisdiction of

incorporation or organization)

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

545 Fifth Avenue, Suite 1400

New York, New York 10017

(212) 220-9226

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001	APLT	The Nasdaq Global Market

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

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

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

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

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

As of August 6, 2024, the registrant had 114,846,271 shares of common stock, $0.0001 par value per share, outstanding.

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		Page
	Special Note Regarding Forward-Looking Statements	2
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Condensed Balance Sheets	4
	Condensed Statements of Operations	5
	Condensed Statements of Comprehensive Loss	6
	Condensed Statements of Stockholders’ Equity/(Deficit)	7
	Condensed Statements of Cash Flows	9
	Notes to Condensed Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities, and Use of Proceeds	84
Item 3.	Defaults Upon Senior Securities	84
Item 4.	Mine Safety Disclosures	84
Item 5.	Other Information	84
Item 6.	Exhibits	85
	Signatures	86

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “opportunity,” “plan,” “predict,” “project”, “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q:

●

our plans to develop, market and commercialize our product candidates;

●

the initiation, timing, progress and results of our current and future preclinical studies and clinical trials and our research and development programs;

●

our ability to take advantage of expedited regulatory pathways for any of our product candidates;

●

our estimates regarding expenses, future revenue, capital requirements, team, growth and needs for additional financing;

●

our ability to successfully acquire or license additional product candidates on reasonable terms and advance product candidates into, and successfully complete, clinical studies;

●

our ability to maintain and establish collaborations or obtain additional funding;

●

our ability to obtain and timing of regulatory approval of our current and future product candidates;

●

the anticipated indications for our product candidates, if approved;

●

our expectations regarding the potential market size and the rate and degree of market acceptance of such product candidates;

●

our ability to fund our working capital requirements and expectations regarding the sufficiency of our capital resources;

●

the implementation of our business model and strategic plans for our business and product candidates;

●

our intellectual property position and the duration of our patent rights;

●

developments or disputes concerning our intellectual property or other proprietary rights;

●

our expectations regarding government and third-party payor coverage and reimbursement;

●

our ability to compete in the markets we serve;

●

the impact of government laws and regulations and liabilities thereunder;

●

developments relating to our competitors and our industry; and

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●

other factors that may impact our financial results.

The foregoing list of risks is not exhaustive. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur at all. You should refer to the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Unless the context otherwise requires, the terms “Applied,” “Applied Therapeutics,” “the Company,” “we,” “us,” “our”, “the registrant” and similar references in this Quarterly Report on Form 10-Q refer to Applied Therapeutics, Inc.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Applied Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share and per share data)

(Unaudited)


	As of		As of
	June 30,		December 31,
	2024		2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	122,197	$	49,898
Security deposits and leasehold improvements		253		254
Prepaid expenses and other current assets		5,122		4,234
Total current assets		127,572		54,386
Operating lease right-of-use asset		206		447
TOTAL ASSETS	$	127,778	$	54,833
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Current portion of operating lease liabilities	$	185	$	429
Accounts payable		2,683		1,742
Accrued expenses and other current liabilities		10,296		15,286
Warrant liabilities		42,192		53,725
Total current liabilities		55,356		71,182
NONCURRENT LIABILITIES:
Noncurrent portion of operating lease liabilities		30		38
Clinical holdback - long-term portion		—		759
Total noncurrent liabilities		30		797
Total liabilities		55,386		71,979
STOCKHOLDERS’ EQUITY/(DEFICIT):
Common stock, $0.0001 par value; 250,000,000 shares authorized as of June 30, 2024 and 200,000,000 shares authorized as of December 31, 2023; 114,846,271 shares issued and outstanding as of June 30, 2024 and 84,869,832 shares issued and outstanding as of December 31, 2023		11		8
Preferred stock, par value $0.0001; 10,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023		—		—
Additional paid-in capital		622,007		451,432
Accumulated deficit		(549,626)		(468,586)
Total stockholders' equity/(deficit)		72,392		(17,146)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)	$	127,778	$	54,833

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics, Inc.

Condensed Statements of Operations

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
REVENUE:
License revenue	$	—	$	—	$	—	$	10,660
Research and development services revenue		144		—		334		—
Total revenue		144		—		334		10,660
COSTS AND EXPENSES:
Research and development		10,004		11,883		22,221		27,818
General and administrative		10,580		5,293		19,646		10,876
Total costs and expenses		20,584		17,176		41,867		38,694
LOSS FROM OPERATIONS		(20,440)		(17,176)		(41,533)		(28,034)
OTHER (EXPENSE) INCOME, NET:
Interest income		628		408		1,215		628
Change in fair value of warrant liabilities		22,744		(12,804)		(40,660)		(12,335)
Other (expense) income, net		(34)		(5)		(62)		27
Total other income (expense), net		23,338		(12,401)		(39,507)		(11,680)
Net income (loss)	$	2,898	$	(29,577)	$	(81,040)	$	(39,714)
Net income (loss) per share attributable to common stockholders—basic	$	0.02	$	(0.37)	$	(0.60)	$	(0.59)
Net income (loss) per share attributable to common stockholders—diluted	$	(0.13)	$	(0.37)	$	(0.60)	$	(0.59)
Weighted-average common stock outstanding—basic		143,934,239		79,041,695		134,627,942		67,762,501
Weighted-average common stock outstanding—diluted		152,392,748		79,041,695		134,627,942		67,762,501

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics Inc.

Condensed Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net income (loss)	$	2,898	$	(29,577)	$	(81,040)	$	(39,714)
Other comprehensive loss, net of tax
Unrealized loss on marketable securities		—		—		—		(51)
Other comprehensive loss, net of tax		—		—		—		(51)
Comprehensive income (loss), net of tax	$	2,898	$	(29,577)	$	(81,040)	$	(39,765)

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics Inc.

Condensed Statements of Stockholders’ Equity/(Deficit)

(in thousands, except share and per share data)

(Unaudited)



	Common Stock
	$0.0001				Additional				Accumulated Other		Total
	Par Value				Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares		Amount		Capital		Deficit		Income (Loss)		Equity
BALANCE, January 1, 2023		48,063,358	$	5	$	352,828	$	(348,823)	$	51	$	4,061
Restricted Stock Units released for common stock issued under Equity Incentive Plan		50,203		—		—		—		—		—
Stock-based compensation expense		—		—		2,055		—		—		2,055
Net loss		—		—		—		(10,137)		—		(10,137)
Other comprehensive income (loss)		—		—		—		—		(51)		(51)
BALANCE, March 31, 2023		48,113,561		5		354,883		(358,960)		—		(4,072)
Issuance of common stock and prefunded warrants, net of issuance costs of $2.5 million		9,735,731		1		27,449		—		—		27,450
Exercise of pre-funded warrants for common stock		4,250,000		—		—		—		—		—
Exercise of stock options		20,174		—		22		—		—		22
Stock-based compensation expense		—		—		1,843		—		—		1,843
Net loss		—		—		—		(29,577)		—		(29,577)
BALANCE, June 30, 2023		62,119,466		6		384,197		(388,537)		—		(4,334)

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Applied Therapeutics Inc.

Condensed Statements of Stockholders’ (Deficit)/Equity

(in thousands, except share and per share data)

(Unaudited)



	Common Stock
	$0.0001				Additional				Total
	Par Value				Paid-in		Accumulated		Stockholders’
	Shares		Amount		Capital		Deficit		(Deficit)/Equity
BALANCE, January 1, 2024		84,869,832	$	8	$	451,432	$	(468,586)	$	(17,146)
Issuance of common stock and prefunded warrants, net of issuance costs of $8.2 million		15,285,714		2		104,746		—		104,748
Exercise of common warrants		9,025,000		1		61,217		—		61,218
Exercise of prefunded warrants		4,206,285		—		—		—		—
Exercise of stock options		32,290		—		33		—		33
Restricted Stock Units released for common stock issued under Equity Incentive Plan		822,682		—		—		—		—
Stock-based compensation expense		—		—		2,379		—		2,379
Net loss		—		—		—		(83,938)		(83,938)
BALANCE, March 31, 2024		114,241,803	$	11	$	619,807	$	(552,524)	$	67,294
Exercise of stock option		295,202		—		310		—		310
Restricted Stock Units released for common stock issued under Equity Incentive Plan		309,266		—		—		—		—
Stock-based compensation expense		—		—		1,890		—		1,890
Net income		—		—		—		2,898		2,898
BALANCE, June 30, 2024		114,846,271	$	11	$	622,007	$	(549,626)	$	72,392

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Applied Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended
	June 30,
	2024		2023
OPERATING ACTIVITIES:
Net loss	$	(81,040)	$	(39,714)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		4,269		3,898
Amortization of insurance premium		566		1,334
Amortization of operating lease right-of-use assets		241		229
Amortization of leasehold improvements		1		1
Change in operating lease liability		(252)		(235)
Change in fair value of warrant liabilities		40,660		12,335
Changes in operating assets and liabilities:
Financed insurance premium		—		(1,546)
Prepaid expenses		(1,454)		(265)
Accounts payable		941		153
Accrued expenses and other current liabilities		(4,679)		210
Other liabilities		(759)		158
Net cash used in operating activities		(41,506)		(23,442)
INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale securities		—		4,944
Proceeds from maturities of available-for-sale securities		—		8,928
Net cash provided by investing activities		—		13,872
FINANCING ACTIVITIES:
Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs		104,748		27,890
Proceeds from financed insurance premium		—		1,546
Repayments of short-term borrowings		(311)		(928)
Exercise of common warrants		9,025		—
Exercise of stock options		343		21
Net cash provided by financing activities		113,805		28,529
NET INCREASE IN CASH AND CASH EQUIVALENTS		72,299		18,959
Cash and cash equivalents at beginning of period		49,898		16,657
Cash and cash equivalents at end of period	$	122,197	$	35,616
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Conversion of warrant liabilities to equity for warrant exercises	$	52,193	$	—
Unrealized loss on marketable securities	$	—	$	(51)
Offering costs still in accrued expense	$	—	$	440

The Notes to Condensed Financial Statements are an integral part of these statements.

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Applied Therapeutics, Inc.

Notes to Condensed Financial Statements (Unaudited)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations and Business

Applied Therapeutics, Inc. (the “Company”) is a clinical-stage biopharmaceutical company developing a pipeline of novel product candidates against validated molecular targets in indications of high unmet medical need. In particular, the Company is currently targeting treatments for rare diseases such as Galactosemia and Sorbitol Dehydrogenase (“SORD”) deficiency. The Company was incorporated in Delaware on January 20, 2016 and is headquartered in New York, New York.

The accompanying unaudited condensed financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2023, included in the Annual Report, filed with the SEC on March 6, 2024 (the “Annual Report”).

The unaudited condensed financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments which are necessary for a fair presentation of the Company’s financial position as of June 30, 2024, results of operations for the three and six months ended June 30, 2024, and 2023 and cash flows for the six months ended June 30, 2024 and 2023. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024. Certain reclassifications have been made to prior period financial statements to conform to the current period presentation.

Liquidity and Going Concern

Under ASC Topic 205-40, Presentation of Financial Statements - Going Concern, management is required at each reporting period to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. As of June 30, 2024, financing through the Company’s March 2024 Private Placement, Leerink ATM Agreement and warrant exercises has resulted in net proceeds of $113.8 million, after deducting placement agent commissions and other offering expenses (see Note 7 and Note 8). The Company continues to evaluate several potential long-term financing options, including equity capital, debt, convertible debt, and synthetic royalty financing. Additionally, the Company is in active dialogue with several potential partners regarding business development opportunities related to one or more of its programs. There can be no assurances that the Company’s discussions with any of the current counterparties will be successful, and the Company expects to continue to pursue additional opportunities.

As reflected in the accompanying financial statements, the Company incurred a net loss of $81.0 million for the six months ended June 30, 2024, and has an accumulated deficit of $549.6 million as of June 30, 2024. The exclusive licensing agreement with Advanz Pharma for commercialization rights to AT-007 in Europe provides a source of capital to the Company based on clinical and regulatory milestones. The Company received a $10.7 million upfront payment from Advanz Pharma in January 2023 in conjunction with signing the agreement. If actualization of these milestones aligns with the projected timelines, and product approvals are received in the timeframes expected, this source of capital may be sufficient to cover operating expenses through expected product approvals and potential revenues. However, there are no guarantees that this will materialize timely or at all, and delays or unexpected data could disrupt this potential liquidity. Broadly, the Company has not yet established an ongoing source of revenues sufficient to cover its

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operating costs and is dependent on debt and equity financing to fund its operations. The Company currently expects that its existing cash and cash equivalents of $122.2 million as of June 30, 2024, will fund its operating expenses and capital requirements for at least twelve months from the date this Quarterly Report on Form 10-Q is issued.

Risks and Uncertainties

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and reliance on third-party manufacturers.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the Company's ability to continue as a going concern as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. In preparing the financial statements, management used estimates in the following areas, among others: prepaid and accrued expenses; warrant liabilities valuation; license revenue; research and development services revenue; stock-based compensation expense; the likelihood of realization of deferred tax assets; and the evaluation of the existence of conditions and events that raise substantial doubt regarding the Company’s ability to continue as a going concern. Actual results could differ from those estimates.

Significant Accounting Policies

The significant accounting policies and estimates used in preparation of the condensed financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Annual Report. There have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2024.

Recent Accounting Pronouncements

Any recent pronouncements issued by the FASB or other authoritative standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company.

2. LICENSE AGREEMENT

Columbia University

In October 2016, the Company entered into a license agreement (the “2016 Columbia Agreement”) with the Trustees of Columbia University (“Columbia University”) to obtain an exclusive royalty-bearing sublicensable license in respect to certain patents. As part of the consideration for entering into the 2016 Columbia Agreement, the Company issued to Columbia University shares equal to 5% of its outstanding common stock on a fully diluted basis at the time of issue. The common stock had a fair value of $0.5 million at the time of issuance. The Company will be required to make further payments to Columbia University of up to an aggregate of $1.3 million for the achievement of specified development and regulatory milestones, and up to an aggregate of $1.0 million for the achievement of a specified level of aggregate annual net sales, in each case in connection with products covered by the 2016 Columbia Agreement. The Company will also be required to pay tiered royalties to Columbia University in the low- to mid-single digit percentages on the Company’s, its affiliates’ and its sublicensees’ net sales of licensed products, subject to specified offsets and reductions. In addition, the Company is required to make specified annual minimum royalty payments to Columbia University, which is contingent upon the approval of the licensed products, in the mid-six figures beginning on the 10th anniversary of the effective date of the 2016 Columbia Agreement. When we grant sublicenses under the 2016

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Columbia Agreement we are required to pay Columbia University a portion of the net sublicensing revenue received from such third parties, at percentages between 10% and 20%, depending on the stage of development at the time such revenue is received from such third parties. The Advanz Agreement includes a sublicense under the 2016 Columbia Agreement.

The 2016 Columbia Agreement will terminate upon the expiration of all the Company’s royalty payment obligations in all countries. The Company may terminate the 2016 Columbia Agreement for convenience upon 90 days’ written notice to Columbia University. At its election, Columbia University may terminate the 2016 Columbia Agreement, or convert the licenses granted to the Company into non-exclusive, non-sublicensable licenses, in the case of (a) the Company’s uncured material breach upon 30 days’ written notice (which shall be extended to 90 days if the Company is diligently attempting to cure such material breach), (b) the Company’s failure to achieve the specified development and funding milestone events, or (c) the Company’s insolvency.

In January 2019, the Company entered into a second license agreement with Columbia University (the “2019 Columbia Agreement”). Pursuant to the 2019 Columbia Agreement, Columbia University granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patents, and non-exclusive with respect to certain know-how, in each case to develop, manufacture and commercialize PI3k inhibitor products. The license grant is worldwide. Under the 2019 Columbia Agreement, the Company is obligated to use commercially reasonable efforts to research, discover, develop and market licensed products for commercial sale in the licensed territory, and to comply with certain obligations to meet specified development and funding milestones within defined time periods. Columbia University retains the right to conduct, and grant third parties the right to conduct, non-clinical academic research using the licensed technology; provided that such research is not funded by a commercial entity or for-profit entity or results in rights granted to a commercial or for-profit entity. As consideration for entering into the 2019 Columbia Agreement, the Company made a nominal upfront payment to Columbia University. The Company will be required to make further payments to Columbia University of up to an aggregate of $1.3 million for the achievement of specified development and regulatory milestones, and up to an aggregate of $1.0 million for the achievement of a specified level of aggregate annual net sales, in each case in connection with products covered by the 2019 Columbia Agreement. The Company will also be required to pay tiered royalties to Columbia University in the low- to mid-single digit percentages on the Company’s, its affiliates’ and its sublicensees’ net sales of licensed products, subject to specified offsets and reductions. In addition, the Company is required to make specified annual minimum royalty payments to Columbia University, which is contingent upon the approval of the licensed products, in the mid-six figures beginning on the tenth anniversary of the effective date of the 2019 Columbia Agreement.

In July 2022, following regulatory changes impacting development of the class of PI3k inhibitors and the Company’s decision to discontinue its early stage preclinical PI3k program, the Company and Columbia entered into an agreement terminating the 2019 Columbia Agreement (the “2022 Columbia Termination Agreement”) as of July 25, 2022. Under the terms of the 2022 Columbia Termination Agreement, the Company assigned certain regulatory documents regarding the preclinical PI3k inhibitor AT-104 to Columbia and granted Columbia a non-exclusive royalty free license (with rights to sublicense any future Columbia licensee) under certain know-how, technical information and data relating to AT-104 that was developed by the Company during the term of the 2019 Columbia Agreement.

In March 2019, and in connection with the 2016 Columbia Agreement, the Company entered into a research services agreement (the “2019 Columbia Research Agreement”) with Columbia University with the purpose of analyzing structural and functional changes in brain tissue in an animal model of Galactosemia, and the effects of certain compounds whose intellectual property rights were licensed to the Company as part of the 2016 Columbia Agreement on any such structural and functional changes. The 2019 Columbia Research Agreement had a term of 12 months from its effective date and expired in accordance with its terms.

On October 3, 2019, and in connection with the 2019 Columbia Agreement, the Company entered into a research services agreement (the “PI3k Columbia Research Agreement” and collectively with the 2016 Columbia Agreement, 2019 Columbia Agreement and 2019 Columbia Research Agreement, the “Columbia Agreements”) with Columbia University with the purpose of analyzing PI3k inhibitors for the treatment of lymphoid malignancies. The PI3k Columbia Research Agreement had a term of 18 months from its effective date and expired in accordance with its terms.

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During the three and six months ended June 30, 2024, the Company recorded $0.1 and $0.2 million, respectively, in expense related to the Columbia Agreements. During the three and six months ended June 30, 2023, the Company recorded $36,000 and $0.1 million in expense, respectively, related to the Columbia Agreements. In aggregate, the Company has incurred $3.1 million in expense from the execution of the Columbia Agreements through June 30, 2024.

As of June 30, 2024, the Company had $33,000 due to Columbia University included in accrued expenses and no amounts in accounts payable. As of December 31, 2023, the Company had $29,000 due to Columbia University included in accrued expenses and no amounts in accounts payable.

University of Miami

2020 Miami License Agreement

On October 28, 2020, the Company entered into a license agreement with the University of Miami (the “2020 Miami License Agreement”) relating to certain technology that is co-owned by the University of Miami (UM), the University of Rochester (UR) and University College London (UCL). UM was granted an exclusive agency from UR and UCL to license each of their rights in the technology. Pursuant to the 2020 Miami License Agreement, UM, on behalf of itself and UR and UCL, granted the Company a royalty-bearing, sublicensable license that is exclusive with respect to certain patent applications and patents that may grant from the applications, and non-exclusive with respect to certain know-how, in each case to research, develop, make, have made, use, sell and import products for use in treating and/or detecting certain inherited neuropathies, in particular those caused by mutation in the sorbitol dehydrogenase (SORD) gene. The license grant is worldwide. Under the 2020 Miami License Agreement, the Company is obligated to use commercially reasonable efforts to develop, manufacture, market and sell licensed products in the licensed territory, and to comply with certain obligations to meet specified development milestones within defined time periods. UM retains for itself, UR, and UCL the right to use the licensed patent rights and licensed technology for their internal non-commercial educational, research and clinical patient care purposes, including in sponsored research and collaboration with commercial entities.

Under the terms of the 2020 Miami License Agreement, the Company was obligated to pay UM an up-front non-refundable license fee of $1.1 million, and a second non-refundable license fee of $0.5 million due on the first anniversary of the date of the license. The Company will be required to make further payments to UM of up to an aggregate $2.2 million for the achievement of specified patenting and development milestones, and up to an aggregate of $4.1 million for achievement of late stage regulatory milestones. The Company will also be required to pay royalties ranging from 0.88% - 5% on the Company’s, the Company’s affiliates’ and the Company’s sublicensees’ net sales of licensed products. When the Company sublicenses the rights granted under the 2020 Miami License Agreement to one or more third parties, the Company will be required to pay to UM a portion of the non-royalty sublicensing revenue received from such third parties ranging from 15% – 25%. The Advanz Agreement includes a sublicense under the 2020 Miami License Agreement.

The 2020 Miami License Agreement terminates upon the expiration of all issued patents and filed patent applications or 10 years after the first commercial sale of the last product or process for which a royalty is due, unless earlier terminated. In addition, the 2020 Miami License Agreement may be terminated by the Company at any time upon 60 days prior written notice to UM, and may be terminated by either the Company or UM upon material breach of an obligation if action to cure the breach is not initiated within 60 days of receipt of written notice.

The Company recorded $0.2 million in research and development expense related to the Miami License Agreement during each of the three and six months ended June 30, 2024. The Company recorded $25,000 and $0.1 million, respectively, in research and development expense related to the Miami License Agreement during the three and six months ended June 2023.

As of June 30, 2024, the Company had $0.3 million due to UM included in accrued expenses relating to the 2020 Miami License Agreement. As of December 31, 2023, the Company had $0.4 million due to UM included in accrued expenses relating to the 2020 Miami License Agreement.

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2020 Miami Option Agreement

On October 28, 2020, the Company entered into an option agreement with the University of Miami (the “2020 Miami Option Agreement”) concerning certain research activities and technology relating to SORD neuropathy that may be pursued and developed by UM. Under the 2020 Miami Option Agreement, if UM conducts such research activities, then UM is obligated to grant us certain option rights to access and use the research results and to obtain licenses to any associated patent rights upon us making specified payments to UM within specified time limits. If the Company elects to obtain option rights the Company will be required to make payments to UM in the low-six figures to the low-seven figures, depending upon the rights the Company elects to obtain, and the Company will be obligated to make certain milestone payments in the high-six figures to mid-seven figures if UM conducts and completes certain research activities within specified time periods and the Company elects to receive rights to use the results of that research.

2020 Miami Sponsored Research Agreement

On December 14, 2020, the Company entered into a research agreement with the University of Miami (the “2020 Miami Research Agreement”), under which the University of Miami will conduct a research study relating to SORD neuropathy and deliver a final report on the study to the Company. The term of the research agreement was from December 14, 2020 through December 30, 2021, and was extended through August 31, 2022, whereby the research study was completed. The total consideration for the 2020 Miami Research Agreement was $0.3 million.

During the three and six months ended June 30, 2024, and 2023, the Company recorded no research and development expense in relation to the 2020 Miami Research Agreement.

As of June 30, 2024, there are no amounts recorded as accrued expenses related to the 2020 Miami Research Agreement. As of December 31, 2023, the Company had $0.1 million in accrued expenses relating to the 2020 Miami Research Agreement.

Bayh-Dole Act

Some of the intellectual property rights the Company has licensed, including certain rights licensed in the agreements described above, may have been generated through the use of U.S. government funding. As a result, the U.S. government may have certain rights to intellectual property embodied in the Company’s current or future product candidates under the Bayh-Dole Act of 1980, or Bayh-Dole Act, including the grant to the government of a non-exclusive, worldwide, freedom to operate license under any patents, and the requirement, absent a waiver, to manufacture products substantially in the United States. To the extent any of the Company’s current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.

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3. FAIR VALUE MEASUREMENTS

The following tables summarize, as of June 30, 2024, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis, according to the fair value hierarchy described in the significant accounting policies in the Company’s audited financial statements as of and for the year ended December 31, 2023, and the notes thereto, which are included in the Annual Report.


	As of June 30, 2024
(in thousands)	Level 1		Level 2		Level 3		Total
Cash	$	13,445	$	—	$	—	$	13,445
Money market funds		108,752		—		—		108,752
Total cash and cash equivalents	$	122,197	$	—	$	—	$	122,197
Total financial assets measured at fair value on a recurring basis	$	122,197	$	—	$	—	$	122,197
Warrant liabilities - Common Warrants		—		—		42,192		42,192
Total financial liabilities measured at fair value on a recurring basis	$	—	$	—	$	42,192	$	42,192

The following tables summarize, as of December 31, 2023, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis.


	As of December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
Cash	$	24,887	$	—	$	—	$	24,887
Money market funds		25,011		—		—		25,011
Total cash and cash equivalents	$	49,898	$	—	$	—	$	49,898
Total financial assets measured at fair value on a recurring basis	$	49,898	$	—	$	—	$	49,898
Warrant liabilities - Common Warrants		—		—		53,725		53,725
Total financial liabilities measured at fair value on a recurring basis	$	—	$	—	$	53,725	$	53,725

On June 27, 2022, the Company issued 30,000,000 warrants to purchase shares of common stock (the “Common Warrants”) and 10,000,000 pre-funded warrants to purchase common stock (the “Pre-Funded Warrants”) in connection with the June 2022 Offering (see Note 7 for more information on the June 2022 Offering). The Common Warrants were accounted for as liabilities under ASC 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”), as these warrants provide for a settlement provision that does not meet the requirements of the indexation guidance under ASC 815-40. The Pre-Funded Warrants were initially recorded at fair value as a liability as the Company could be required to settle the Pre-Funded Warrants in cash under certain circumstances. In December 2022, the Company amended the Pre-Funded Warrants to remove the potential requirement that they could be settled in cash under certain circumstances. Upon the amendment to the Pre-Funded Warrants, the Pre-funded Warrants liability was reclassified to equity, using their fair value as of the amendment date.

The Common Warrant liabilities were measured at fair value at inception and are then subsequently measured at on a recurring basis, with changes in fair value recognized in other income (expense) within the Company’s statement of operations.

The Company uses a Black-Scholes option pricing model to estimate the fair value of the Common and Pre-Funded Warrants, which utilizes certain unobservable inputs and is therefore considered a Level 3 fair value measurement. Certain inputs used in this Black-Scholes pricing model may fluctuate in future periods based upon factors that are outside of the Company’s control, including a potential change in control outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liabilities, which could also result in material non-cash gains or losses being reported in the Company’s condensed statement of operations.

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The Common Warrants were remeasured using a Black-Scholes option pricing model with a range of assumptions included below as of June 30, 2024 and December 31, 2023.


	June 30,		December 31,
	2024		2023
Expected term (in years)	2.4		2.4
Volatility	96.11	%	109.46	%
Risk-free interest rate	4.67	%	4.32	%
Dividend yield	0.00	%	0.00	%

As of June 30, 2024, the Company utilized a probability-weighted approach that considered the probability of a change in control at the Company in the Black-Scholes option pricing model, whereby a 20% probability of change in control was used for years three and four and a 10% probability was used for year five in the term of the agreements.

As of December 31, 2023, the Company utilized a probability-weighted approach that considered the probability of a change in control at the Company in the Black-Scholes option pricing model, whereby a 20% probability of change in control was used for years two and three and a 5% probability was used for years four and five in the term of the agreements.

The following table provides a roll forward of the aggregate fair values of the Company’s warrant liability, for which fair value is determined using Level 3 inputs (in thousands):



	Warrant Liabilities
Balance as of January 1, 2024	$	53,725
Warrants exercised		(52,193)
Change in fair value		40,660
Balance as of June 30, 2024	$	42,192

The inputs utilized by management to value the warrant liabilities are highly subjective. The assumptions used in calculating the fair value of the warrant liabilities represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the fair value of the warrant liability for Common Warrants may be materially different in the future.

4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:


	June 30,		December 31,
(in thousands)	2024		2023
Prepaid research and development expenses	$	2,828	$	2,880
Insurance premium asset		—		566
Prepaid insurance		1,095		—
Prepaid commercial and patient advocacy		339		284
Research and development tax credit receivable		262		262
Other prepaid expenses and current assets		598		242
Total prepaid expenses & other current assets	$	5,122	$	4,234

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5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:


	June 30,		December 31,
(in thousands)	2024		2023
Accrued pre-clinical and clinical expenses	$	4,922	$	10,142
Short-term insurance financing note		—		310
Deferred revenue		333		667
Accrued professional fees		1,112		1,307
Accrued compensation and benefits		1,421		2,066
Accrued commercial expenses		1,322		19
Accrued patent expenses		284		396
Other		902		379
Total accrued expenses & other current liabilities	$	10,296	$	15,286

6. STOCK-BASED COMPENSATION

Equity Incentive Plans

In May 2019, the Company’s board of directors (the “Board”) adopted its 2019 Equity Incentive Plan (“2019 Plan”), which was subsequently approved by its stockholders and became effective on May 13, 2019. As a result, no additional awards under the Company’s 2016 Equity Incentive Plan, as amended (the “2016 Plan”) will be granted and all outstanding stock awards granted under the 2016 Plan that are repurchased, forfeited, expired, or are cancelled will become available for grant under the 2019 Plan in accordance with its terms. The 2016 Plan will continue to govern outstanding equity awards granted thereunder.

The 2019 Plan provides for the issuance of incentive stock options (“ISOs”) to employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other forms of stock awards to the Company’s employees, officers, and directors, as well as non- employees, consultants, and affiliates to the Company. Under the terms of the 2019 Plan, stock options may not be granted at an exercise price less than fair market value of the Company’s common stock on the date of the grant. The 2019 Plan is administered by the Compensation Committee of the Company’s Board.

Initially, subject to adjustments as provided in the 2019 Plan, the maximum number of the Company’s common stock that may be issued under the 2019 Plan was 4,530,000 shares, which is the sum of (i) 1,618,841 new shares, plus (ii) the number of shares (not to exceed 2,911,159 shares) that remained available for the issuance of awards under the 2016 Plan, at the time the 2019 Plan became effective, and (iii) any shares subject to outstanding stock options or other stock awards granted under the 2016 Plan that are forfeited, expired, or reacquired. The 2019 Plan provides that the number of shares reserved and available for issuance under the 2019 Plan will automatically increase each January 1, beginning on January 1, 2020, by 5% of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board. Subject to certain changes in capitalization of the Company, the aggregate maximum number of shares of common stock that may be issued pursuant to the exercise of ISOs is equal to 13,000,000 shares of common stock. Stock options awarded under the 2019 Plan expire 10 years after grant and typically vest over four years.

As of June 30, 2024, there were 611,473 shares of common stock available for issuance under the 2019 Plan.

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Stock-Based Compensation Expense

Total stock-based compensation expense recorded for employees, directors and non-employees:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2024		2023		2024		2023
Research and development	$	964	$	752	$	1,956	$	1,614
General and administrative		926		1,091		2,313		2,284
Total stock-based compensation expense	$	1,890	$	1,843	$	4,269	$	3,898

Stock Option Activity

During the six months ended June 30, 2024, the Company did not grant any stock options. For the three months ended June 30, 2024 and 2023, amortization of stock compensation of options amounted to $0.5 million and $1.3 million, respectively, and for the six months ended June 30, 2024 and 2023, amortization of stock compensation of options amounted to $1.2 million and $2.9 million, respectively. As of June 30, 2024 and 2023, the total unrecognized stock-based compensation expense for unvested options was $1.1 million and $4.9 million, respectively, which is expected to be recognized over 1.3 years and 2.0 years, respectively.

The following table summarizes the information about stock options outstanding at June 30, 2024:


				Weighted-Average
		Weighted-		Remaining	Aggregate
	Options	Average		Contractual	Intrinsic
(in thousands, except for share data)	Outstanding	Exercise Price		Term (in years)	Value
Outstanding at December 31, 2023	4,695,619	$	2.01	5.9	$	7,875
Options granted	—		—
Options exercised	(327,492)		1.05
Forfeited	(58,123)		1.05
Expired	—		—
Outstanding at June 30, 2024	4,310,004	$	2.09	5.3	$	11,141

Exercisable at June 30, 2024	4,124,702	$	2.14	5.2	$	10,470
Nonvested at June 30, 2024	185,302	$	1.05	7.3	$	671

The aggregate intrinsic value is calculated as the difference between the exercise price of all outstanding and exercisable stock options and the fair value of the Company’s common stock at June 30, 2024. The intrinsic value of stock options exercised during the three and six months ended June 30, 2024, was $0.9 million and $1.1 million, respectively. The intrinsic value of stock options exercised during the three and six months ended June 30, 2023, was $13,000. The total grant-date fair value of stock options vested during the three and six months ended June 30, 2024 was $44,000 and $0.1 million, respectively. The total grant-date fair value of stock options vested during the three and six months ended June 30, 2023 was $0.1 million and $0.3 million, respectively.

Restricted Stock Unit Activity

During the six months ended June 30, 2024, the Company granted 1,287,500, restricted stock units (“RSUs”). For the three months ended June 30, 2024 and 2023, amortization of stock compensation of RSUs amounted to $1.4 million and $0.5 million, respectively. For the six months ended June 30, 2024 and 2023, amortization of stock compensation of RSUs amounted to $3.1 million and $1.0 million, respectively. As of June 30, 2024 and 2023, the unamortized compensation costs associated with non-vested restricted stock awards were $18.7 million and $5.3 million, respectively, with a weighted-average remaining amortization period of 2.8 years.

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The following table summarizes the information about restricted stock units outstanding at June 30, 2024:


		Weighted-Average
		Grant Date
(in thousands, except for share data)	Shares	Fair Value
Outstanding at December 31, 2023	6,917,422	$	2.35
Awarded	1,287,500		5.72
Released	(1,131,948)		1.88
Forfeited	(633,984)		2.92
Outstanding at June 30, 2024	6,438,990	$	3.27
Nonvested at June 30, 2024	6,339,779	$	3.28

Weighted Average Remaining Recognition Period (in years)	2.8

2019 Employee Stock Purchase Plan

In May 2019, the Company’s Board and its stockholders approved the 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective as of May 13, 2019. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the U.S. Internal Revenue Code of 1986, as amended. The number of shares of common stock initially reserved for issuance under the ESPP was 180,000 shares. The ESPP provides for an annual increase on the first day of each year beginning in 2020 and ending in 2029, in each case subject to the approval of the Board, equal to the lesser of (i) 1% of the shares of common stock outstanding on the last day of the calendar month before the date of the automatic increase and (ii) 360,000 shares; provided that prior to the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (i) and (ii). As of June 30, 2024, no shares of common stock had been issued under the ESPP. The first offering period has not yet been decided by the Board.

7. STOCKHOLDERS’ EQUITY

As of June 30, 2024, and December 31, 2023, the authorized capital stock of the Company consisted of 250,000,000 and 200,000,000 shares of common stock, respectively, par value $0.0001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share, respectively.

Common Stock

June 2022 Offering

On June 27, 2022, the Company completed the June 2022 Offering, an underwritten public offering of 20,000,000 shares of common stock, 10,000,000 Pre-Funded Warrants, and accompanying Common Warrants to purchase up to 30,000,000 shares of common stock. The shares and accompanying Common Warrants were offered at a price to the public of $1.00 per share and warrant, and the Pre-Funded Warrants and accompanying Common Warrants were offered at a price to the public of $0.9999, resulting in aggregate net proceeds of approximately $27.8 million, after deducting underwriting discounts and commissions and offering expenses. The Pre-Funded Warrants and the Common Warrants are immediately exercisable and will expire five years from the date of issuance. Holders may not exercise any Pre-Funded Warrants or Common Warrants that would cause the aggregate number of shares of common stock beneficially owned by the holder to exceed 9.99% of the Company’s