SEC Filing | Replimune

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repl-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2021


☐			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 001-38596

REPLIMUNE GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware			82-2082553
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

500 Unicorn Park

Woburn MA 01801

(Address of principal executive offices)

(Zip Code)

(781) 222-9600

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

REPL

The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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


Large accelerated filer ☐			Accelerated filer ☐
Non-accelerated filer ☒			Smaller reporting company ☒
			Emerging growth company ☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐

No ☒

The number of shares of the registrant’s Common Stock, par value $0.001 per share, outstanding as of August 2, 2021 was 46,772,263.

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REPLIMUNE GROUP, INC.

FORM 10-Q

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			Page No.
PART I FINANCIAL INFORMATION			4

	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4

		Condensed Consolidated Balance Sheets	4

		Condensed Consolidated Statements of Operations	4

		Condensed Consolidated Statements of Comprehensive Loss	6

		Condensed Consolidated Statements of Stockholders’ Equity	7

		Condensed Consolidated Statements of Cash Flows	8

		Notes to Unaudited Condensed Consolidated Financial Statements	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

	Item 4.	Controls and Procedures	39

PART II OTHER INFORMATION			40

	Item 1.	Legal Proceedings	40

	Item 1A.	Risk Factors	40

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73

	Item 3.	Defaults Upon Senior Securities	73

	Item 4.	Mine Safety Disclosure	73

	Item 5.	Other Information	73

	Item 6.	Exhibits	74

SIGNATURES			75

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


	June 30, 2021		March 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	192,528	$	182,518
Short-term investments	265,803		293,784
Research and development incentives receivable	2,968		2,953
Prepaid expenses and other current assets	3,264		4,492
Total current assets	464,563		483,747
Property, plant and equipment, net	7,176		7,442
Research and development incentives receivable, non-current	781		—
Restricted cash	1,636		1,636
Right-to-use asset - operating leases	5,653		5,751
Right-to-use asset - financing leases	43,915		44,522
Total assets	$	523,724	$	543,098

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,382	$	2,355
Accrued expenses and other current liabilities	9,186		8,735
Operating lease liabilities, current	975		970
Financing lease liabilities, current	2,506		2,487
Total current liabilities	15,049		14,547
Operating lease liabilities, non-current	4,978		5,078
Financing lease liabilities, non-current	24,673		24,745
Total liabilities	$	44,700	$	44,370
Commitments and contingencies (Note 12)
Stockholders' equity
Common stock, $0.001 par value; 150,000,000 shares authorized as of June 30, 2021 and March 31, 2021; 46,730,451 and 46,566,481 shares issued and outstanding as of June 30, 2021 and March 31, 2021, respectively	47		47
Additional paid-in capital	699,666		692,243
Accumulated deficit	(220,479)		(193,168)
Accumulated other comprehensive loss	(210)		(394)
Total stockholders' equity	479,024		498,728
Total liabilities and stockholders' equity	$	523,724	$	543,098

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

REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

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	Three Months Ended June 30,
	2021		2020
Operating expenses:
Research and development	$	18,554	$	12,157
General and administrative	8,827		5,676
Total operating expenses	27,381		17,833
Loss from operations	(27,381)		(17,833)
Other income (expense):
Research and development incentives	788		686
Investment income	92		527
Interest expense on finance lease liability	(558)		(561)
Interest expense on debt obligations	—		(284)
Other (expense) income	(252)		(28)
Total other (expense) income, net	70		340
Net loss attributable to common stockholders	$	(27,311)	$	(17,493)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.53)	$	(0.44)
Weighted average common shares outstanding, basic and diluted	51,910,331		39,862,319

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

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REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

(Unaudited)


	Three Months Ended June 30,
	2021		2020
Net loss	$	(27,311)	$	(17,493)
Other comprehensive loss:
Foreign currency translation gain (loss)	224		(12)
Net unrealized (loss) gain on short-term investments, net of tax of $0	(40)		(196)
Comprehensive loss	$	(27,127)	$	(17,701)

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

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REPLIMUNE GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)


	Common stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total stockholders’ equity
	Shares	Amount
Balances as of March 31, 2021	46,566,481	$	47	$	692,243	$	(193,168)	$	(394)	$	498,728
Foreign currency translation adjustment	—	—		—		—		224		224
Unrealized loss on short-term investments	—	—		—		—		(40)		(40)
Exercise of stock options	163,970	—		1,173		—		—		1,173
Stock-based compensation expense	—	—		6,250		—		—		6,250
Net loss	—	—		—		(27,311)		—		(27,311)
Balances as of June 30, 2021	46,730,451	$	47	$	699,666	$	(220,479)	$	(210)	$	479,024

Balances as of March 31, 2020	36,668,743	$	37	$	296,961	$	(112,298)	$	(982)	$	183,718
Issuance of prefunded warrants to purchase common stock, net of $2,100 issuance costs	—	—		32,900		—		—		32,900
Issuance of common stock, net of issuance costs and underwriter fees of $5,117	3,478,261	3		74,879						74,882
Foreign currency translation adjustment	—	—		—		—		(12)		(12)
Unrealized loss on short-term investments	—	—		—		—		(196)		(196)
Exercise of stock options	133,416	—		1,547		—		—		1,547
Stock-based compensation expense	—	—		2,468		—		—		2,468
Net loss	—	—		—		(17,493)		—		(17,493)
Balances as of June 30, 2020	40,280,420	$	40	$	408,755	$	(129,791)	$	(1,190)	$	277,814

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

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REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Three Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(27,311)	$	(17,493)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	6,250		2,468
Depreciation and amortization	518		391
Net amortization of premiums and discounts on short-term investments	658		91
Noncash interest expense	—		63
Changes in operating assets and liabilities:
Research and development incentives receivable	(788)		(684)
Prepaid expenses and other current assets	1,228		(301)
Operating lease, right-of-use-asset	108		135
Finance lease, right-of-use-asset	607		607
Accounts payable	66		(224)
Accrued expenses and other current liabilities	456		(11)
Operating lease liabilities	(106)		(132)
Net cash used in operating activities	(18,314)		(15,090)
Cash flows from investing activities:
Purchases of property, plant and equipment	(291)		(932)
Purchase of short-term investments	(32,232)		(125,812)
Proceeds from sales and maturities of short-term investments	59,515		77,618
Net cash provided by (used in) investing activities	26,992		(49,126)
Cash flows from financing activities:
Proceeds from issuance of common stock in follow-on public offering, net of underwriting fees and discounts	—		75,199
Proceeds from issuance of prefunded warrants to purchase common stock, net of underwriting fees and discounts	—		32,900
Payment of issuance costs	—		(100)
Principal payment of finance lease obligation	(53)		(32)
Proceeds from exercise of stock options	1,173		1,547
Net cash provided by financing activities	1,120		109,514
Effect of exchange rate changes on cash, cash equivalents and restricted cash	212		(1)
Net increase (decrease) in cash, cash equivalents and restricted cash	10,010		45,297
Cash, cash equivalents and restricted cash at beginning of period	184,154		61,136
Cash, cash equivalents and restricted cash at end of period	$	194,164	$	106,433
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	—	$	221

Supplemental disclosure of non-cash investing and financing activities:
Net unrealized (loss) on short-term investments	(40)		(196)
Issuance costs included in accounts payable	—		317
Purchases of property and equipment included in accounts payable	39		64
Lease assets obtained in exchange for new operating lease liabilities	—		1,580

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

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REPLIMUNE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

1. Nature of the business

Replimune Group, Inc. (the “Company”) is a clinical-stage biotechnology company focused on the development of oncolytic immunotherapies to treat cancer. Replimune Group, Inc., whose predecessor was founded in 2015, is the parent company of its wholly owned, direct and indirect subsidiaries: Replimune Limited (“Replimune UK”); Replimune, Inc. (“Replimune US”); Replimune Securities Corporation; and Replimune (Ireland) Limited.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance and reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Basis of presentation

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses since its inception, including net losses of $27,311 and $17,493 for the three months ended June 30, 2021 and 2020, respectively. In addition, as of June 30, 2021, the Company had an accumulated deficit of $220,479. The Company expects to continue to generate operating losses for the foreseeable future. As of the issuance date of these consolidated financial statements, the Company expects that its cash and cash equivalents and short-term investments will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance of the consolidated financial statements.

Impact of the COVID-19 coronavirus

In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 coronavirus has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. government imposed travel restrictions on travel between the United States, Europe and certain other countries. The impact of this pandemic has been, and will likely continue to be, extensive in many aspects of society, which has resulted, and will likely continue to result, in significant disruptions to the global economy as well as businesses and capital markets around the world.

In response to public health directives and orders and to help minimize the risk of the virus to employees, the Company has taken precautionary measures, including implementing work-from-home policies for the Company’s employees, other than those in its laboratory, those performing manufacturing functions and certain other employees as deemed appropriate from time to time. For those employees, the Company has implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. The Company has taken these and other precautionary steps while maintaining business continuity in order to continue to progress its programs. While there has been no prolonged material disruption to the Company’s business to date, the impact of the virus, including work-from-home policies, may negatively impact productivity, disrupt the Company’s business, and delay its preclinical research and clinical trial activities and its development program timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct its business in the ordinary course. Other impacts to the Company’s business may include temporary closures of its suppliers and disruptions or restrictions on its employees’ ability to travel. Any prolonged material disruption to the Company’s employees or suppliers could adversely impact the Company’s preclinical research and clinical trial activities, financial condition and results of operations, including its ability to obtain financing.

2. Summary of significant accounting policies

Principles of consolidation

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The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and include the accounts of the Company and its direct and indirect wholly owned subsidiaries, Replimune UK, Replimune US, Replimune Securities Corporation and Replimune (Ireland) Limited after elimination of all intercompany accounts and transactions.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

The full extent to which the COVID-19 pandemic, including evolving COVID-19 viral strains, will directly or indirectly impact our business, results of operations and financial condition, including, expenses, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Estimates are periodically reviewed in light of reasonable changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates or assumptions.

Unaudited interim financial information

The accompanying consolidated balance sheet as of June 30, 2021, the consolidated statements of operations, of comprehensive loss and of stockholders’ equity for the three months ended June 30, 2021 and 2020 and the consolidated statements of cash flows for the three months ended June 30, 2021 and 2020 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021 and the results of its operations for the three months ended June 30, 2021 and 2020 and its cash flows for the three months ended June 30, 2021 and 2020. The financial data and other information disclosed in these consolidated notes related to the three months ended June 30, 2021 and 2020 are unaudited. The results for the three months ended June 30, 2021 are not necessarily indicative of results to be expected for the year ending March 31, 2022, any other interim periods or any future year or period. The financial information included herein should be read in conjunction with the financial statements and notes in the Company's Annual Report on Form 10-K for the year ended March 31, 2021.

During the three months ended June 30, 2021, there have been no changes to the Company’s significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended March 31, 2021 which was filed with the Securities and Exchange Commission on May 20, 2021, except as described below.

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The new standard was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We adopted ASU 2019-12 effective April 1, 2021. The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326). The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at

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fair value through net income. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies and corrects certain unintended applications of the guidance contained in each of the amended Topics. Additionally, in May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326), which provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. The standard is effective for fiscal years and interim periods beginning after December 15, 2022. Early adoption is permitted for all periods beginning after December 15, 2018. The adoption of ASU 2016-13 is not expected to have a material impact on the Company's consolidated financial statements.

3. Fair value of financial assets and liabilities

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:


	Fair Value Measurements as of June 30, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	—	$	179,008	$	—	$	179,008
US Government Agency bonds	—		57,833		—		57,833
US Treasury bonds	—		207,970		—		207,970
	$	—	$	444,811	$	—	$	444,811


	Fair Value Measurements as of March 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	—	$	150,734	$	—	$	150,734
US Government Agency bonds	—		67,012		—		67,012
US Treasury bonds	—		226,772		—		226,772
	$	—	$	444,518	$	—	$	444,518

The underlying securities held in the money market funds held by the Company are all government backed securities.

During the three months ended June 30, 2021 and 2020, there were no transfers between levels.

Valuation of cash equivalents and short-term investments

Money market funds, U.S. Government Agency bonds and U.S. Treasury bonds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. Cash equivalents consisted of money market funds at June 30, 2021 and March 31, 2021.

4. Short-term investments

Short-term investments by investment type consisted of the following:


	June 30, 2021
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
US Government agency bonds	$	57,841	$	5	$	(13)	$	57,833
US Treasury bonds	207,957		33		(20)		207,970
	$	265,798	$	38	$	(33)	$	265,803

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	March 31, 2021
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
US Government agency bonds	67,017		12		(17)		67,012
US Treasury bonds	226,722		55		(5)		226,772
	$	293,739	$	67	$	(22)	$	293,784

5. Property, plant and equipment, net

Property, plant and equipment, net consisted of the following:


	June 30, 2021		March 31, 2021
Office equipment	$	833	$	830
Computer equipment	1,697		1,695
Plant and laboratory equipment	6,653		6,369
Leasehold improvements	785		784
Construction in progress	374		412
	10,342		10,090
Less: Accumulated depreciation and amortization	(3,166)		(2,648)
	$	7,176	$	7,442

Depreciation and amortization expense was $518 and $391 for the three months ended June 30, 2021 and 2020, respectively. Depreciation and amortization expense are recorded within research and development and general and administrative expenses in the consolidated statement of operations.

6. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:


	June 30, 2021		March 31, 2021
Accrued research and development costs	$	4,618	$	3,862
Accrued compensation and benefits costs	3,325		3,952
Accrued professional fees	445		407
Other	798		514
	$	9,186	$	8,735

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7. Long-term debt

For the periods ended June 30, 2021 and March 31, 2021, there are no debt balances outstanding as the Company entered a payoff letter in the prior fiscal year.

Hercules Loan Agreement

On August 8, 2019, (the “Closing Date”) the Company and certain of its affiliates entered into a Loan and Security Agreement (as amended, the “Hercules Loan Agreement”) with Hercules Capital, Inc. (“Hercules”) pursuant to which Hercules agreed to make available to the Company a secured term loan facility in the amount of $30,000 (the “Term Loan Facility”), subject to certain terms and conditions. The Company borrowed $10,000 under the Hercules Loan Agreement in one advance as a single tranche term loan on the Closing Date upon which the Company paid a $225 facility charge and incurred $130 in additional closing and legal fees.

On June 1, 2020, the Company entered into the First Amendment to the Hercules Loan Agreement (the “Hercules First Amendment”), to, among other things, increase the aggregate principal amount of the secured term loan facility from $30,000 to $40,000. Pursuant to the Hercules First Amendment, subject to the achievement of certain milestones, the Company could have borrowed three tranches of up to $10,000 between October 1, 2020 and December 15, 2020, July 1, 2020 and June 30, 2021, and July 1, 2021 and December 15, 2021, respectively. The Company incurred $100 in additional closing and legal fees in connection with Hercules First Amendment which were capitalized and will be amortized as part of the effective yield.

On December 15, 2020, the Company entered into a payoff letter with respect to the Hercules Loan Agreement (the "Payoff Letter"), which resulted in a loss on extinguishment of debt of $913 including both cash and non-cash expense. Pursuant to the Payoff Letter, the Company paid a total of $10,839 to Hercules, representing $10,000 in outstanding principal, $495 end of term charge, $300 early termination fee due and $44 in accrued interest owed to Hercules under the Hercules Loan Agreement. In connection with the execution of the Payoff Letter and the repayment of the Company’s outstanding obligations under the Hercules Loan Agreement, the Hercules Loan Agreement and the related loan documents were terminated.

The Term Loan Facility was secured by substantially all of the Company’s assets, but excluding its intellectual property, and subject to certain exceptions and exclusions. All liens on the Company’s assets held by Hercules were released in connection with the execution of the Payoff Letter.

In connection with entering into the Hercules Loan Agreement, the Company paid Hercules $355 of upfront fees, including closing costs and legal fees associated with entering into the agreement, which were recorded as a debt discount. In connection with entering into the Hercules First Amendment, the Company paid $100 of upfront fees, including closing costs and legal fees associated with entering into the amendment, which were recorded as debt discount.

The Company recognized aggregate interest expense under the Hercules Loan Agreement of $0 and $284 during the three months ended June 30, 2021 and June 30, 2020, respectively, which included non-cash interest expense of $0 and $63. Non-cash interest expense related to the amortization of the debt discount of $0 and $27, and the accretion of the final payment of $0 and $36 for the three months ended June 30, 2021 and June 30, 2020, respectively.

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8 Stockholders’ equity

Common stock

As of June 30, 2021 and March 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue up to 150,000,000 shares of common stock, par value $0.001 per share.

As of June 30, 2021 and March 31, 2021, the Company had reserved 14,408,145 and 14,572,115 shares of common stock for the exercise of outstanding stock options and the vesting of restricted share units, the number of shares remaining available for grant under the Company’s 2018 Omnibus Incentive Compensation Plan and the Company’s Employee Stock Purchase Plan (see Note 9) and the exercise of the outstanding warrants to purchase shares of common stock, respectively.

Undesignated preferred stock

As of June 30, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue up to 10,000,000 shares of undesignated preferred stock, par value $0.001 per share. There were no undesignated preferred shares issued or outstanding as of June 30, 2021.

ATM program

In August 2019, the Company entered into a Sales Agreement (as amended, the “2019 Sales Agreement”) with SVB Leerink LLC (the “Agent”), pursuant to which the Company could sell, from time to time, at its option, up to an aggregate amount of $75,000 of shares of the Company’s common stock, $0.001 par value per share, through the Agent, as the Company’s sales agent. In June 2020, the 2019 Sales Agreement was amended to reduce the aggregate offering amount under the 2019 Sales Agreement from $75,000 of shares to $30,000 of shares.

On August 11, 2020, the 2019 Sales Agreement was terminated by the execution by the Company and the Agent of a new sales agreement, which was subsequently amended on October 21, 2020 (as amended, the “2020 Sales Agreement”). Under the 2020 Sales Agreement the Company may sell, from time to time, at its option, up to an aggregate of $62,500 of shares of the Company’s common stock, $0.001 par value per share (the “Shares”), through the Agent, as the Company’s sales agent.

Any Shares to be offered and sold under the 2020 Sales Agreement will be issued and sold (i) by methods deemed to be an “at the market offering” (“ATM”) as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended or in negotiated transactions, if authorized by the Company, and (ii) pursuant to, and only upon the effectiveness of, a registration statement on Form S-3 filed by the Company with the Securities and Exchange Commission on August 11, 2020 for an offering of up to $350,000 of various securities, including shares of the Company’s common stock, preferred stock, debt securities, warrants and/or units for sale to the public in one or more public offerings.

Subject to the terms of the 2020 Sales Agreement, the Agent will use reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company cannot provide any assurances that it will issue any Shares pursuant to the 2020 Sales Agreement. The Company will pay the Agent a commission of up to 3.0% of the gross proceeds from the sale of the Shares, if any. The Company has also agreed to provide the Agent with customary indemnification rights.

During the year ended March 31, 2020, the Company issued and sold 287,559 shares, of common stock under the 2019 Sales Agreement, for gross proceeds of $4,568 less offering fees of $137 for net proceeds of $4,431 under the ATM. The Company did not issue or sell any shares under the 2020 Sales Agreement during the quarter ended June 30, 2021 or during the year ended March 31, 2021.

Equity offerings

In November 2019, pursuant to an underwriting agreement (the “November 2019 Underwriting Agreement”) with J.P. Morgan Securities LLC and SVB Leerink LLC, as representatives of the several underwriters named therein (the “November 2019 Underwriters”), the Company issued and sold to the November 2019 Underwriters (a) 4,516,561 shares of the Company’s common stock (the “November 2019 Shares”), inclusive of the November 2019 Underwriters partially exercised 30-day option and purchased an additional 838,530 shares of the Company’s common stock, and (b) pre-funded warrants to purchase 2,200,000 shares of the Company’s common stock (the “November 2019 Pre-Funded Warrants”). The November 2019 shares were sold to the November 2019 Underwriters (the “November 2019 Offering”) at the public offering price of $13.61 per share

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and the November 2019 Pre-Funded Warrants were sold at a public offering price of $13.6099 per November 2019 Pre-Funded Warrant, which represented the per share public offering price for the November 2019 Shares less a $0.0001 per share exercise price for each such November 2019 Pre-Funded Warrant. The Company received aggregate net proceeds of approximately $85,598 in the November 2019 Offering, after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $5,814.

Funds affiliated with Redmile Group, LLC purchased all of the November 2019 Pre-Funded Warrants. The November 2019 Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of November 2019 Pre-Funded Warrants may not exercise the November 2019 Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise.

In June 2020, pursuant to an underwriting agreement (the “June 2020 Underwriting Agreement”) with J.P. Morgan Securities LLC and SVB Leerink LLC, as representatives of the several underwriters named therein (the "June 2020 Underwriters”), the Company sold to the June 2020 Underwriters (a) 3,478,261 shares of the Company’s common stock (the “June 2020 Shares”), inclusive of the underwriters 30-day option to purchase up to an additional 652,173 shares of the Company's common stock, and (b) pre-funded warrants to purchase 1,521,738 shares of the Company’s common stock (the “June 2020 Pre-Funded Warrants”). The June 2020 Shares of the Company's common stock were sold to the June 2020 Underwriters at the public offering price of $23.00 per share and the June 2020 Pre-Funded Warrants were sold at a public offering price of $22.9999 per June 2020 Pre-Funded Warrant, which represented the per share public offering price for the June 2020 shares less a $0.0001 per share exercise price for each such June 2020 Pre-Funded Warrant. The Company received aggregate net proceeds of approximately $107,782 after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $7,217.

Funds affiliated with Redmile Group, LLC and funds affiliated with a second institutional investor purchased all of the June 2020 Pre-Funded Warrants. The June 2020 Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of June 2020 Pre-Funded Warrants may not exercise the June 2020 Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. A holder of June 2020 Pre-Funded Warrants may increase or decrease this percentage up to 19.99% by providing at least 61 days’ prior notice to the Company.

In October 2020, pursuant to an underwriting agreement with J.P. Morgan Securities LLC and SVB Leerink LLC, as representatives of the several underwriters named therein, the Company issued and sold to the underwriters (a) 5,625,000 shares of the Company’s common stock, inclusive of the underwriters 30-day option to purchase up to an additional 937,500 shares of the Company’s common stock, and (b) pre-funded warrants to purchase 1,562,500 shares of the Company’s common stock (the “October 2020 Pre-Funded Warrants”). The shares of the Company’s common stock were sold to the underwriters at the public offering price of $40.00 per share and the October 2020 Pre-Funded Warrants were sold at a public offering price of $39.9999 per October 2020 Pre-Funded Warrant, which represented the per share public offering price for the Company’s common stock less a $0.0001 per share exercise price for each October 2020 Pre-Funded Warrant. The Company received aggregate net proceeds of approximately $269,975 after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $17,525.

Funds affiliated with Redmile Group, LLC and funds affiliated with a second institutional investor purchased all of the October 2020 Pre-Funded Warrants. The October 2020 Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of October 2020 Pre-Funded Warrants may not exercise the October 2020 Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. A holder of October 2020 Pre-Funded Warrants may increase or decrease this percentage up to 19.99% by providing at least 61 days’ prior notice to the Company.

Other than as set forth in Note 9 and Note 10 to these consolidated financial statements, the 5,284,238 Pre-Funded Warrants are not included in the number of issued and outstanding shares of the Company’s common stock set forth herein. As of June 30, 2021, none of the November 2019 Pre-Funded Warrants, the June 2020 Pre-Funded Warrants, or the October 2020 Pre-Funded Warrants had been exercised.

9 Stock-based compensation

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Stock-based compensation expense

Stock-based compensation expense was classified in the consolidated statements of operations as follows:


	Three Months Ended June 30,
	2021		2020
Research and development	$	2,458	$	1,000
General and administrative	3,792		1,468
	$	6,250	$	2,468

The following table summarizes stock-based compensation expense by award type for the three months ended June 30, 2021 and 2020:


	Three Months Ended June 30,
	2021		2020
Stock options	$	5,175	$	2,468
Restricted stock units	1,075		—
	$	6,250	$	2,468

2015 Enterprise Management Incentive Share Option Plan

The 2015 Enterprise Management Incentive Share Option Plan of Replimune UK (the “2015 Plan”) provided for Replimune UK to grant incentive stock options, non-statutory stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. Incentive stock options are granted only to the Company’s employees, including officers and directors who are also employees. Non-statutory stock options are granted to employees, members of the board of directors, outside advisors and consultants of the Company.

2017 Equity Compensation Plan

In July 2017, in conjunction with the Reorganization, the 2015 Plan was terminated, and all awards were cancelled with replacement awards issued under the 2017 Equity Compensation Plan (the “2017 Plan”). Subsequent to the Reorganization, no additional grants will be made under the 2015 Plan and any outstanding awards under the 2015 Plan will continue with their original terms. The Company concluded that the cancellation of the 2015 Plan and issuance of replacement awards under the 2017 Plan was a modification with no change in the material rights and preferences and therefore no recorded change in the fair value of each respective award.

The Company’s 2017 Plan provides for the Company to grant incentive stock options or non-statutory stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. Incentive stock options may be granted only to the Company’s employees, including officers and directors who are also employees. Restricted stock awards and non-statutory stock options may be granted to employees, officers, members of the board of directors, advisors and consultants of the Company. The maximum number of common shares that may be issued under the 2017 Plan was 2,659,885, of which none remained available for future grants as of June 30, 2021. Shares with respect to which awards have expired, terminated, surrendered or cancelled under the 2017 Plan without having been fully exercised will be available for future awards under the 2017 Plan. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.

2018 Omnibus Incentive Compensation Plan

On July 9, 2018, the Company’s board of directors adopted, and the Company’s stockholders approved the 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering. The 2018 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. The number of shares initially reserved for issuance under the 2018 Plan is 3,617,968 shares. If any options or stock appreciation rights, including outstanding options and stock appreciation rights granted under the 2017 Plan (up to 2,520,247 shares), terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if any stock awards,

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stock units or other stock-based awards, including outstanding awards granted under the 2017 Plan, are forfeited, terminated, or otherwise not paid in full in shares of common stock, the shares of the Company’s common stock subject to such grants will be available for purposes of our 2018 Plan. The number of shares reserved for issuance under the 2018 Plan will increase automatically on the first day of each April equal to 4.0% of the total number of shares of Company stock outstanding on the last trading day in the immediately preceding fiscal year, or such lesser amount as determined by the Board. On April 1, 2021, the number of shares reserved for issuance under the 2018 Plan automatically increased by 2,074,028 shares pursuant to the terms of the 2018 Plan and based on total number of shares of Company stock outstanding on March 31, 2021, including the November 2019 Pre-Funded Warrants, the June 2020 Pre-Funded Warrants and the October 2020 Pre-Funded Warrants. On April 1, 2020, the number of shares reserved for issuance under the 2018 Plan automatically increased by 1,466,749 shares pursuant to the terms of the 2018 Plan. As of June 30, 2021, 1,587,935 shares remained available for future grants under the 2018 Plan.

The 2015 Plan, the 2017 Plan and the 2018 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. However, the board of directors shall administer and approve all grants made to non-employee directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, except that the exercise price per share of incentive stock options may not be less than 100% of the fair market value of the common stock on the date of grant (or 110% of fair value in the case of an award granted to employees who hold more than 10% of the total combined voting power of all classes of stock at the time of grant) and the term of stock options may not be greater than five years for an incentive stock option granted to a 10% stockholder and greater than ten years for all other options granted. Stock options awarded under both plans expire ten years after the grant date, unless the board of directors sets a shorter term. Vesting periods for both plans are determined at the discretion of the board of directors. Incentive stock options granted to employees and non-statutory options granted to employees, officers, members of the board of directors, advisors, and consultants of the Company typically vest over four years. In 2021 the board of directors initiated the award of restricted stock units, or RSUs, under the 2018 Plan in addition to stock option awards available as part of the Company's equity incentive for employees, officers, advisors and consultants of the Company. The RSUs typically vest over four roughly equal installments on the anniversary date of the designated vesting date that is in closest proximity to the date of grant.

Employee Stock Purchase Plan

On July 9, 2018, the Company’s board of directors adopted and the Company’s stockholders approved the Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO. The total shares of common stock initially reserved for issuance under the ESPP is limited to 348,612 shares. In addition, as of the first trading day of each fiscal year during the term of the ESPP (excluding any extensions), an additional number of shares of the Company’s common stock equal to 1% of the total number of shares outstanding on the last trading day in the immediately preceding fiscal year, including the November 2019 Pre-Funded Warrants, the June 2020 Pre-Funded Warrants, and the October 2020 Pre-Funded Warrants, or 697,224 shares, whichever is less (or such lesser amount as determined by the Company’s board of directors) will be added to the number of shares authorized under the ESPP. In accordance with the terms of the ESPP, on April 1, 2021 and 2020, the number of shares reserved for issuance under the ESPP automatically increased by 518,507 and 366,687 shares respectively, for a total of 1,550,375 shares reserved for the ESPP. If the total number of shares of common stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the ESPP, then the plan administrator will allocate the available shares pro-rata and refund any excess payroll deductions or other contributions to participants. The Company’s ESPP is not currently active.

Out-of-Plan Inducement Grant

In May 2021, the Company granted an equity award to a newly hired executive as an inducement material to enter into employment with the Company. The grant constitutes an "employment inducement grant" in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, and the grant was not issued under the Replimune Group, Inc. 2018 Omnibus Incentive Compensation Plan or any of the other stock incentive plans described above. The inducement grant included a nonqualified stock option to purchase up to 125,000 shares of the Company's common stock, as well as a restricted stock unit grant representing 88,333 shares of its common stock. These stock option and restricted stock unit inducement grants have terms and conditions consistent with those set forth under the 2018 Plan and vest under the same respective vesting schedules as stock option and restricted stock unit awards granted under the 2018 Plan. The inducement grant is included in the stock option and RSU award tables below.

Stock option valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. As the Company has limited company-specific historical and implied volatility information, the expected stock volatility is based on a combination

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of Replimune volatility and the historical volatility of a set of publicly traded peer companies. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted-average basis, the assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and directors:


	Three Months Ended June 30,
	2021		2020
Risk-free interest rate	1.12	%	1.24	%
Expected term (in years)	6.0		6.5
Expected volatility	80.2	%	75.0	%
Expected dividend yield	0	%	0	%

Stock options

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


	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of March 31, 2021	6,460,184	$	13.26	7.95	$	116,193
Granted	1,224,812	$	32.54
Exercised	(163,970)	$	7.16		$	4,174
Cancelled	(109,346)	$	26.98
Outstanding as of June 30, 2021	7,411,680	$	16.39	7.93	$	164,305
Options exercisable as of March 31, 2021	2,698,708	$	8.38	6.79	$	59,717
Options exercisable as of June 30, 2021	3,340,279	$	8.97	6.82	$	98,367

As of June 30, 2021, there was $55.5 million of unrecognized compensation cost related to unvested common stock options, which is expected to be recognized over a weighted average period of 2.82 years.

The weighted average grant-date fair value of stock options granted during the three months ended June 30, 2021 and 2020 was $22.29 and $6.94, respectively. The aggregate intrinsic value of stock options exercised during the three months ended June 30, 2021 was $4.2 million.

Restricted stock units

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A summary of the changes in the Company's RSUs during the three months ended June 30, 2021 is as follows:


	Number of Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2021	15,975	34.15
Granted	657,431	32.84
Vested	—	—
Cancelled	(4,298)	31.58
Outstanding as of June 30, 2021	669,108	32.88

As of June 30, 2021, there was $20.9 million of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 3.86 years. As of June 30, 2020, there was no unrecognized compensation cost related to unvested restricted stock units.

10 Net loss per share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:


	Three Months Ended June 30,
	2021		2020
Numerator:
Net loss attributable to common stockholders	$	(27,311)	$	(17,493)
Denominator:
Weighted average common shares outstanding, basic and diluted	51,910,331		39,862,319
Net loss per share attributable to common stockholders, basic and diluted	$	(0.53)	$	(0.44)

The November 2019 Pre-Funded Warrants, the June 2020 Pre-Funded Warrants and the October 2020 Pre-Funded Warrants are included as outstanding common stock in the calculation of basic and diluted net loss per share attributable to common stockholders.

The Company’s potentially dilutive securities, which include stock options and warrants to purchase shares of series seed preferred stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:


	Three Months Ended June 30,
	2021	2020
Options to purchase common stock	7,411,680	6,510,522
Warrants to purchase common stock	497,344	497,344
	7,909,024	7,007,866

11 Significant agreements

Agreement with Bristol-Myers Squibb Company

In February 2018, the Company entered into an agreement with Bristol-Myers Squibb Company (“BMS”). Pursuant to the agreement, BMS will provide to the Company, at no cost, a compound for use in the Company’s ongoing clinical trial of

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RP1. Under the agreement, the Company will sponsor, fund and conduct the clinical trial in accordance with an agreed-upon protocol. BMS granted the Company a non-exclusive, non-transferrable, royalty-free license (with a right to sublicense) under its intellectual property to its compound in the clinical trial and agreed to supply its compound, at no cost to the Company, for use in the clinical trial. In January 2020, this agreement was expanded to cover an additional cohort of 125 patients with anti-PD-1 failed melanoma.

Unless earlier terminated, the agreement will remain in effect until (i) the completion of the clinical trial, (ii) all related clinical trial data have been delivered to both parties and (iii) the completion of any statistical analyses and bioanalyses contemplated by the clinical trial protocol or any analysis otherwise agreed upon by the parties. The agreement may be terminated by either party (i) in the event of an uncured material breach by the other party, (ii) in the event the other party is insolvent or in bankruptcy proceedings or (iii) for safety reasons. Upon termination, the licenses granted to the Company to use BMS’s compound in the clinical trial will terminate.

In April 2019, the Company entered into a separate agreement with BMS on terms similar to the terms set forth in the agreement described above, pursuant to which BMS will provide to the Company, at no cost, nivolumab for use in the Company’s Phase 1 clinical trial of RP2 in combination with nivolumab.

Agreement with Regeneron Pharmaceuticals, Inc.

In May 2018, the Company entered into an agreement with Regeneron Pharmaceuticals, Inc. (“Regeneron”). The Company and Regeneron are each independently developing compounds for the treatment of certain tumor types. Pursuant to the agreement, the Company and Regeneron will undertake one or more clinical trials using a combination of the compounds being developed by each entity. Under the agreement, each study will be conducted under terms set out in a separately agreed upon study plan that will identify the name of the sponsor and which party will manage the particular clinical trial, and include the protocol, the budget and a schedule of clinical obligations. In June 2018, under the terms of the agreement between the Company and Regeneron, the parties agreed to the first study plan. The Company and Regeneron have agreed to the protocol, budget, sample testing and clinical obligations schedule under the study plan. Development and supply costs associated with the study plan will be split equally between the Company and Regeneron.

Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license under its respective intellectual property and agreed to contribute the necessary resources needed to fulfill its respective obligations, in each case, under the terms of the agreed-upon or to-be agreed upon study plans. Development costs of a particular clinical trial will be split equally between the Company and Regeneron in accordance with the agreed upon study plan.

The agreement may be terminated by either party if (i) there is no active study plan for which a final study report has not been completed and the parties have not entered into a study plan for an additional clinical trial within a period of time after the delivery of the most recent final study report or (ii) in the event of a material breach.

The agreement with Regeneron is accounted for under ASC 808, Collaborative Arrangements (“ASC 808”), as both parties are active participants and each party pays its own compound costs and share equally in development costs. The Company will account for costs incurred as part of the study, including costs to supply compounds for use in the study, as research and development expenses within the consolidated statement of operations. The Company will recognize any amounts received from Regeneron in connection with this agreement as an offset to research and development expense within the consolidated statement of operations.

Under the terms of the agreement, on a quarterly basis the Company and Regeneron true-up costs of the study and make corresponding payments to the party that incurred the majority of the costs. During the three months ended June 30, 2021 and 2020, the Company did not make any payments under the terms of the agreement from Regeneron. As of June 30, 2021 and March 31, 2021, the Company recorded $1.4 million and $1.3 million of receivables from Regeneron in connection with this agreement in prepaid expenses and other current assets in the consolidated balance sheet, respectively.

12 Commitments and contingencies

Leases

The Company leases real estate assets and equipment, and determination if an arrangement is a lease occurs at inception. For leases with terms greater than 12 months, the Company records a related right-of-use (“ROU”) asset and lease liability at the present value of lease payments over the term. Many leases include fixed rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company’s

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leases do not provide an implicit rate, and thus the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has elected not to record a ROU asset and lease obligation for short-term leases (with terms less than 12 months) or separate non-lease components from associated lease components for its real estate lease assets. As a result, all contract consideration is allocated to the single lease component.

The Company’s leases have remaining lease terms of eight years to eighteen years. Some of our leases include one or more options to renew with renewal terms that can extend the lease for additional years, or options to terminate the leases, both at the Company’s discretion. The Company’s lease terms include options to extend or terminate leases when the Company concludes it is reasonably certain that it would exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis based on the fixed components of a lease arrangement. The Company amortizes this expense over the term of the lease beginning with the date of initial possession, which is the date the Company can enter the leased space and begin to make improvements in preparation for its intended use. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred.

The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheet as of June 30, 2021:


	Three Months Ended June 30,
	2021		2020
Lease cost
Finance lease costs:
Amortization of right-to-use asset	$	607	$	607
Interest on lease liabilities	558		561
Operating lease costs	242		230
Total lease cost	$	1,407	$	1,398

The Company incurred finance lease amortization costs of $607 for both the three months ended June 30, 2021 and 2020, respectively, of which $518 and $517 are recognized in research and development expenses. In addition, the Company incurred interest expense on finance leases of $558 and $561, of which $468 and $471 are recognized in research and development for the three months ended June 30, 2021 and 2020, respectively. For both the three months ended June 30, 2021 and 2020, the Company recognized $89 of operating lease costs within general and administrative expenses. The following table summarizes the maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating and financing lease liabilities recognized on our balance sheet as of June 30, 2021:


	June 30, 2021
	Operating leases		Financing lease		Total
2022 (remaining three months)	$	731	$	1,876	$	2,607
2023	982		2,562		3,544
2024	991		2,639		3,630
2025	1,000		2,718		3,718
2026	1,010		2,799		3,809
Thereafter	4,076		40,905		44,981
Total lease payments	8,790		53,499		62,289
Less: interest	2,837		26,320		29,157
Total lease liabilities	$	5,953	$	27,179	$	33,132

The following table provides lease disclosure as of June 30, 2021 and March 31, 2021:

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	June 30, 2021		March 31, 2021
Leases
Right-to-use operating lease asset	$	5,653	$	5,751
Right-to-use finance lease asset	43,915		44,522
Total lease assets	$	49,568	$	50,273

Operating lease liabilities, current	$	975	$	970
Finance lease liabilities, current	2,506		2,487
Operating lease liabilities, non-current	4,978		5,078
Finance lease liabilities, non-current	24,673		24,745
Total lease liabilities	$	33,132	$	33,280

The following table provides lease disclosure for the three months ended June 30, 2021 and 2020:


	Three Months Ended June 30,
	2021				2020
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	242			$	209
Operating cash flows from finance leases	$	558			$	561
Financing cash flows from finance leases	$	53			$	32
Right-to-use asset obtained in exchange for new operating lease liabilities	$	—			$	1,580
Weighted-average remaining lease term - operating leases	8.6			years	9.8			years
Weighted-average remaining lease term - financing leases	18.1			years	19.3			years
Weighted-average discount rate - operating leases	9.9		%		10		%
Weighted-average discount rate - financing leases	8.3		%		8		%

The variable lease costs and short-term lease costs were insignificant for three months ended June 30, 2021 and 2020.

Manufacturing commitments

The Company has entered into an agreement with a contract manufacturing organization to provide clinical trial products. As of June 30, 2021 and March 31, 2021, the Company had committed to minimum payments under these arrangements totaling $1,600 and $1,651, respectively, through June 30, 2021.

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its executive management team and its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and therefore it has not accrued any liabilities related to such obligations in its consolidated financial statements as of June 30, 2021 or March 31, 2021.

Legal proceedings

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The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.

13 Geographic information

The Company operates in two geographic regions: the United States (Massachusetts) and the United Kingdom (Oxfordshire). Information about the Company’s long-lived assets held in different geographic regions is presented in the tables below:


	June 30, 2021		March 31, 2021
United States	$	6,654	$	6,866
United Kingdom	522		576
	$	7,176	$	7,442

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Item 2. Management’s discussion and analysis of financial condition and results of operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, or this Quarterly Report, and with our audited consolidated financial statements and notes thereto for the year ended March 31, 2021, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

In addition to historical information, some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report, particularly including those risks identified in Part II, Item 1A “Risk factors” and our other filings with the Securities Exchange Commission, or SEC.

We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. Statements made herein are as of the date of the filing of this Quarterly Report with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

General

We are a clinical-stage biotechnology company committed to applying our leading expertise in the field of oncolytic immunotherapy to transform the lives of cancer patients. We use our proprietary Immulytic platform to design and develop product candidates that are intended to maximally activate the immune system against cancer.

Oncolytic immunotherapy is an emerging drug class, which we intend to establish as the second cornerstone of immune-based cancer treatments, alongside checkpoint blockade. Oncolytic immunotherapy exploits the ability of certain viruses to selectively replicate in and directly kill tumors, as well as induce a potent, patient-specific, anti-tumor immune response. Our product candidates incorporate multiple mechanisms of action into a practical “off-the-shelf” approach that is intended to maximize the immune response against a patient’s cancer and to offer significant advantages over personalized vaccine approaches. We believe that the bundling of multiple approaches for the treatment of cancer into single therapies will simplify the development path of our product candidates, while also improving patient outcomes at a lower cost to the healthcare system than the use of multiple different drugs.

The foundation of our Immulytic platform consists of a proprietary, engineered strain of herpes simplex virus 1, or HSV-1, that has been “armed” with a fusogenic glycoprotein intended to substantially increase anti-tumor activity. Our Immulytic platform enables us to incorporate various genes into HSV-1 that are intended to further augment the inherent properties of HSV-1 in order to both directly destroy tumor cells and induce an anti-tumor immune response. We currently have three product candidates in our development pipeline, RP1 (vusolimogene oderparepvec), our lead product candidate, RP2 and RP3. Although our fiscal year runs from April 1st - March 31st, our programs and program updates are reported on a calendar year basis.

Our current product candidate pipeline is summarized in the table below:

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We are conducting a number of clinical trials of RP1, both as a monotherapy and in combination with anti-PD-1 therapy, with a focus on immune-responsive tumors, including anti-PD-1 failed patients with these tumor types. We are actively enrolling patients in the CERPASS trial, a global randomized, Phase 2 clinical trial of RP1 in cutaneous squamous cell carcinoma, or CSCC, RP1’s lead indication in collaboration with our partner Regeneron. CERPASS is a registration-directed clinical trial evaluating RP1 in combination with cemiplimab, an anti-PD-1 therapy developed by Regeneron, versus cemiplimab alone. CERPASS includes two independent primary endpoints, complete response (CR) rate and overall response rate (ORR), and a sample size of 180 patients. Regeneron has granted to us a non-exclusive royalty-free license to cemiplimab for use in this trial, is funding one-half of the clinical trial costs, and is supplying cemiplimab at no cost. If this clinical trial generates compelling clinical data demonstrating the benefits of the combined treatment, we believe the data could support a filing with regulatory authorities seeking marketing approval. We expect to complete enrollment in mid-year 2022 and for the primary data read-out to be triggered in late 2022.

We continue our collaboration with BMS under which it has granted us a non-exclusive, royalty-free license to, and is supplying at no cost, its anti-PD-1 therapy, nivolumab, for use in combination with RP1 in our multi-cohort Phase 1/2 IGNYTE clinical trial. This trial includes a registration directed Phase 2 cohort enrolling 125 patients with anti-PD-1 failed cutaneous melanoma who are being treated with RP1 in combination with nivolumab. We initiated this cohort after completing enrollment in a prior Phase 2 cohort in the same clinical trial of approximately 30 patients with melanoma, which demonstrated the safety and clinical activity of the combination of RP1 and nivolumab in patients with melanoma who failed prior anti-PD-1 when given alone or in combination with CTLA-4 blockade. In March 2021 we held a Type B meeting with the FDA to discuss the design of this cohort in the IGNYTE trial. In this meeting, the FDA expressed that while a randomized controlled clinical trial would always be preferred for registration purpose, that in this patient population with no clear standard of care, if the clinical data is sufficiently compelling then the data could be considered for submission by the FDA under the accelerated approval pathway. The FDA also indicated that a randomized confirmatory trial would also be needed as is required under the accelerated approval pathway. The design of the confirmatory trial is intended to be discussed with the FDA prior to a BLA submission. We expect to complete enrollment in mid-year 2022 and release data from this cohort in late 2022. In order to document sufficient durability of response, an important secondary endpoint of the study, the timing of the primary analysis upon which a filing is intended to be made is expected to be extended by approximately 6 months from year end 2022. In connection with a presentation at SITC in October 2020 we announced updated clinical data from the IGNYTE Phase 1/2 clinical trial evaluating RP1 in combination with nivolumab from the cohorts of patients with melanoma and non-melanoma skin cancers. As reported, RP1 in combination with nivolumab has continued to be well tolerated, and we believe demonstrates continued promising anti-tumor activity in patients with skin cancers, including in patients with anti-PD-1 failed melanoma, and in patients with CSCC. In June 2021 we presented a data update from these cohorts of RP1 in combination with nivolumab that showed compelling depth and durability of response and strongly supports these ongoing studies in CSCC and anti-PD-1 failed melanoma.

We continue to enroll patients in other IGNYTE Phase 2 cohorts under our collaboration with BMS in which we are evaluating RP1 in combination with nivolumab. Currently, enrollment is ongoing in a 45 patient cohort with non-melanoma

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skin cancer, or NMSC, (including the recent addition of 15 patients who have failed prior anti-PD-1 therapy); a 15 patient cohort with MSI-H/dMMR tumors and a 30 patient cohort with anti-PD(L)-1 failed non-small cell lung cancer, or NSCLC. We have enrolled 29 of the original 30 NMSC patient cohort (anti-PD-1 naïve) of RP1 in combination with nivolumab and continue to enroll patients with anti-PD-1 failed NMSC. We expect to provide initial data from the anti-PD-1 failed NMSC patients in the first quarter of 2022. Due to development challenges in the anti-PD-1 naïve setting for our cohort with MSI-H/dMMR tumors we have decided to not pursue RP1 in combination with nivolumab for this cohort but instead enroll patients with anti-PD-1 failed disease, for which a protocol amendment is expected to be made in the third quarter of 2021. As previously reported, dosing is underway in our 30 patient cohort of RP1 in combination with nivolumab in anti-PD(L)-1 failed NSCLC and we are planning an amendment to the protocol to include modifications to the patient eligibility criteria for this cohort which are expected to enhance enrollment into the trial. We expect to provide initial data from our NSCLC cohort of RP1 in combination with nivolumab in the first quarter of 2022.

We also have open for enrollment a Phase 1b/2 clinical trial of single agent RP1 in solid organ transplant recipients with CSCC, or ARTACUS or the ARTACUS trial, which we believe to be potentially registrational (in its own right or, subject to discussion with regulatory authorities, following enrollment of additional patients, including as a potential label expansion after an initial approval of RP1 in a different indication). We are currently enrolling patients in this clinical trial to assess the safety and efficacy of RP1 in liver and kidney transplant recipients with recurrent CSCC. The protocol has been amended to enroll up to 65 patients with potentially registrational intent. While enrollment in this clinical trial has been impacted by COVID-19, as the patient population is severely immune-compromised and considered very high risk, we expect to present initial data from this clinical trial in the first quarter of 2022.

We are also developing additional product candidates, RP2 and RP3, that have been further engineered to enhance anti-tumor immune responses and are intended to address additional tumor types, including traditionally less immune responsive tumor types. In addition to the expression of GALV-GP R(-) and human GM-CSF as in RP1, RP2 has been engineered to express an antibody-like molecule intended to block the activity of CTLA-4, a protein that inhibits the full activation of an immune response, including to tumors. RP3, which does not include the expression of GM-CSF, has been engineered with the intent to further stimulate an anti-tumor immune response through activation of immune co-stimulatory pathways through expression of the ligands for CD40 and 4-1BBL, in addition to anti-CTLA-4 and GALV-GP R(-).

We initiated a Phase 1 clinical trial of RP2 alone and in combination with nivolumab in the second half of 2019. This clinical trial is also being conducted as part of our collaboration with BMS, under which BMS has granted us a non-exclusive, royalty-free license to, and will supply at no cost, nivolumab, for use in combination with RP2. In November 2020, we and BMS agreed to increase the number of patients in the combination part of the clinical trial from 12 to 30 patients. In October 2020, we presented positive data from the single agent RP2 portion of the clinical trial that showed deep and durable responses, including demonstration of tumor response in uninjected lesions and in patients with difficult to treat advanced cancers. This data supports the hypothesis that anti-CTLA-4 delivered intra-tumorally through oncolytic virus replication, with accompanying antigen release and presentation, can provide potent anti-tumor effects. In June 2021 we presented a data update from both the RP2 single agent and combination portions of this clinical trial that showed compelling activity in patients with immune insensitive tumors and with anti-PD-1 failed disease. We have fully enrolled the initial 30 patient cohort evaluating RP2 in combination with nivolumab in difficult to treat cancers and we expect to provide updated data from this program in the second half of 2021. We also intend to expand this clinical trial to provide further signal confirmation for the treatment of patients with liver metastases from various tumor types. A protocol amendment to facilitate this expansion is expected to be made in the third quarter of 2021.

We have obtained clearance from the Medicines and Healthcare Products Regulatory Agency in the United Kingdom to begin clinical development with RP3 and in December 2020 we initiated dosing in this clinical trial. This Phase 1 clinical trial is designed to evaluate RP3 alone and combined with anti-PD-1 therapy in advanced solid tumor patients. Initial data from the RP3 single agent cohort is expected to be presented in the first quarter of 2022. In addition to this cohort, we expect to begin enrolling a cohort evaluating RP3 in combination with anti-PD-1 therapy in solid tumor patients by the end of 2021, with a focus on patients with lung, breast and gastrointestinal cancers including colorectal cancer.

Based on the observation of clinical responses in patients with liver metastases from a range of difficult to treat tumor types following treatment with RP1 in combination with nivolumab and/or with RP2 alone or in combination with nivolumab, and the fact that treating liver metastases is a considerable unmet need in patients with advanced cancer, we plan to initiate a clinical development program with RP2 and/or RP3 with particular focus on patients with liver metastases from a range of prevalent cancer types. We expect to initiate a multi-tumor type Phase 2 clinical program with RP2 and/or RP3 in these patients around mid-year 2022 with the details of this program, including tumor types and setting, being announced in the first quarter of 2022.

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RP1, RP2 and RP3 are administered by direct injection into solid tumors, guided either visually or by ultrasound, computerized tomography, or CT, or other imaging methods. We believe that direct injection maximizes virus-mediated tumor cell death, provides the most efficient delivery of virus-encoded immune activating proteins into the tumor with the goal of activating systemic immunity, and limits the systemic toxicities that could be associated with intravenous administration. Activation of systemic immunity through local administration is intended to lead to the induction of anti-tumor immune responses leading to clinical response of tumors that have not themselves been injected.

Financial

Since our inception, we have devoted substantially all of our resources to developing our Immulytic platform building our intellectual property portfolio, conducting research and development of our product candidates, business planning, raising capital and providing general and administrative support for our operations. To date, we have financed our operations primarily with proceeds from the sale of equity securities and to a lesser extent the proceeds from the issuance of debt securities. We do not have any products approved for sale and have not generated any revenue from product sales.

Since our initial public offering, or IPO, on July 24, 2018, we have raised an aggregate of approximately $569.0 million in net proceeds to fund our operations, of which $101.2 million was from our IPO, $463.4 million was from three separate follow-on offerings, or the Public Offerings, that we closed in November 2019, June 2020 and October 2020, respectively, and $4.4 million was from at-the-market offerings. We sold 7,407,936 shares of common stock in our IPO, an aggregate of 13,619,822 shares of our common stock and pre-funded warrants to purchase 5,284,238 shares of our common stock in the Public Offerings, and 287,559 shares of common stock through our at-the-market facility.

Funds affiliated with two separate institutional investors hold all of our outstanding pre-funded warrants. Other than as set forth in Note 8 of our condensed consolidated financial statements appearing elsewhere in this Quarterly Report, the shares of our common stock into which our outstanding pre-funded warrants are exercisable are not included in the number of issued and outstanding shares of our common stock set forth in this Quarterly Report.

In addition, on August 8, 2019, we entered into a Loan and Security Agreement with Hercules Capital, Inc., or Hercules, which we refer to as the Hercules Loan Agreement, pursuant to which we borrowed $10.0 million under a secured term loan facility in the amount of $30.0 million. The Hercules Loan Agreement was subsequently amended on June 1, 2020, in order to, among other things, increase the secured term loan facility from $30.0 million to $40.0 million. On December 15, 2020, we paid a total of $10.8 million, representing the outstanding principal, accrued and unpaid interest, fees, costs and expenses due and owing under the Hercules Loan Agreement and related loan documents, in repayment of all of our outstanding obligations thereunder, and thereby terminated the Hercules Loan Agreement and the related loan documents.

Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were $27.3 million and $17.5 million for the three months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, we had an accumulated deficit of $220.5 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We anticipate that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates, and if and as we:

•conduct our current and future clinical trials with RP1, RP2 and RP3;

•further preclinical development of our platform;

•operate our own in-house manufacturing facility;

•seek to identify and develop additional product candidates;

•seek marketing approvals for any of our product candidates that successfully complete clinical trials, if any;

•establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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•until our manufacturing facility is fully validated, continued limited manufacturing by third parties for clinical development;

•maintain, expand and protect our intellectual property portfolio;

•hire and retain additional clinical, quality control, scientific and general and administration personnel;

•acquire or in-license other drugs and technologies; and

•add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and operations as a public company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for RP1 or our other product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership in any jurisdiction, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing, and distribution.

As a result, we will need additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, lines of credit, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back, or discontinue the development and commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of June 30, 2021, we had cash and cash equivalents and short-term investments of $458.3 million. We believe that our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements through at least 12 months from the issuance of the consolidated financial statements included in this Quarterly Report.

See “—Liquidity and capital resources” and “Risk factors—Risks related to our financial position and need for additional capital.”

The COVID-19 pandemic

We are continuing to monitor the global outbreak and spread of COVID-19, including evolving COVID-19 viral strains, and have taken steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic. For example, we have implemented a global work from home policy for certain employees who are able to perform their duties remotely. For those employees working from our facilities, including certain essential employees in our laboratory and who perform manufacturing functions, and certain other employees we deem essential from time to time, we have implemented stringent safety measures designed to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic. The COVID-19 pandemic is affecting the United States and global economies and has affected and may continue to affect our operations and those of third parties on which we rely, including by causing disruptions in our raw material and anti-PD-1 supply, the manufacturing of our product candidates and our commercialization processes. In addition, timing of patient enrollment and treatment in certain of our ongoing clinical studies has been impacted by the pandemic. For example, the enrollment of our clinical trial of RP1 in liver and kidney transplant patients with CSCC, representing highly immunocompromised patient populations, has been slower than expected for reasons we attribute to the COVID-19 pandemic. However, the extent of these delays is currently unknown and has and will likely continue to vary by clinical study. In addition, we may incur unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays. 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, including new viral strains of COVID-19, the actions taken in an effort to contain it or to potentially treat or continue to vaccinate against COVID-19 and the economic impact on local, regional, national and

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international markets. We continue to actively monitor this situation and the possible effects on our financial condition, liquidity, operations, suppliers, industry and workforce. For additional information, see “Risk Factors—Our financial condition and results of operations could be adversely affected by the coronavirus disease-2019, or COVID-19, outbreak.” in Part II, Item 1A of this Quarterly Report.

Components of our results of operations

Revenue

To date, we have not generated any revenue from product sales as we do not have any approved products and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for RP1 or any other product candidates that we may develop in the future are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from those collaborations or license agreements.

Operating expenses

Our expenses since inception have consisted solely of research and development costs and general and administrative costs.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:

•expenses incurred under agreements with third parties, including clinical research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture our product candidates for use in our preclinical and clinical trials;

•salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

•costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

•the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

•costs related to compliance with regulatory requirements in connection with the development of our product candidates; and

•facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

These costs will be partially offset by our agreement with Regeneron related to our CERPASS trial.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

Our direct external research and development expenses are tracked on a program-by-program basis and consist of costs, such as fees paid to consultants, contractors, CMOs, and CROs in connection with our preclinical and clinical development activities. We do not allocate personnel costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. All non-employee costs associated with our manufacturing facility have been fully burdened to our RP1 program.

The table below summarizes our research and development expenses by product candidate or development program for each of the periods presented:

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	Three months ended June 30,
	2021		2020
	(Amounts in thousands)
Direct research and development expenses by program:
RP1	$	3,702	$	5,997
RP2	3,079		—
RP3	238		—
Unallocated research and development expenses:
Personnel related (including stock-based compensation)	9,254		5,060
Other	2,281		1,100
Total research and development expenses	$	18,554	$	12,157

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue enrollment and initiate additional clinical trials and continue to discover and develop additional product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:

•the scope, rate of progress, expense and results of our ongoing clinical trials, as well as future clinical trials or other product candidates and other research and development activities that we may conduct;

•the number and scope of preclinical and clinical programs we decide to pursue;

•our ability to maintain our current research and development programs and to establish new ones;

•uncertainties in clinical trial design;

•the rate of enrollment in clinical trials;

•the successful completion of clinical trials with safety, tolerability, and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;

•the receipt of regulatory approvals from applicable regulatory authorities;

•our success in operating our manufacturing facility, or securing manufacturing supply through relationships with third parties;

•our ability to obtain and maintain patents, trade secret protection, and regulatory exclusivity, both in the United States and internationally;

•our ability to protect our rights in our intellectual property portfolio;

•the commercialization of our product candidates, if and when approved;

•the acceptance of our product candidates, if approved, by patients, the medical community, and third-party payors;

•our ability to successfully develop our product candidates for use in combination with third-party products or product candidates;

•negative developments in the field of immuno-oncology;

•competition with other products; and

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•significant and changing government regulation and regulatory guidance.

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 another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our continued research and development and potential commercialization of our product candidates. We also expect to continue to incur increased expenses, including accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements; director and officer insurance costs; and investor and public relations costs.

Other income (expense), net

Research and development incentives

Research and development incentives consists of reimbursements of research and development expenditures. We participate, through our subsidiary in the United Kingdom, in the research and development program provided by the United Kingdom tax relief program, such that a percentage of up to 14.5% of our qualifying research and development expenditures are reimbursed by the United Kingdom government, and such incentives are reflected as other income.

Investment income

Investment income consists of income earned on our cash and cash equivalents and short-term investments.

Interest expense on finance lease liability

Interest expense on finance lease liability consists of amortization of finance charges under our financing lease.

Interest expense on debt obligations

Interest expense on debt obligations consists of the amortization of debt discount and cash paid for interest under the term loan facility with Hercules.

Loss on extinguishment of debt

Loss on extinguishment of debt consists of the loss from extinguishment of debt obligations under the term loan facility with Hercules.

Other income (expense), net

Other income (expense), net consists primarily of realized and unrealized foreign currency transaction gains and losses.

Income taxes

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Since our inception and through June 30, 2021, we have not recorded any income tax benefits for the net losses we incurred in each jurisdiction in which we operate, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards will not be realized.

Results of operations

Comparison of the three months ended June 30, 2021 and 2020

The following chart summarizes our results of operations for the three months ended June 30, 2021 and 2020:


	Three Months Ended June 30,
	2021		2020		Change
	(Amounts in thousands)
Operating expenses:
Research and development	$	18,554	$	12,157	$	6,397
General and administrative	8,827		5,676		3,151
Total operating expenses	27,381		17,833		9,548
Loss from operations	(27,381)		(17,833)		(9,548)
Other income (expense):
Research and development incentives	788		686		102
Investment income	92		527		(435)
Interest expense on finance lease liability	(558)		(561)		3
Interest expense on debt obligations	—		(284)		284
Other (expense) income	(252)		(28)		(224)
Total other income (expense), net	70		340		(270)
Net loss	$	(27,311)	$	(17,493)	$	(9,818)

Research and development expenses


	Three Months Ended June 30,
	2021	2020	Change
Direct research and development expenses by program:
RP1	3,702	5,997	(2,295)