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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, 2022
OR
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)
Delaware82-2082553
(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)
(781222-9600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareREPL
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 1, 2022 was 49,306,734.



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REPLIMUNE GROUP, INC.
FORM 10-Q
Table of Contents
Page No.

2

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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, 2022March 31, 2022
Assets
Current assets:
Cash and cash equivalents$112,245 $105,948 
Short-term investments282,837 289,707 
Research and development incentives receivable2,825 3,055 
Prepaid expenses and other current assets4,040 5,267 
Total current assets401,947 403,977 
Property, plant and equipment, net8,267 7,933 
Research and development incentives receivable, non-current821  
Restricted cash1,636 1,636 
Right-to-use asset - operating leases5,269 5,552 
Right-to-use asset - financing leases41,487 42,094 
Total assets$459,427 $461,192 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$4,482 $3,732 
Accrued expenses and other current liabilities12,215 13,392 
Operating lease liabilities, current1,036 1,070 
Financing lease liabilities, current2,581 2,562 
Total current liabilities20,314 20,756 
Operating lease liabilities, non-current4,541 4,801 
Financing lease liabilities, non-current24,310 24,406 
Total liabilities$49,165 $49,963 
Commitments and contingencies (Note 11)
Stockholders' equity
Common stock, $0.001 par value; 150,000,000 shares authorized as of June 30, 2022 and March 31, 2022; 49,298,467 and 47,338,660 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively
49 47 
Additional paid-in capital763,150 723,359 
Accumulated deficit(353,457)(311,204)
Accumulated other comprehensive income (loss)520 (973)
Total stockholders' equity410,262 411,229 
Total liabilities and stockholders' equity$459,427 $461,192 
The accompanying notes are an integral part of these condensed consolidated financial statements.


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REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
Three Months Ended June 30,
20222021
Operating expenses:
Research and development$29,478 $18,554 
Selling, general and administrative11,398 8,827 
Total operating expenses40,876 27,381 
Loss from operations(40,876)(27,381)
Other income (expense):
Research and development incentives851 788 
Investment income343 92 
Interest expense on finance lease liability(552)(558)
Other (expense) income (2,019)(252)
Total other (expense) income, net(1,377)70 
Net loss $(42,253)$(27,311)
Net loss per common share, basic and diluted$(0.78)$(0.53)
Weighted average common shares outstanding, basic and diluted54,211,446 51,910,331 
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,
20222021
Net loss$(42,253)$(27,311)
Other comprehensive loss:
Foreign currency translation gain 1,737 224 
Net unrealized loss on short-term investments, net of tax of $0
(244)(40)
Comprehensive loss$(40,760)$(27,127)
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 stockAdditional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
stockholders’
equity
SharesAmount
Balances as of March 31, 202247,338,660 $47 $723,359 $(311,204)$(973)$411,229 
Issuance of common stock through ATM sales, net of offering costs1,686,438 2 31,035 31,037 
Foreign currency translation adjustment— 1,737 1,737 
Unrealized loss on short-term investments— (244)(244)
Exercise of stock options124,028 — 1,562 1,562 
Vesting of RSUs149,341 — — — 
Stock-based compensation expense— 7,194 7,194 
Net loss— (42,253)(42,253)
Balances as of June 30, 202249,298,467 49 763,150 (353,457)520 410,262 
Balances as of March 31, 202146,566,481 $47 $692,243 $(193,168)$(394)$498,728 
Foreign currency translation adjustment— 224 224 
Unrealized loss on short-term investments— (40)(40)
Exercise of stock options163,970 — 1,173 1,173 
Stock-based compensation expense— 6,250 6,250 
Net loss— (27,311)(27,311)
Balances as of June 30, 202146,730,451 47 699,666 (220,479)(210)479,024 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three Months Ended June 30,
20222021
Cash flows from operating activities:
Net loss$(42,253)$(27,311)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense7,194 6,250 
Depreciation620 518 
Net amortization of premiums and discounts on short-term investments243 658 
Changes in operating assets and liabilities:
Research and development incentives receivable(850)(788)
Prepaid expenses and other current assets1,158 1,228 
Operating lease, right-of-use-asset126 108 
Finance lease, right-of-use-asset607 607 
Accounts payable895 66 
Accrued expenses and other current liabilities(1,067)456 
Operating lease liabilities(128)(106)
Net cash used in operating activities(33,455)(18,314)
Cash flows from investing activities:
Purchases of property, plant and equipment(1,068)(291)
Purchase of short-term investments(60,617)(32,232)
Proceeds from sales and maturities of short-term investments67,000 59,515 
Net cash provided by investing activities5,315 26,992 
Cash flows from financing activities:
Proceeds from issuance of common stock through ATM sales, net of offering costs31,037  
Principal payment of finance lease obligation(77)(53)
Proceeds from exercise of stock options1,562 1,173 
Net cash provided by financing activities32,522 1,120 
Effect of exchange rate changes on cash, cash equivalents and restricted cash1,915 212 
Net increase in cash, cash equivalents and restricted cash6,297 10,010 
Cash, cash equivalents and restricted cash at beginning of period107,584 184,154 
Cash, cash equivalents and restricted cash at end of period$113,881 $194,164 
Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable318 39 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

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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 committed to applying its leading expertise in the field of oncolytic immunotherapy to transform the lives of cancer patients through its novel tumor-directed oncolytic immunotherapies. The Company's proprietary tumor-directed oncolytic immunotherapy product candidates are designed and intended to maximally activate the immune system against 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 $42.3 million and $27.3 million for the three months ended June 30, 2022 and 2021, respectively. In addition, as of June 30, 2022, the Company had an accumulated deficit of $353.5 million. 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 these 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 may continue to be, extensive in many aspects of society, which has resulted, and may continue to result, in significant disruptions to the global economy as well as businesses and capital markets around the world.
The Company is continuing to monitor the global outbreak and spread of COVID-19 and, throughout the pandemic, has implemented measures designed to comply with applicable federal, state and local guidelines, as well as care for our employee's health and well-being. The Company will continue to examine its protocols as the pandemic and health guidance evolves. The COVID-19 pandemic continues to affect the United States and global economies and has affected and may continue to affect the Company's operations and those of third parties on which it relies, including by causing disruptions in our raw material and supply of other materials, the manufacturing of its product candidates and its commercialization processes. However, the extent of these delays is currently unknown and has and will likely continue to vary. In addition, the Company may incur unforeseen costs as a result of disruptions in raw material supplies, clinical product supplies, and preclinical studies or clinical trial delays. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's 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, 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 international markets. The Company continues to actively monitor this situation and the possible effects on its financial condition, liquidity, operations, suppliers, supplies, industry and workforce.
2. Summary of significant accounting policies
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Principles of consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("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 will directly or indirectly impact the Company's 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. The Company has made estimates of the impact of COVID-19 within the Company's financial statements and there may be changes to those estimates in future periods.
On an ongoing basis, management evaluates its estimates 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, 2022, the consolidated statements of operations, of comprehensive loss and of stockholders’ equity for the three months ended June 30, 2022 and 2021 and the consolidated statements of cash flows for the three months ended June 30, 2022 and 2021 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, 2022 and the results of its operations for the three months ended June 30, 2022 and 2021 and its cash flows for the three months ended June 30, 2022 and 2021. The financial data and other information disclosed in these consolidated notes related to the three months ended June 30, 2022 and 2021 are unaudited. The results for the three months ended June 30, 2022 are not necessarily indicative of results to be expected for the year ending March 31, 2023, 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, 2022, which was filed with the Securities and Exchange Commission on May 19, 2022 (the "Annual Report").
During the three months ended June 30, 2022, there have been no changes to the Company’s significant accounting policies as described in the Annual Report, except as described below.
Recently adopted 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 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. The Company adopted ASU 2016-13 as of April 1, 2022. The adoption of ASU 2016-13 did not 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:
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Fair Value Measurements as of
June 30, 2022 Using:
Level 1Level 2Level 3Total
Assets
Money market funds$ $82,137 $ $82,137 
US Government Agency bonds 24,527  24,527 
US Treasury bonds 258,310  258,310 
$ $364,974 $ $364,974 
Fair Value Measurements as of
March 31, 2022 Using:
Level 1Level 2Level 3Total
Assets
Money market funds$ $75,117 $ $75,117 
US Government Agency bonds 26,688  26,688 
US Treasury bonds 263,019  263,019 
$ $364,824 $ $364,824 
The underlying securities in the money market funds held by the Company are all government backed securities.
During the three months ended June 30, 2022 and 2021, 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, 2022 and March 31, 2022.
4. Short-term investments
As of June 30, 2022 and March 31, 2022, the Company's available-for-sale investments by type consisted of the following:
June 30, 2022
Amortized
cost
Gross unrealized
gains
Gross unrealized
losses
Credit LossesFair value
US Government agency bonds$24,719 $ $(192)$ $24,527 
US Treasury bonds259,644  (1,334) 258,310 
     Total$284,363 $ $(1,526)$ $282,837 
March 31, 2022
Amortized costGross unrealized gainsGross unrealized lossesCredit LossesFair value
US Government agency bonds26,827  (139)$ 26,688 
US Treasury bonds264,162  (1,143) 263,019 
     Total $290,989 $ $(1,282)$ $289,707 

As of June 30, 2022, available-for-sale securities consisted of investments that mature within one year. As of March 31, 2022, available-for-sale securities consisted of investments that mature within one year, with the exception of certain U.S. Government agency bonds and U.S. Treasury bonds which had maturities between one and two years and an aggregate fair value of $7.6 million.
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5. Property, plant and equipment, net
Property, plant and equipment, net consisted of the following:
June 30, 2022March 31, 2022
Office equipment$941 $937 
Computer equipment1,689 1,667 
Plant and laboratory equipment8,039 7,720 
Leasehold improvements1,736 785 
Construction in progress1,277 1,619 
     Total property, plant and equipment13,682 12,728 
Less: Accumulated depreciation(5,415)(4,795)
     Property, plant and equipment, net$8,267 $7,933 
Depreciation expense was $620 and $518 for the three months ended June 30, 2022 and 2021, respectively. Depreciation expense are recorded within research and development and selling, 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, 2022March 31, 2022
Accrued research and development costs$7,591 $5,882 
Accrued compensation and benefits costs3,016 5,569 
Accrued professional fees560 621 
Other1,048 1,320 
     Total accrued expenses and other current liabilities$12,215 $13,392 

7. Stockholders’ equity
Common stock
As of June 30, 2022 and March 31, 2022, 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, 2022 and March 31, 2022, the Company had reserved 18,963,578 and 16,605,804 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 8) and the exercise of the outstanding warrants to purchase shares of common stock, respectively.
Undesignated preferred stock
As of June 30, 2022, 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, 2022.
ATM program
On August 11, 2020, the Company and the SVB Leerink LLC (the "Agent") entered into a sales agreement, which was subsequently amended on October 21, 2020 (as amended, the “2020 Sales Agreement”), pursuant to which the Company could 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, through the Agent, as the Company’s sales agent.
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During the three months ended June 30, 2022, the Company settled transactions that occurred pursuant to the 2020 Sales Agreement, whereby the Company issued and sold an aggregate of 1,686,438 shares of its common stock, resulting in gross proceeds of $32.0 million, before deducting fees of $1.0 million. The Company did not issue or sell any shares under the 2020 Sales Agreement during the year ended March 31, 2022.
On June 23, 2022, the 2020 Sales Agreement was terminated by the execution by the Company and the Agent of a new sales agreement (the “2022 Sales Agreement”). Under the 2022 Sales Agreement, the Company may sell, from time to time, at its option, up to an aggregate of $100,000 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 2022 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 if authorized by the Company, in negotiated transactions or block trades, and (ii) pursuant to a registration statement on Form S-3 filed by the Company with the Securities and Exchange Commission on June 23, 2022 for an offering of up to $400,000 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 2022 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 additional Shares pursuant to the 2022 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. The Company has also agreed to provide the Agent with customary indemnification rights.
Equity offerings
In June 2020, the Company completed a public offering of (a) 3,478,261 shares of the Company’s common stock (the “June 2020 Shares”), inclusive of the June 2020 Underwriters fully exercised 30-day option to purchase 652,173 shares of the Company's common stock at a public offering price of $23.00 per share,, and (b) pre-funded warrants to purchase 1,521,738 shares of the Company’s common stock at a public offering price of $22.9999 per 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.
In October 2020, the Company completed a public offering of (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, at a public offering price of $40.00 per share and (b) pre-funded warrants to purchase 1,562,500 shares of the Company’s common stock at a public offering price of $39.9999 per 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.
The pre-funded warrants described above are exercisable at any time after the date of issuance. Unless otherwise modified by a holder of a pre-funded warrant, no holder may exercise a pre-funded warrant if such 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 a pre-funded warrant may increase or decrease this percentage up to 19.99% by providing at least 61 days’ prior notice to the Company. Certain holders have decreased the 9.99% threshold to a 4.99% threshold.
Other than as set forth in Note 8 and Note 9 to these consolidated financial statements, the 3,084,238 shares of the Company's common stock underlying the above described pre-funded warrants, and the 2,200,000 shares of the Company's common stock underlying pre-funded warrants that were issued by the Company in 2019, are not included in the number of issued and outstanding shares of the Company’s common stock set forth herein. As of June 30, 2022, no pre-funded warrants had been exercised.
8. 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,
20222021
Research and development$2,614 $2,458 
Selling, general and administrative4,580 3,792 
$7,194 $6,250 

     The following table summarizes stock-based compensation expense by award type for the three months ended June 30, 2022 and 2021:
Three Months Ended
June 30,
20222021
Stock options$5,159 $5,175 
Restricted stock units2,035 1,075 
$7,194 $6,250 
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 were granted under the 2015 Plan only to the Company’s employees, including officers and directors who were also employees. Non-statutory stock options were granted under the 2015 Plan 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 reorganization by Replimune Limited, pursuant to which each shareholder thereof exchanged their outstanding shares in Replimune Limited for shares in Replimune Group, Inc., on a one-for-one basis (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 have been or will be made under the 2015 Plan and any outstanding awards under the 2015 Plan have continued, and 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 were granted under the 2017 Plan only to the Company’s employees, including officers and directors who were also employees. Restricted stock awards and non-statutory stock options were granted under the 2017 Plan 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, 2022. 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 2018 Plan referenced below. 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 filed in connection with 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
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awards. The number of shares of common stock 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, 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 the 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, which includes for these purposes, the 5,284,238 shares issuable upon exercise of those pre-funded warrants described in Note 7 to these consolidated financial statements, or such lesser amount as determined by the Board. On April 1, 2022, the number of shares reserved for issuance under the 2018 Plan automatically increased by 2,104,915 shares pursuant to the terms of the 2018 Plan and based on total number of shares of Company stock outstanding on March 31, 2022. 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. As of June 30, 2022, 2,337,711 shares remained available for future grants under the 2018 Plan.
The 2015 Plan, the 2017 Plan and the 2018 Plan are 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 the 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 ("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 approximately equal annual installments with the first such installment occurring on a designated vesting date that is approximately on the one year anniversary of the date of grant and the subsequent installments occurring on the subsequent three annual anniversaries of the designated vesting date.
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 that was filed in connection with the Company’s IPO. The total shares of common stock initially reserved for issuance under the ESPP is 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, which includes for these purposes, the 5,284,238 shares issuable upon exercise of those pre-funded warrants described in Note 7 to these consolidated financial statements, 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, 2022 and 2021, the number of shares reserved for issuance under the ESPP automatically increased by 526,228 and 518,507 shares respectively, for a total of 2,076,603 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 a material inducement 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 was issued outside of the 2018 Plan and each 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 the Company's 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.
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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 of Replimune volatility and the historical volatility of a publicly traded set of 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,
20222021
Risk-free interest rate2.59 %1.12 %
Expected term (in years)6.06.0
Expected volatility75.6 %80.2 %
Expected dividend yield0 %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, 20226,514,334 $16.78 7.26$30,358 
Granted1,265,509 $18.08 
Exercised(124,028)$12.60 
Cancelled(144,256)$19.82 
Outstanding as of June 30, 20227,511,559 $17.01 7.47$31,884 
Options exercisable as of March 31, 20223,645,749 $10.85 6.31$24,875 
Options exercisable as of June 30, 20224,144,044 $13.15 6.36$26,859 
As of June 30, 2022, there was $46.3 million of unrecognized compensation cost related to unvested common stock options, which is expected to be recognized over a weighted average period of 2.7 years.
The weighted average grant-date fair value of stock options granted during the three months ended June 30, 2022 and 2021 was $12.15 and $22.29, respectively. The aggregate intrinsic value of stock options exercised during the three months ended June 30, 2022 was $0.5 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, 2022 is as follows:
Number of Restricted SharesWeighted
Average
Grant Date Fair Value
Outstanding as of March 31, 2022826,213 31.38 
Granted616,902 18.01 
Vested(149,341)32.92 
Cancelled(37,651)27.79 
Outstanding as of June 30, 20221,256,123 24.74 
As of June 30, 2022, there was $29.0 million of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 3.4 years. As of June 30, 2021, there was $20.9 million unrecognized compensation cost related to unvested restricted stock units.
9. Net loss per share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows:
Three Months Ended June 30,
20222021
Numerator:
Net loss $(42,253)$(27,311)
Denominator:
Weighted average common shares outstanding, basic and diluted54,211,446 51,910,331 
Net loss per share, basic and diluted$(0.78)$(0.53)
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.
The Company’s potentially dilutive securities, which include stock options and warrants to purchase common 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 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 for the periods indicated because including them would have had an anti-dilutive effect:
Three Months Ended June 30,
20222021
Options to purchase common stock7,511,559 7,411,680 
Warrants to purchase common stock497,344 497,344 
8,008,903 7,909,024 

10. 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 RP1. Under the agreement, the Company will sponsor, fund and conduct the clinical trial in accordance with an agreed-upon
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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 (x) in the event of an uncured material breach by the other party, (y) in the event the other party is insolvent or in bankruptcy proceedings or (z) 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 first 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 shares equally in development costs in accordance with and up to the amount in the agreed upon first study plan. 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 up to the amount in the study plan or modified version thereof agreed by the Joint Development Committee established to govern the collaboration. In July 2022, Regeneron informed the Company that the costs of the study have reached the initial budget for the initial study plan of June 2018 and that Regeneron's reimbursement of CERPASS study costs to the Company have completed in the period ending June 30, 2022 in relation to the initial study budget. The Company and Regeneron are in communication regarding receiving Regeneron's acknowledgement of the sharing of the study costs according to the current budget that superseded that of the initial study plan and initial budget. The true-up cost in discussion for the period ending June 30, 2022 is $1.4 million to the Company, which have not been recorded in prepaid expenses and other current assets in the consolidated balance sheet or as an offset to research and development expense within the consolidated statement of operations. During the three months ended June 30, 2022 and 2021, the Company did not make any payments to Regeneron under the terms of the agreement. During the three months ended June 30, 2022 and 2021, the Company received payments under the terms of the agreement from Regeneron of $2.0 million and $1.3 million, respectively. As of June 30, 2022 and March 31, 2022, the Company recorded $1.1 million and $2.0 million of receivables from Regeneron in connection with this agreement in prepaid expenses and other current assets in the consolidated balance sheet, respectively.
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11. Commitments and contingencies
Leases
The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheet as of June 30, 2022:
Three Months Ended June 30,
20222021
Lease cost
Finance lease costs:
Amortization of right-to-use asset$607 $607 
Interest on lease liabilities552 558 
Operating lease costs259 242 
Total lease cost$1,418 $1,407 
The following table summarizes the classification of lease costs in the consolidated statement of operations for the three months ended June 30, 2022 and 2021 as follows:
Three Months Ended June 30,
20222021
Finance Lease Costs
   Research and development$518 $518 
   Selling, general and administrative89 89 
Other income (expense)552 558 
Operating Lease Costs
Research and development110 94 
   Selling, general and administrative149 148 
Total lease cost$1,418 $1,407 
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 its balance sheet as of June 30, 2022:
June 30, 2022
Operating leasesFinancing leaseTotal
2023 (remaining nine months)$777 $1,932 $2,709 
20241,044 2,639 3,683 
20251,053 2,718 3,771 
20261,062 2,799 3,861 
20271,030 2,883 3,913 
Thereafter2,868 38,022 40,890 
Total lease payments7,834 50,993 58,827 
Less: interest2,257 24,102 26,359 
Total lease liabilities$5,577 $26,891 $32,468 
The following table provides lease disclosure as of June 30, 2022 and March 31, 2022:
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June 30, 2022March 31, 2022
Leases
Right-to-use operating lease asset$5,269 $5,552 
Right-to-use finance lease asset41,487 42,094 
Total lease assets$46,756 $47,646 
Operating lease liabilities, current$1,036 $1,070 
Finance lease liabilities, current2,581 2,562 
Operating lease liabilities, non-current4,541 4,801 
Finance lease liabilities, non-current24,310 24,406 
Total lease liabilities$32,468 $32,839 
The following table provides lease disclosure for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
20222021
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$261 $242 
Operating cash flows from finance leases$552 $558 
Financing cash flows from finance leases$77 $53 
Weighted-average remaining lease term - operating leases7.6years8.6years
Weighted-average remaining lease term - financing leases17.3years18.1years
Weighted-average discount rate - operating leases10.0 %9.9 %
Weighted-average discount rate - financing leases8.3 %8.3 %
The variable lease costs and short-term lease costs were insignificant for three months ended June 30, 2022 and 2021.
Manufacturing commitments
The Company has entered into an agreement with a contract manufacturing organization to provide clinical trial products. As of June 30, 2022 and March 31, 2022, the Company had committed to minimum payments under these arrangements totaling $1,631 and $1,951, respectively, through June 30, 2022.
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, 2022 or March 31, 2022.
Legal proceedings
The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.
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12. 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, 2022March 31, 2022
United States$6,601 $6,318 
United Kingdom1,666 1,615 
$8,267 $7,933 

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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, 2022, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.
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 through our novel tumor-directed oncolytic immunotherapies. Our proprietary tumor-directed oncolytic immunotherapy product candidates are designed and 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 other approaches to inducing anti-tumor immunity, including personalized vaccine approaches. We believe that the bundling of multiple approaches for the treatment of cancer into single therapies will increase clinical efficacy and 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.
Our proprietary RPx platform is based on a proprietary, engineered strain of herpes simplex virus 1, or HSV-1, backbone with payloads added to maximize immunogenic cell death and the induction of a systemic anti-tumor immune response. The RPx platform has a dual local and systemic mechanism of action, or MOA, consisting of direct selective virus-mediated killing of the tumor resulting in the release of tumor-derived antigens and altering of the tumor microenvironment to ignite a strong and durable systemic response. This MOA is expected to be synergistic with most established and experimental cancer treatment modalities, and, with an attractive safety profile the RPx platform is expected to have the versatility to be developed alone or combined with a variety of other treatment options. We currently have three RPx 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.
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. We are actively enrolling patients in a randomized, controlled Phase-2 clinical trial of RP1 with cutaneous squamous cell carcinoma, or CSCC, RP1’s lead indication, which is referred to herein as CERPASS or the CERPASS trial, under an agreement with our partner Regeneron Pharmaceuticals, Inc., or Regeneron.
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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 is enrolling approximately 180 evaluable patients with locally advanced or metastatic CSCC who are naïve to anti-PD1 therapy. The CERPASS trial will evaluate complete response, or CR rate, and overall response rate, or ORR, as its two primary efficacy endpoints as assessed by independent review, as well as duration of response, progression-free survival, or PFS, and overall survival, or OS, as secondary endpoints. 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 up to the amount agreed in the first study plan, and is supplying cemiplimab at no cost. We are currently in communication with Regeneron regarding receiving Regeneron's acknowledgement of the sharing of the study costs according to the current budget that superseded that of the initial study plan and initial budget. If the CERPASS 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 have enrolled the pre-specified target of 180 patients in the CERPASS trial and additional patients screened in August will also be enrolled with the last patient expected to initiate dosing this quarter. Topline primary analysis data from the CERPASS trial is expected in the first half of 2023.

We continue our collaboration with Bristol Myers Squibb Company, or BMS, under which BMS 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 a multi-cohort Phase 1/2 clinical trial which is referred to herein as IGNYTE, or the IGNYTE trial. There are four tumor specific cohorts currently enrolling in the IGNYTE trial including a registration directed Phase 2 expansion cohort enrolling 125 patients with anti-PD-1 failed cutaneous melanoma who are being treated with RP1 in combination with nivolumab. The additional three cohorts are in non-melanoma skin cancers, or NMSC, which includes patients with both naïve and anti-PD-1 failed disease, in anti-PD-1 failed microsatellite instability high, or MSI-H/dMMR tumors (which we recently changed by protocol amendment from anti-PD1 naïve disease), and in anti-PD(L)-1 failed non-small cell lung cancer, or NSCLC.

We initiated the registration directed Phase 2 expansion cohort in the IGNYTE trial enrolling 125 patients with anti-PD-1 failed cutaneous melanoma after completing enrollment in a prior Phase 2 cohort in the same clinical trial of approximately 30 patients with melanoma, which demonstrated the tolerability and clinical activity of the combination of RP1 and nivolumab in patients with melanoma, including those who had 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 the 125 patient expansion 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. In March 2022, we released updated data showing that RP1 combined with nivolumab continues to demonstrate deep and durable responses in patients with melanoma, including a 37.5% overall response rate in anti-PD-1 failed disease. We have completed enrollment of the first 75 patients in this cohort of the IGNYTE trial and expect to release a data snapshot from these patients with six months follow-up in late 2022. The data snapshot from these first 75 patients will be investigator assessed as compared to the primary endpoint of ORR for all patients in this cohort which is to be assessed by central review. In order to document sufficient durability of response, an important secondary endpoint of the study, the primary analysis upon which a filing is intended to be made, is expected to be triggered 12 months following the last patient being enrolled.

We continue to enroll patients in our three additional IGNYTE Phase-2 cohorts under our collaboration with BMS in which we are evaluating RP1 in combination with nivolumab. In NMSC, enrollment in the anti-PD-1 naïve NMSC cohort has completed, included patients with cutaneous squamous cell carcinoma, or CSCC, basal cell carcinoma, or BCC, merkel cell carcinoma, or MCC, and angiosarcoma. Updated data from the CSCC patients in the anti-PD-1 naïve NMSC cohort, presented in March 2022, continued to show nearly half of the patients achieving a complete response and nearly 65% achieving a complete or partial response. We are currently enrolling 30 patients in an extension of the NMSC cohort of RP1 in combination with nivolumab in NMSC patients who have failed prior treatment with anti-PD(L)-1. In March 2022, we reported initial data from this extension cohort where responses had been observed in anti-PD(L)-1 failed CSCC, MCC and angiosarcoma tumors. We believe the activity of RP1 combined with nivolumab in this anti-PD(L)-1 failed cohort represents a new potential therapeutic option for these patients and supports the broad potential for RP1 in anti-PD(L)-1 failed disease beyond melanoma. Recruitment remains ongoing into the cohorts of patients with anti-PD1 failed NMSC, including CSCC, anti-PD1 failed NSCLC, and anti-PD1 failed MSI-H/dMMR cancers, with a data update expected in the first half of 2023.

We also have open for enrollment a Phase 1b/2 clinical trial of single agent RP1 in solid organ transplant recipients with skin cancers, including CSCC, which is referred to herein as 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 up to 65 patients in the ARTACUS trial to assess the safety and efficacy of RP1 in liver and kidney transplant recipients with skin cancers. Enrollment in this clinical trial has been impacted by COVID-19, as the patient population is severely immune-compromised and considered very high risk. Even though the patient numbers are currently
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small, as reported in March 2022, we have observed responses in these patients with RP1as monotherapy with a similar safety profile to that observed in our other RP1 clinical trials in patients who are not immune suppressed. Enrollment continues in the ARTACUS trial and we expect to provide a data update in the first half of 2023.

In addition to these ongoing trials with RP1, we are developing a protocol for testing RP1 along and combined with an anti-PD1 therapy for the neoadjuvant treatment of CSCC. We expect to initiate this clinical trial in the first half of 2023.
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 has been engineered with the intent to further stimulate an anti-tumor immune response through activation of immune co-stimulatory pathways through the additional expression of the ligands for CD40 and 4-1BBL, as well as anti-CTLA-4 and GALV-GP R(-), but without the expression of GM-CSF.

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. We have presented data from the single agent RP2 portion of this 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. We believe that 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. We have also presented combination data from both the clinical trial that showed compelling activity in patients with immune insensitive tumors and with anti-PD-1 failed disease. In the second half of 2021, we reported full enrollment in the initial 30 patient combination with nivolumab part of the Phase 1 clinical trial following which a protocol amendment was made to expand this clinical trial to enroll additional patients who are required to have specific tumor types of interest, including gastro-intestinal cancers, breast cancer, lung cancer, head and neck cancer and uveal melanoma, rather than any type of tumor as were eligible for the initial 30 patient group. Initial data from this expanded cohort of RP2 Phase 1 patients is expected toward the end of 2022.

We have obtained clearance from the Medicines and Healthcare products Regulatory Agency in the United Kingdom to enter 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. In March 2022, we reported initial data from the single agent monotherapy cohort of RP3 in superficial and deep tumors exploring two dose levels of RP3, including injections into deep tumors. The higher dose level has been confirmed as the recommended Phase 2 dose and no new safety signals have been observed as compared to RP1 or RP2. Enrollment of the combination part of this study has begun, combining RP3 with nivolumab under a collaboration and supply agreement with BMS. This cohort is focusing on enrolling patients with gastro-intestinal cancers, breast cancer, lung cancer and head and neck cancer. Additional monotherapy patients will also be enrolled. Initial data from this expanded cohort of RP3 Phase 1 patients is expected toward the end of 2022.

We intend to initiate a Phase 2 development plan for RP2 and/or RP3 to target a range of tumor types with un-met need, including where liver tumors are common and in patients with early disease where the objective of treatment would be to increase the proportion of patients achieving cure. This includes the development of RP2 and/or RP3 in combination with the current standard of care, including immunotherapy, chemotherapy and radiation, and in settings following the current standard of care. We are planning for initial signal finding single arm Phase 2 clinical trials in the following tumor types: squamous cell carcinoma of the head and neck, or SCCHN, locally advanced and recurrent/metastatic; hepatocellular carcinoma, or HCC, both first and second line; and colorectal cancer, or CRC, third line; with additional signal finding studies intended to follow. We expect to initiate this Phase 2 development work in the first quarter of 2023.
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 proprietary RPx platform, building our intellectual property portfolio, conducting research and development of our product candidates, business planning,
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raising capital and providing general and administrative support for our operations. To date, we have incurred significant operating losses and 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. 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. 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 20, 2018, we have raised an aggregate of approximately $600.0 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 $35.4 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 common stock in the Public Offerings, and 1,973,997 shares of common stock through our at-the-market facility.
Our net losses were $42.3 million and $27.3 million for the three months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, we had an accumulated deficit of $353.5 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;
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.
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, 2022, we had cash and cash equivalents and short-term investments of $395.1 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.”
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The COVID-19 pandemic
We are continuing to monitor the global outbreak and spread of COVID-19, and, throughout the pandemic, have implemented measures designed to comply with applicable federal, state and local guidelines, as well as care for our employee's health and well-being. We will continue to examine our protocols as the pandemic and health guidance evolves. The COVID-19 pandemic We continues to affect 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. 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 raw material supplies, clinical product supplies, and preclinical studies 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, 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 international markets. We continue to actively monitor this situation and the possible effects on our financial condition, liquidity, operations, suppliers, supplies, 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 engaged in research and development functions, 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.
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These costs may be partially offset by cost-sharing arrangements under collaboration agreements from time to time.
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.
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 maintain, expand and 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
significant and changing government regulation and regulatory guidance.
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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.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate, commercial and business development and administrative functions. Selling, general and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, pre-commercial planning, 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 selling, general and administrative expenses will continue to increase in the future as we increase our selling, general and administrative headcount to support our continued research and development and pre-launch activities to prepare for 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.
Other income (expense), net
Other income (expense), net consists primarily of realized and unrealized foreign currency transaction gains and losses.
Income taxes
Since our inception and through June 30, 2022, 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, 2022 and 2021
The following chart summarizes our results of operations for the three months ended June 30, 2022 and 2021:
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Three Months Ended
June 30,
20222021Change
(Amounts in thousands)
Operating expenses:
Research and development$29,478 $18,554 $10,924 
General and administrative11,398 8,827 2,571 
Total operating expenses40,876 27,381 13,495 
Loss from operations(40,876)(27,381)(13,495)
Other income (expense):
Research and development incentives851 788 63 
Investment income343 92 251 
Interest expense on finance lease liability(552)(558)
Other (expense) income(2,019)(252)(1,767)
Total other income (expense), net(1,377)70 (1,447)
Net loss$(42,253)$(27,311)$(14,942)
Research and development expenses
Research and development expenses for the three months ended June 30, 2022 were $29.5 million, compared to $18.6 million for the three months ended June 30, 2021. The following table summarizes our research and development expenses for the three months ended June 30, 2022 and 2021:
Three Months Ended
June 30,
20222021Change
Direct research and development expenses by program:
     RP15,962 3,702 2,260 
  RP21,868 3,079 (1,211)
  RP35,008 238 4,770 
Unallocated research and development expenses:— 
      Personnel related (including stock-based compensation)12,505 9,254 3,251 
   Other4,135 2,281 1,854 
Total research and development expenses$29,478 $18,554 $10,924 
The change in our direct research and development expenses between our product candidates is associated with technology transfer, process development, qualification and comparability of our in-house manufactured materials compared to our third-party manufactured materials in readiness for utilizing our product candidates made at our in-house manufacturing facility in our clinical development programs and preparation for potential commercial manufacture, if approved.
The increase in RP1 is primarily the result of an increase in our number of clinical trial sites and patient enrollment as compared to the prior year, and reduction of costs sharing in the CERPASS trial from Regeneron during the current period as discussed in Note 10 to the consolidated financial statements appearing elsewhere in this Quarterly Report. During the three months ended June 30, 2022, manufacturing specifically focused on the technology transfers and process development from RP2 to RP3, which is the driver of the change in RP2 and RP3 program costs year over year.
The increase of $5.1 million in our unallocated expenses was due primarily to a $3.3 million increase in personnel-related costs, including a $3.1 million increase in payroll and fringe benefits and a stock-based compensation increase of $0.2 million. The increase in personnel-related costs largely reflected the hiring of additional personnel in our research and development functions as we continue to expand the development plan in multiple indications. Personnel related costs for the three months ended June 30, 2022 and 2021 included stock-based compensation expense of $2.6 million and $2.5 million, respectively.
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Selling, general and administrative expenses
Selling, general and administrative expenses were $11.4 million for the three months ended June 30, 2022, compared to $8.8 million for the three months ended June 30, 2021. The increase of $2.6 million is primarily the result of an increase of $1.4 million in personnel related costs, including a stock-based compensation increase of $0.8 million, and an increase of $0.6 million in payroll and fringe benefits. The increase in personnel related costs was driven by the continued hiring of additional personnel in our general and administrative functions, including the addition of commercial personnel associated with pre-launch commercial planning and initial build of the Company's commercial infrastructure, which accounts for approximately $0.2 million of the increase. In addition, there is an increase of approximately $0.6 million related to outside services and external expenses related to commercial planning and initial commercial activities compared to prior year, as we expand our operations.
Total other (expense) income, net
Other (expense) income was $(1.4) million for the three months ended June 30, 2022, compared to $0.1 million for the three months ended June 30, 2021. The net change of $1.4 million is primarily attributable to an increase in expense of $1.8 million in the current year compared to the prior year due to exchange rate fluctuations related to the changes in foreign exchange rates of the Great British Pound to the United States Dollar, specifically on intercompany and other non-functional currency transactions. This increased expense is somewhat offset by an increase in investment income of approximately $0.3 million.
Liquidity and capital resources
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for the foreseeable future, if at all.
Sources of liquidity
To date, we have financed our operations primarily with proceeds from the sale of equity securities and, to a lesser extent, proceeds from borrowing under a secured loan facility. Through June 30, 2022, we had received net proceeds of $686.8 million through the sale of shares of common stock in public offerings and at-the-market offerings. As of June 30, 2022, we had cash and cash equivalents and short-term investments of $395.1 million.

On June 23, 2022, in connection with our entry into a new sales agreement with the SVB Securities LLC, or the Agent, we and the Agent mutually agreed to terminate a previous sales agreement. Under the new sales agreement, we may sell, from time to time, at our option, up to an aggregate of $100 million of shares of our common stock by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, or if authorized by us, in negotiated transactions or block trade, in each case, pursuant to a registration statement on Form S-3 filed by us with the Securities and Exchange Commission on June 23, 2022.
Cash flows
The following table summarizes our cash flows for each of the periods presented:
Three Months Ended June 30, 2022
20222021
(Amounts in thousands)
Net cash used in operating activities$(33,455)$(18,314)
Net cash provided by (used in) investing activities5,315 26,992 
Net cash provided by financing activities32,522 1,120 
Effect of exchange rate changes on cash and cash equivalents1,915 212 
Net decrease in cash and cash equivalents$6,297 $10,010 
Operating activities
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During the three months ended June 30, 2022, net cash used in operating activities was $33.5 million, primarily resulting from our net loss of $42.3 million, partially offset by non-cash charges of $8.1 million, primarily consisting of stock-based compensation expense of $7.2 million, and an increase in cash of $0.7 million related to changes in our operating assets and liabilities. Changes in our operating assets and liabilities for the three months ended June 30, 2022 consisted primarily of a $1.1 million decrease in accrued expenses and other current liabilities, a $0.9 million increase in accounts payable, a $0.9 million decrease in research and development incentives receivable from the United Kingdom government due to the timing and amount of our qualifying expenditures, a net $0.6 million change in operating and financing right-of-use assets and lease liabilities, and as well as a $1.2 million increase in prepaid expenses and other current assets.
During the three months ended June 30, 2021, net cash used in operating activities was $18.3 million, primarily resulting from our net loss of $27.3 million, partially offset by non-cash charges of $7.4 million, primarily consisting of an increase in stock-based compensation expense of $3.8 million, and an increase in cash of $1.6 million related to changes in our operating assets and liabilities. Net cash used by our changes in our operating assets and liabilities for the three months ended June 30, 2021 consisted primarily of a $1.2 million increase in prepaid expenses and other current assets, a $0.8 million decrease in research and development incentives receivable from the United Kingdom government due to the timing and amount of our qualifying expenditures, a net $0.6 million increase in cash related to changes in operating and financing right-of-use assets and lease liabilities and a $0.5 million increase in accrued expenses and other current liabilities.
Investing activities
During the three months ended June 30, 2022, net cash provided by investing activities was $5.3 million, consisting of $67.0 million in proceeds from sales and maturities of short-term investments, partially offset by $60.6 million in purchases of available for sale securities and $1.1 million in purchases of property, plant and equipment.
During the three months ended June 30, 2021, net cash used in investing activities was $27.0 million, consisting of $59.5 million in proceeds from sales and maturities of short-term investments, partially offset by $32.2 million in purchases of available for sale securities and $0.3 million in purchases of property, plant and equipment.
Financing Activities
During the three months ended June 30, 2022, net cash provided by financing activities was $32.5 million, consisting primarily of $31.0 million from the issuance of common stock through ATM sales, as well as approximately $1.6 million in proceeds from the exercise of stock options.
During the three months ended June 30, 2021, net cash provided by financing activities was $1.1 million, consisting of primarily $1.2 million in proceeds from the exercise of stock options.
Funding requirements
Our plan of operation is to continue implementing our business strategy, continue research and development of RP1 and our other product candidates and continue to expand our research pipeline and our internal research and development capabilities. We expect our expenses to 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 RPx platform;
operate, qualify and maintain 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;
until our planned manufacturing facility is fully validated, continued limited manufacturing by third parties for clinical development.
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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.
As of June 30, 2022, we had cash and cash equivalents and short-term investments of $395.1 million. We believe that our existing cash, cash equivalents and short-term investments as of June 30, 2022, will enable us to fund our operations into the second half of calendar 2024, excluding any confirmatory trial required by the FDA or other regulatory body. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Because of the numerous risks and uncertainties associated with the development of RP1 and other product candidates and programs, and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including those described in this section and above under “—Operating expenses—Research and development expenses.”
Developing novel biopharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of therapies that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of our equity or convertible debt securities, our shareholders’ interest may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholder. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute your ownership interest.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations and commitments
During the three months ended June 30, 2022, there were no material changes to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the SEC on May 20, 2021.
Collaborations
BMS
In February 2018, we entered into a Clinical Trial Collaboration and Supply Agreement with Bristol-Myers Squibb Company, or BMS. Pursuant to the agreement, BMS is providing to us, at no cost, nivolumab, its anti-PD-1 therapy, for use in combination with RP1 in our ongoing Phase 1/2 clinical trial. Under the agreement, we will sponsor, fund and conduct the
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clinical trial in accordance with an agreed-upon protocol. BMS granted us a non-exclusive, non-transferrable, royalty-free license (with a right to sublicense) under its intellectual property to use nivolumab in the clinical trial and has agreed to supply nivolumab, at no cost to us, for use in the clinical trial. Both parties will own the study data produced in the clinical trial, other than study data related solely to nivolumab, which will belong solely to BMS, or study data related solely to RP1, which will belong solely to us. 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 (x) in the event of an uncured material breach by the other party, (y) in the event the other party is insolvent or in bankruptcy proceedings or (z) for safety reasons. Upon termination, the licenses granted to us to use nivolumab in the clinical trial will terminate. The agreement contains representations, warranties, undertakings and indemnities customary for a transaction of this nature.
In April 2019, we 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, at no cost to us, nivolumab for use in our Phase 1 clinical trial of RP2 in combination with nivolumab.
Regeneron
In May 2018, we entered into a Master Clinical Trial Collaboration and Supply Agreement with Regeneron Pharmaceuticals, Inc., or Regeneron. Pursuant to the agreement we agreed to undertake one or more clinical trials with Regeneron for the administration of our product candidates in combination with cemiplimab, an anti-PD-1 therapy developed by Regeneron, across multiple solid tumor types, the first of which, agreed in June 2018, is our ongoing Phase 2 clinical trial testing RP1 in combination with cemiplimab versus cemiplimab alone in patients with CSCC. Each clinical trial will be conducted pursuant to an agreed study plan which, among other things, will identify the name of the sponsor and which party will manage the particular study, and include the protocol, the budget and a schedule of clinical obligations. The first study plan related to the Phase 2 clinical trial in CSCC has been agreed.
Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license of their respective intellectual property and agreed to contribute the necessary resources needed to fulfill their respective obligations, in each case, under the terms of agreed study plans. Development costs of an agreed study plan will be split equally. In July 2022, Regeneron informed the Company that the costs of the study have reached the initial budget for the initial study plan of June 2018 and that Regeneron's reimbursement of CERPASS study costs to the Company have completed in the period ending June 30, 2022 in relation to the initial study budget. The Company and Regeneron are in communication regarding receiving Regeneron's acknowledgement of the sharing of the study costs according to the current budget that superseded that of the initial study plan and initial budget. The agreement contains representations, warranties, undertakings and indemnities customary for a transaction of this nature. The agreement also contains certain time-based covenants that restrict us from entering into a third-party arrangement with respect to the use of our product candidates in combination with an anti-PD-1 therapy and that restrict Regeneron from entering into a third-party arrangement with respect to the use of cemiplimab in combination with an HSV-1 virus, in each case, for the treatment of a tumor type that is the subject of a clinical trial to which the covenants apply. Unless otherwise mutually agreed in a future study plan, these covenants are only applicable to our ongoing Phase 2 clinical trial in CSCC.
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.
Critical accounting policies and estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our
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estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in greater detail in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Accrued research and development expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:
CROs in connection with performing research activities and conducting preclinical studies and clinical trials on our behalf;
CMOs in connection with the production of preclinical and clinical trial materials;
investigative sites or other service providers in connection with clinical trials;
vendors in connection with preclinical and clinical development activities; and
vendors related to product manufacturing and development and distribution of preclinical and clinical supplies.
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CMOs and CROs that supply, conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.
Stock-based compensation
We issue stock-based awards to employees, directors, consultants and non-employees in the form of stock options and restricted stock units. We measure such stock-based awards in accordance with ASC 718, Compensation — Stock Compensation, which requires all stock-based awards to be recognized in the consolidated statements of operations and comprehensive loss based on their fair value on the date of the grant and the related compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. We have, to date, only issued stock-based awards with service-based vesting conditions and record the expense for these awards using the straight-line method. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield. See Note 9 to our consolidated financial statements appearing elsewhere in this Quarterly Report for more information. Forfeitures are accounted for as they occur. The fair value of each stock-based award is estimated on the date of grant based on the fair value of our common stock on that same date.
We classify stock-based compensation expense in our consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
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Recently issued accounting pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report.
Emerging growth company status
As an “emerging growth company,” the Jumpstart Our Business Startups Act of 2012 permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.
Item 3. Quantitative and Qualitative Disclosures about Market Risks.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2022.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedu