SEC Filing | Replimune

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repl-20221231

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 December 31, 2022


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

For the transition period from to

Commission file number 001-38596

REPLIMUNE GROUP, INC.

(Exact name of registrant as specified in its charter)


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

500 Unicorn Park

Woburn MA 01801

(Address of principal executive offices)

(Zip Code)

(781) 222-9600

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

REPL

The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

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

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

Yes ☒ No ☐

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


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

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

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

No ☒

The number of shares of the registrant’s Common Stock, par value $0.001 per share, outstanding as of February 6, 2023 was 56,654,974.

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REPLIMUNE GROUP, INC.

FORM 10-Q

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			Page No.
PART I FINANCIAL INFORMATION			3

	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

		Condensed Consolidated Balance Sheets	3

		Condensed Consolidated Statements of Operations	4

		Condensed Consolidated Statements of Comprehensive Loss	5

		Condensed Consolidated Statements of Stockholders’ Equity	6

		Condensed Consolidated Statements of Cash Flows	7

		Notes to Unaudited Condensed Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

	Item 4.	Controls and Procedures	38

PART II OTHER INFORMATION			40

	Item 1.	Legal Proceedings	40

	Item 1A.	Risk Factors	40

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74

	Item 3.	Defaults Upon Senior Securities	74

	Item 4.	Mine Safety Disclosure	74

	Item 5.	Other Information	74

	Item 6.	Exhibits	75

SIGNATURES			76

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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)


	December 31, 2022		March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	206,667	$	105,948
Short-term investments	409,707		289,707
Research and development incentives receivable	1,996		3,055
Prepaid expenses and other current assets	5,591		5,267
Total current assets	623,961		403,977
Property, plant and equipment, net	7,679		7,933

Restricted cash	1,636		1,636
Right-to-use asset - operating leases	5,002		5,552
Right-to-use asset - financing leases	40,272		42,094
Total assets	$	678,550	$	461,192

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	3,648	$	3,732
Accrued expenses and other current liabilities	19,158		13,392
Operating lease liabilities, current	1,039		1,070
Financing lease liabilities, current	2,619		2,562
Total current liabilities	26,464		20,756
Operating lease liabilities, non-current	4,265		4,801
Financing lease liabilities, non-current	24,086		24,406
Long term debt, net of discount	$	28,390	$	—
Total liabilities	$	83,205	$	49,963
Commitments and contingencies (Note 13)
Stockholders' equity
Common stock, $0.001 par value; 150,000,000 shares authorized as of December 31, 2022 and March 31, 2022; 56,632,999 and 47,338,660 shares issued and outstanding as of December 31, 2022 and March 31, 2022, respectively	57		47
Additional paid-in capital	1,027,798		723,359
Accumulated deficit	(436,249)		(311,204)
Accumulated other comprehensive income (loss)	3,739		(973)
Total stockholders' equity	595,345		411,229
Total liabilities and stockholders' equity	$	678,550	$	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 December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Operating expenses:
Research and development	$	30,261	$	19,353	$	88,573	$	57,809
Selling, general and administrative	11,369		10,345		35,512		28,517
Total operating expenses	41,630		29,698		124,085		86,326
Loss from operations	(41,630)		(29,698)		(124,085)		(86,326)
Other income (expense):
Research and development incentives	607		733		2,032		2,246
Investment income	2,675		87		4,130		259
Interest expense on finance lease liability	(548)		(555)		(1,650)		(1,670)
Interest expense on debt obligations	(941)		—		(941)		—
Other income (expense)	147		(241)		(4,531)		(849)
Total other income (expense), net	1,940		24		(960)		(14)
Net loss	$	(39,690)	$	(29,674)	$	(125,045)	$	(86,340)
Net loss per common share, basic and diluted	$	(0.69)	$	(0.57)	$	(2.25)	$	(1.66)
Weighted average common shares outstanding, basic and diluted	57,857,132		52,319,877		55,618,052		52,104,548

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 December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Net loss	$	(39,690)	$	(29,674)	$	(125,045)	$	(86,340)
Other comprehensive loss:
Foreign currency translation gain	158		161		4,225		604
Net unrealized gain (loss) on short-term investments, net of tax of $0	650		(351)		487		(391)
Comprehensive loss	$	(38,882)	$	(29,864)	$	(120,333)	$	(86,127)

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 stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total stockholders’ equity
	Shares	Amount
Balances as of March 31, 2022	47,338,660	$	47	$	723,359	$	(311,204)	$	(973)	$	411,229
Issuance of common stock through ATM sales, net of offering costs	1,686,438	2		31,035		—		—		31,037
Foreign currency translation adjustment	—	—		—		—		1,737		1,737
Unrealized loss on short-term investments	—	—		—		—		(244)		(244)
Exercise of stock options	124,028	—		1,562		—		—		1,562
Vesting of RSUs	149,341	—		—		—		—		—
Stock-based compensation expense	—	—		7,194		—		—		7,194
Net loss	—	—		—		(42,253)		—		(42,253)
Balances as of June 30, 2022	49,298,467	49		763,150		(353,457)		520		410,262
Issuance of common stock through ATM sales, net of offering costs	340,000	1		6,400		—		—		6,401
Foreign currency translation adjustment	—	—		—		—		2,330		2,330
Unrealized loss on short-term investments	—	—		—		—		81		81
Exercise of stock options	88,252	—		1,108		—		—		1,108
Vesting of RSUs	12,688	—		—		—		—		—
Stock-based compensation expense	—	—		6,992		—		—		6,992
Net loss	—	—		—		(43,102)		—		(43,102)
Balances as of September 30, 2022	49,739,407	50		777,650		(396,559)		2,931		384,072
Issuance of prefunded warrants to purchase common stock				92,778						92,778
Issuance of common stock, net of issuance costs and underwriter fees	6,810,658	7		149,847						149,854
Foreign currency translation adjustment	—	—		—		—		158		158
Unrealized loss on short-term investments	—	—		—		—		650		650
Exercise of stock options	60,921	—		500		—		—		500
Vesting of RSUs	22,013	—		—		—		—		—
Stock-based compensation expense	—	—		7,023		—		—		7,023
Net loss	—	—		—		(39,690)		—		(39,690)
Balances as of December 31, 2022	56,632,999	$	57	$	1,027,798	$	(436,249)	$	3,739	$	595,345

Balances as of March 31, 2021	46,566,481	$	47	$	692,243	$	(193,168)	$	(394)	$	498,728
Foreign currency translation adjustment	—	—		—		—		224		224
Unrealized loss on short-term investments	—	—		—		—		(40)		(40)
Exercise of stock options	163,970	—		1,173		—		—		1,173
Stock-based compensation expense	—	—		6,250		—		—		6,250
Net loss	—	—		—		(27,311)		—		(27,311)
Balances as of June 30, 2021	46,730,451	47		699,666		(220,479)		(210)		479,024
Foreign currency translation adjustment	—	—		—		—		219		219

Exercise of stock options	124,880	—		1,211		—		—		1,211
Stock-based compensation expense	—	—		6,313		—		—		6,313
Net loss	—	—		—		(29,355)		—		(29,355)
Balances as of September 30, 2021	46,855,331	47		707,190		(249,834)		9		457,412
Foreign currency translation adjustment	—	—		—		—		161		161
Unrealized loss on short-term investments	—	—		—		—		(351)		(351)
Exercise of stock options	350,985	—		4,043		—		—		4,043
Stock-based compensation expense	—	—		5,918		—		—		5,918
Net loss	—	—		—		(29,674)		—		(29,674)
Balances as of December 31, 2021	47,206,316	$	47	$	717,151	$	(279,508)	$	(181)	$	437,509

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)


	Nine Months Ended December 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(125,045)	$	(86,340)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	21,209		18,481
Depreciation	1,919		1,598
Noncash interest expense	235		—
Net amortization of premiums and discounts on short-term investments	(1,782)		1,792
Changes in operating assets and liabilities:
Research and development incentives receivable	812		700
Prepaid expenses and other current assets	(396)		(934)
Operating lease, right-of-use-asset	382		(29)
Finance lease, right-of-use-asset	1,821		1,821
Accounts payable	357		1,193
Accrued expenses and other current liabilities	5,625		2,047
Operating lease liabilities	(391)		48
Net cash used in operating activities	(95,254)		(59,623)
Cash flows from investing activities:
Purchases of property, plant and equipment	(2,019)		(1,184)
Purchase of short-term investments	(433,911)		(192,546)
Proceeds from sales and maturities of short-term investments	316,180		196,250
Net cash used in investing activities	(119,750)		2,520
Cash flows from financing activities:
Proceeds from issuance of common stock, net of underwriting fees and discounts	150,102		—
Proceeds from issuance of prefunded warrants to purchase common stock, net of underwriting fees and discounts	92,778		—
Proceeds from issuance of common stock through ATM sales, net of offering costs	37,438		—
Proceeds from long-term debt	30,000		—
Payment of debt issuance costs	(1,846)		—
Principal payment of finance lease obligation	(262)		(188)
Proceeds from exercise of stock options	3,170		6,427
Net cash provided by financing activities	311,380		6,239
Effect of exchange rate changes on cash, cash equivalents and restricted cash	4,343		621
Net decrease in cash, cash equivalents and restricted cash	100,719		(50,243)
Cash, cash equivalents and restricted cash at beginning of period	107,584		184,154
Cash, cash equivalents and restricted cash at end of period	$	208,303	$	133,911

Supplemental disclosure of non-cash investing and financing activities:
Common stock issuance costs included in accrued expenses	249		—
Purchases of property and equipment included in accounts payable	19		491
Lease assets obtained in exchange for new operating lease liabilities	—		365

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

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REPLIMUNE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

1. Nature of the business

Replimune Group, Inc. (the “Company”) is a clinical-stage biotechnology company 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, third-party intellectual property, 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 $39.7 million and $29.7 million for the three months ended December 31, 2022 and 2021, respectively and net losses of $125.0 million and $86.3 million for the nine months ended December 31, 2022 and 2021, respectively. In addition, as of December 31, 2022, the Company had an accumulated deficit of $436.2 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 generally monitor the 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 the Company's 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 developing 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 monitor this situation and the possible effects on its financial condition, liquidity, operations, suppliers, supplies, industry and workforce.

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2. Summary of significant accounting policies

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 December 31, 2022, the consolidated statements of operations, of comprehensive loss and of stockholders’ equity for the three and nine months ended December 31, 2022 and 2021 and the consolidated statements of cash flows for the nine months ended December 31, 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 December 31, 2022 and the results of its operations for the three and nine months ended December 31, 2022 and 2021 and its cash flows for the nine months ended December 31, 2022 and 2021. The financial data and other information disclosed in these consolidated notes related to the three and nine months ended December 31, 2022 and 2021 are unaudited. The results for the three and nine months ended December 31, 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 and nine months ended December 31, 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

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


	Fair Value Measurements as of December 31, 2022 Using:
	Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	—	$	174,237	$	—	$	174,237
US Government Agency bonds	—		140,840		—		140,840
US Treasury bonds	—		268,867		—		268,867
	$	—	$	583,944	$	—	$	583,944


	Fair Value Measurements as of March 31, 2022 Using:
	Level 1		Level 2		Level 3		Total
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 and nine months ended December 31, 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 December 31, 2022 and March 31, 2022.

4. Short-term investments

As of December 31, 2022 and March 31, 2022, the Company's available-for-sale investments by type consisted of the following:


	December 31, 2022
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Credit Losses		Fair value
US Government agency bonds	$	141,109	$	46	$	(315)	$	—	$	140,840
US Treasury bonds	269,393		18		(544)		—		268,867
Total	$	410,502	$	64	$	(859)	$	—	$	409,707


	March 31, 2022
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Credit Losses		Fair value
US Government agency bonds	26,827		—		(139)		$	—	26,688
US Treasury bonds	264,162		—		(1,143)		—		263,019
Total	$	290,989	$	—	$	(1,282)	$	—	$	289,707

As of December 31, 2022, available-for-sale securities consisted of investments that mature within one year, with the exception of certain U.S. Government agency bonds which have maturities between one and two years and an aggregate fair value of $24.0 million. As of March 31, 2022, available-for-sale securities consisted of investments that mature within one year,

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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.

5. Property, plant and equipment, net

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


	December 31, 2022		March 31, 2022
Office equipment	$	1,113	$	937
Computer equipment	1,899		1,667
Plant and laboratory equipment	9,042		7,720
Leasehold improvements	1,706		785
Construction in progress	633		1,619
Total property, plant and equipment	14,393		12,728
Less: Accumulated depreciation	(6,714)		(4,795)
Property, plant and equipment, net	$	7,679	$	7,933

Depreciation expense was $682 and $1,919 for the three and nine months ended December 31, 2022 and $548 and $1,598 for the three and nine months ended December 31, 2021, respectively. Depreciation expense is 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:


	December 31, 2022		March 31, 2022
Accrued research and development costs	$	9,999	$	5,882
Accrued compensation and benefits costs	7,339		5,569
Accrued professional fees	674		621
Other	1,146		1,320
Total accrued expenses and other current liabilities	$	19,158	$	13,392

7 Debt

On October 6, 2022, the Company entered into a Loan and Security Agreement (the “Loan Agreement”), with Hercules Capital, Inc., as administrative agent, collateral agent and as a lender (“Hercules”). Pursuant to the Loan Agreement, the Company can borrow term loans in an aggregate maximum principal amount of up to $200.0 million under multiple tranches (the “Term Loan Facility”). Under the Loan Agreement, the Company borrowed an initial amount of $30.0 million on the Closing Date, and at the Company's sole option, can draw down an additional $30.0 million on or prior to September 30, 2023, as well as additional term loan advances in an aggregate principal amount of up to $115.0 million during the term of the Term Loan Facility subject to achievement of specified performance milestones, and two additional term loan advances up to an aggregate principal amount of $25.0 million subject to certain terms and conditions, on or prior to the end of the interest-only period. The Company intends to use the proceeds of the Term Loan Facility for working capital and general corporate purposes.

The Term Loan Facility will mature on October 1, 2027 (the “Maturity Date”). The outstanding principal balance of the Term Loan Facility bears interest payable in cash at a floating rate per annum equal to the greater of (i) 7.25% and (ii) the sum of the Prime Rate (which is capped at 7.25%) and 1.75%. Accrued interest is payable monthly following the funding of each term loan advance. In addition, the principal balance of the Term Loan Facility will bear “payment-in-kind” interest at the rate of 1.50% (“PIK Interest”), which PIK Interest will be added to the outstanding principal balance of the Term Loan Facility on each interest payment date.

Borrowings under the Loan Agreement are repayable in monthly interest-only payments through September 2026. After the interest-only payment period, borrowings under the Loan Agreement are repayable in equal monthly payments of principal and accrued interest until October 2027. At the Company's option, the Company may prepay all or a portion of the outstanding borrowings, subject to a prepayment fee of 3.0% of the principal amount if prepayment occurs during the 12

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months following the Closing Date, 2.0% after 12 months following the Closing Date but prior to 36 months following the Closing Date, and 1.0% thereafter.

The Loan Agreement contains customary facility fees, events of default and representations, warranties and affirmative and negative covenants, including a financial covenant requiring us to maintain certain levels of cash in accounts subject to a control agreement in favor of the Agent (the “Unrestricted Cash”) at all times commencing on January 1, 2024. In addition, the Loan Agreement also contains a financial covenant that beginning on the later of (i) July 1, 2024 and (ii) the date on which the aggregate outstanding principal amount of the Term Loan Facility is equal to or greater than $100.0 million, the Company is required to satisfy one of the following requirements: (1) achieve a minimum amount of trailing three-month net product revenue tested on a monthly basis, (2) maintain a market capitalization in excess of $1.2 billion and Unrestricted Cash in an amount no less than 50% of the outstanding amount under the Term Loan Facility, or (3) maintain Unrestricted Cash in an amount no less than 85% of the outstanding amount under the Term Loan Facility.

The Company paid a $0.5 million facility charge and incurred debt issuance costs of $1.5 million upon closing of the Loan Agreement. The Loan Agreement also provides for a final payment, payable upon maturity or the repayment of the obligations in full or in part (on a pro rata basis), equal to 4.95% of the aggregate principal amount of Term Loans advanced to the Borrower and repaid on such date, which is being accrued on the Company's consolidated balance sheet. As of December 31, 2022, the amount accrued for the final payment is $0.1 million.

Unamortized debt issuance costs are recorded as a reduction of the carrying amount on the term loan and amortized as interest expense using the effective-interest method. In addition, unamortized deferred financing costs of $0.3 million were recorded in other assets as of December 31, 2022 related to the Company's right to borrow additional amounts from Hercules in the future and amortized to interest expense over the relevant draw period on a straight-line basis. Interest expense for the three and nine months ended December 31, 2022 was $0.9 million.

The summary of obligations under the term loan as of December 31, 2022 consisted of the following (in thousands):


	December 31, 2022
Principal loan balance	$	30,109
Facility charge and diligence fee	(328)
Unamortized issuance costs	(1,465)
Accumulated end of term fee	74
Long term debt, net	$	28,390

The annual principal payments due under the Loan Agreement as of December 31, 2022 were as follows:


	December 31, 2022
2023 (remaining 3 months)	—
2024	—
2025	—
2026	—
2027	13,438
Thereafter	18,701
Total	$	32,139

The table of future payments of long-term debt excludes the end of term charge of $1.5 million, which is due upon the maturity of the loan

8 Stockholders’ equity

Common stock

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As of December 31, 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.

The Company had reserved for 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 as follows:


	December 31, 2022	March 31, 2022
Stock options, issued and outstanding	7,510,458	6,514,334
Restricted stock units	1,353,745	826,213
Stock options and restricted stock units, future issuance	2,194,816	1,933,300
Employee stock purchase plan, available for future grants	2,076,603	1,550,375
Pre-IPO warrants to purchase common stock	497,344	497,344
Pre-funded warrants	9,484,238	5,284,238
Total shares of common stock reserved for future issuance	23,117,204	16,605,804

Undesignated preferred stock

As of December 31, 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 December 31, 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 $62.5 million of shares of the Company’s common stock, $0.001 par value per share, through the Agent, as the Company’s sales agent.

During the nine months ended December 31, 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 nine months ended December 31, 2021.

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 $100.0 million 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 $400.0 million 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 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.

During the nine months ended December 31, 2022, pursuant to the 2022 Sales Agreement, the Company issued and sold an aggregate of 340,000 shares of its common stock, resulting in gross proceeds of $6.7 million, before deducting fees of $0.3 million. The Company cannot provide any assurances that it will issue any additional Shares pursuant to the 2022 Sales Agreement.

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The Company did not issue or sell any shares under the 2020 Sales Agreement or the 2022 Sales Agreement during the three and nine months ended December 31, 2022.

Equity offerings

In November 2019, the Company completed a public offering of (a) 4,516,561 shares of the Company's common stock at a public offering price of $13.61 per share, and (b) pre-funded warrants to purchase 2,200,000 shares of the Company's common stock at a public offering price of $13.6099 per warrant. The Company received aggregate net proceeds of approximately $85,598 after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $5,814.

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.

In December 2022, the Company completed a public offering of (a) 6,810,658 shares of the Company’s common stock, inclusive of the underwriters 30-day option to purchase up to an additional 1,436,172 shares of the Company’s common stock, at a public offering price of $23.50 per share and (b) pre-funded warrants to purchase 4,200,000 shares of the Company’s common stock at a public offering price of $23.4999 per warrant. The Company received aggregate net proceeds of approximately $242,631 after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $16,119.

9 Pre-funded Warrants

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 of 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.

The 9,484,238 shares of the Company's common stock underlying the above described pre-funded warrants, are not included in the number of issued and outstanding shares of the Company’s common stock outstanding as reported on the consolidated balance sheet, though they are included in the Company's annual pool increase calculation as well as the weighted average outstanding common stock in the calculation of basic and diluted net loss per share, as noted below in Note 10. As of December 31, 2022, no pre-funded warrants had been exercised.

10 Stock-based compensation

Stock-based compensation expense

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


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Research and development	$	2,600	$	1,829	$	7,743	$	6,514
Selling, general and administrative	4,423		4,089		13,466		11,967
	$	7,023	$	5,918	$	21,209	$	18,481

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The following table summarizes stock-based compensation expense by award type for the three and nine months ended December 31, 2022 and 2021:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Stock options	$	4,811	$	4,517	$	14,815	$	14,785
Restricted stock units	2,212		1,401		6,394		3,696
	$	7,023	$	5,918	$	21,209	$	18,481

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 December 31, 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 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 common 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 9 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

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number of shares of common 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 December 31, 2022, 2,194,816 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 9,484,238 shares issuable upon exercise of those pre-funded warrants described in Note 9 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 Grants

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.

In December 2022, 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 82,500 shares of the Company's common stock, as well as a restricted stock unit grant representing 55,000 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.

Stock option valuation

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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 December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Risk-free interest rate	3.93	%	1.27	%	2.78	%	1.12	%
Expected term (in years)	6.1		6.0		6.0		6.0
Expected volatility	73.7	%	78.3	%	75.3	%	80.0	%
Expected dividend yield	0	%	0	%	0	%	0	%

Stock options

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


	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of March 31, 2022	6,514,334	$	16.78	7.26	$	30,358
Granted	1,514,524	$	18.78
Exercised	(273,201)	$	11.61
Cancelled	(245,199)	$	22.75
Outstanding as of December 31, 2022	7,510,458	$	17.17	7.12	$	85,400
Options exercisable as of March 31, 2022	3,645,749	$	10.85	6.31	$	24,875
Options exercisable as of December 31, 2022	4,504,534	$	14.07	6.14	$	63,812

As of December 31, 2022, there was $39.4 million of unrecognized compensation cost related to unvested common stock options, which is expected to be recognized over a weighted average period of 2.4 years.

The weighted average grant-date fair value of stock options granted during the nine months ended December 31, 2022 and 2021 was $12.64 and $22.25, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended December 31, 2022 was $2.3 million.

Restricted stock units

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A summary of the changes in the Company's RSUs during the nine months ended December 31, 2022 is as follows:


	Number of Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2022	826,213	31.38
Granted	782,862	18.93
Vested	(184,042)	32.38
Cancelled	(71,288)	26.38
Outstanding as of December 31, 2022