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Table of Contents
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 September 30, 2023
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 Drive
Suite 303

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 November 3, 2023 was 59,059,343.



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

2

Table of Contents
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)
September 30, 2023March 31, 2023
Assets
Current assets:
Cash and cash equivalents$75,996 $146,590 
Short-term investments420,765 436,796 
Research and development incentives receivable2,900 2,939 
Prepaid expenses and other current assets8,514 6,278 
Total current assets508,175 592,603 
Property, plant and equipment, net8,445 7,479 
Research and development incentives receivable, non-current809  
Restricted cash1,636 1,636 
Right-to-use asset - operating leases4,882 5,208 
Right-to-use asset - financing leases38,451 39,665 
Total assets$562,398 $646,591 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$4,365 $5,364 
Accrued expenses and other current liabilities31,651 24,704 
Operating lease liabilities, current1,138 1,118 
Financing lease liabilities, current2,678 2,639 
Total current liabilities39,832 33,825 
Operating lease liabilities, non-current4,052 4,389 
Financing lease liabilities, non-current23,709 23,965 
Long term debt, net of discount29,161 28,648 
Other liabilities, non-current472 472 
Total liabilities$97,226 $91,299 
Commitments and contingencies (Note 14)
Stockholders' equity
Common stock, $0.001 par value; 150,000,000 shares authorized as of September 30, 2023 and March 31, 2023; 59,059,343 and 56,676,313 shares issued and outstanding as of September 30, 2023 and March 31, 2023, respectively
59 57 
Additional paid-in capital1,054,712 1,034,994 
Accumulated deficit(595,087)(485,488)
Accumulated other comprehensive income 5,488 5,729 
Total stockholders' equity465,172 555,292 
Total liabilities and stockholders' equity$562,398 $646,591 
The accompanying notes are an integral part of these condensed consolidated financial statements.

3

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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 September 30,Six Months Ended September 30,
2023202220232022
Operating expenses:
Research and development$49,101 $28,834 $89,538 $58,312 
Selling, general and administrative14,730 12,745 29,941 24,143 
Total operating expenses63,831 41,579 119,479 82,455 
Loss from operations(63,831)(41,579)(119,479)(82,455)
Other income (expense):
Research and development incentives443 574 836 1,425 
Investment income6,049 1,112 12,235 1,455 
Interest expense on finance lease liability(542)(550)(1,086)(1,102)
Interest expense on debt obligations(955) (2,070) 
Other (expense) income
(1,409)(2,659)(35)(4,678)
Total other income (expense), net3,586 (1,523)9,880 (2,900)
Loss before income taxes$(60,245)$(43,102)$(109,599)$(85,355)
Income tax (benefit)
(201)$ $ $ 
Net loss $(60,044)$(43,102)$(109,599)$(85,355)
Net loss per common share, basic and diluted$(0.90)$(0.79)$(1.65)$(1.57)
Weighted average common shares outstanding, basic and diluted66,582,280 54,770,291 66,475,577 54,492,395 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

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REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
(Unaudited)
Three Months Ended September 30,Six Months Ended September 30,
2023202220232022
Net loss$(60,044)$(43,102)$(109,599)$(85,355)
Other comprehensive loss:
Foreign currency translation gain
1,308 2,330 3 4,067 
Net unrealized loss on short-term investments, net of tax of $0
214 81 (244)(163)
Comprehensive loss$(58,522)$(40,691)$(109,840)$(81,451)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

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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, 202356,676,313 $57 $1,034,994 $(485,488)$5,729 $555,292 
Foreign currency translation adjustment— — (1,305)(1,305)
Unrealized loss on short-term investments— (458)(458)
Exercise of pre-funded warrants1,922,655 — — — 
Exercise of stock options96,146 — 1,209 — — 1,209 
Vesting of RSUs281,211 — — — 
Stock-based compensation expense— 8,846 8,846 
Net loss— (49,555)(49,555)
Balances as of June 30, 202358,976,325 57 1,045,049 (535,043)3,966 514,029 
Foreign currency translation adjustment— — — — 1,308 1,308 
Unrealized gain on short-term investments— — — — 214 214 
Exercise of stock options67,210 1 549 — — 550 
Vesting of RSUs15,808 1 — — — 1 
Stock-based compensation expense— — 9,114 — — 9,114 
Net loss— — — (60,044)— (60,044)
Balances as of September 30, 202359,059,343 59 1,054,712 (595,087)5,488 465,172 
Balances as of March 31, 202247,338,660 $47 $723,359 $(311,204)$(973)$411,229 
Issuance of common stock through ATM sales, net of offering costs1,686,438 2 31,035 31,037 
Foreign currency translation adjustment— 1,737 1,737 
Unrealized loss on short-term investments— (244)(244)
Exercise of stock options124,028 — 1,562 1,562 
Vesting of RSUs149,341 — — — 
Stock-based compensation expense— 7,194 7,194 
Net loss— (42,253)(42,253)
Balances as of June 30, 202249,298,467 49 763,150 (353,457)520 410,262 
Issuance of common stock through ATM sales, net of offering costs340,000 1 6,400 — — 6,401 
Foreign currency translation adjustment— — — — 2,330 2,330 
Unrealized gain on short-term investments— — — — 81 81 
Exercise of stock options88,252 — 1,108 — — 1,108 
Vesting of RSUs12,688 — — 
Stock-based compensation expense— — 6,992 — — 6,992 
Net loss— — — (43,102)— (43,102)
Balances as of September 30, 202249,739,407 50 777,650 (396,559)2,931 384,072 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Six Months Ended September 30,
20232022
Cash flows from operating activities:
Net loss$(109,599)$(85,355)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense17,961 14,186 
Depreciation1,275 1,237 
Net amortization of premiums and discounts on short-term investments(6,459)(161)
Noncash interest expense513  
Unrealized foreign currency transaction losses37  
Changes in operating assets and liabilities:
Research and development incentives receivable(835)(1,417)
Prepaid expenses and other current assets(2,243)159 
Operating lease, right-of-use-asset300 252 
Finance lease, right-of-use-asset1,214 1,214 
Accounts payable(1,029)698 
Accrued expenses and other current liabilities6,977 2,779 
Operating lease liabilities(290)(257)
Net cash used in operating activities(92,178)(66,665)
Cash flows from investing activities:
Purchases of property, plant and equipment and software capitalization(2,203)(1,464)
Purchase of short-term investments(281,246)(193,685)
Proceeds from sales and maturities of short-term investments303,493 200,500 
Net cash provided by investing activities20,044 5,351 
Cash flows from financing activities:
Proceeds from issuance of common stock through ATM sales, net of offering costs 37,438 
Principal payment of finance lease obligation(217)(163)
Proceeds from exercise of stock options1,760 2,670 
Net cash provided by financing activities1,543 39,945 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(3)4,351 
Net (decrease) increase in cash, cash equivalents and restricted cash(70,594)(17,018)
Cash, cash equivalents and restricted cash at beginning of period148,226 107,584 
Cash, cash equivalents and restricted cash at end of period$77,632 $90,566 
Supplemental disclosure of cash flow information:
Cash paid during the period for interest1,343  
Cash paid for income taxes
300  
Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable138 96 
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 with the mission to transform cancer treatment by pioneering the development of a novel portfolio of oncolytic immunotherapies. The Company's proprietary 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 $60.0 million and $43.1 million for the three months ended September 30, 2023 and 2022, respectively, and net losses of $109.6 million and $85.4 million for the six months ended September 30, 2023 and 2022, respectively. In addition, as of September 30, 2023, the Company had an accumulated deficit of $595.1 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.
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.
Unaudited interim financial information
The accompanying consolidated balance sheet as of September 30, 2023, the consolidated statements of operations, of comprehensive loss and of stockholders’ equity for the three and six months ended September 30, 2023 and 2022 and the consolidated statements of cash flows for the six months ended September 30, 2023 and 2022 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial
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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 September 30, 2023 and the results of its operations for the three and six months ended September 30, 2023 and 2022 and its cash flows for the six months ended September 30, 2023 and 2022. The financial data and other information disclosed in these consolidated notes related to the three and six months ended September 30, 2023 and 2022 are unaudited. The results for the three and six months ended September 30, 2023 are not necessarily indicative of results to be expected for the year ending March 31, 2024, 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, 2023, which was filed with the Securities and Exchange Commission on May 18, 2023 (the "Annual Report").
During the three and six months ended September 30, 2023, there have been no changes to the Company’s significant accounting policies as described in the Annual Report.
3. Fair value of financial assets and liabilities
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:
Fair Value Measurements as of
September 30, 2023 Using:
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$ $60,837 $ $60,837 
Short-term investments
US Government Agency bonds 266,256  266,256 
US Treasury bonds 154,509  154,509 
$ $481,602 $ $481,602 
Fair Value Measurements as of
March 31, 2023 Using:
Level 1Level 2Level 3Total
Cash equivalents
Money market funds$ $121,455 $ $121,455 
Short-term investments
US Government Agency bonds 240,355  240,355 
US Treasury bonds 196,441  196,441 
$ $558,251 $ $558,251 
The underlying securities in the money market funds held by the Company are all government backed securities.
During the three and six months ended September 30, 2023 and 2022, 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 September 30, 2023 and money market funds at March 31, 2023.
4. Short-term investments
As of September 30, 2023 and March 31, 2023, the Company's available-for-sale investments by type consisted of the following:
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September 30, 2023
Amortized
cost
Gross unrealized
gains
Gross unrealized
losses
Credit LossesFair value
US Government agency bonds$266,452 $68 $(264)$ $266,256 
US Treasury bonds154,620 1 (112) 154,509 
     Total$421,072 $69 $(376)$ $420,765 
March 31, 2023
Amortized costGross unrealized gainsGross unrealized lossesCredit LossesFair value
US Government agency bonds240,371 187 (203)$ 240,355 
US Treasury bonds196,488 77 (124) 196,441 
     Total $436,859 $264 $(327)$ $436,796 

As of September 30, 2023, available-for-sale securities consisted of investments that mature within one year. As of March 31, 2023, 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 $15.1 million.
5. Property, plant and equipment, net
Property, plant and equipment, net consisted of the following:
September 30, 2023March 31, 2023
Office equipment$1,397 $1,240 
Computer equipment1,846 1,806 
Plant and laboratory equipment9,706 9,186 
Leasehold improvements1,842 1,706 
Capitalized software724  
Construction in progress1,447 783 
     Total property, plant and equipment16,962 14,721 
Less: Accumulated depreciation(8,517)(7,242)
     Property, plant and equipment, net$8,445 $7,479 
Depreciation expense was $0.7 million and $1.3 million for the three and six months ended September 30, 2023 and $0.6 million and $1.2 million for the three and six months ended September 30, 2022, 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:
September 30, 2023March 31, 2023
Accrued research and development costs$19,945 $11,261 
Accrued compensation and benefits costs7,128 9,909 
Accrued professional fees687 540 
Other3,891 2,994 
     Total accrued expenses and other current liabilities$31,651 $24,704 

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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, could have drawn, but did not draw, down an additional $30.0 million on or prior to September 30, 2023. The Company can also draw 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 Loan Agreement was subsequently amended (the "Amendment") on June 28, 2023 pursuant to which the Company agreed to draw an initial term loan advance in an aggregate principal amount not less than $30.0 million, provided that the aggregate amount of the term loan advances made under tranche 1 do not exceed $30.0 million, which reflects a decrease of $30 million from the $60.0 million in the original Loan Agreement for tranche 1. The total amount of the Loan Agreement, as well as the outstanding balance of the loan, is unchanged, but the option to borrow an additional $30.0 million moved from tranche 1 to tranche 2. Therefore, the Amendment provides that the Company can draw down an additional $45.0 million on or prior to December 31, 2023, which includes the $30.0 million that was moved from tranche 1 to tranche 2, and the $15.0 million in the original Loan Agreement for tranche 2. The impact of this amendment is not a modification, as it does not relate to outstanding debt, but is rather an amendment that provides for a future potential benefit. There is no material impact to the financial statements as a result of the Amendment.

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 had occurred during the 12 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 the Company to maintain unrestricted cash in an amount not less than 35% of the aggregate outstanding secured obligations under the Loan Agreement 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 Company and repaid on such date, which is being accrued on the Company's consolidated balance sheet. The amount accrued for the final payment is $0.3 million as of September 30, 2023 and $0.2 million as of March 31, 2023.

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 related to the Company's right to borrow additional amounts from Hercules in the future were recorded in other assets and amortized to interest expense over the relevant draw period on a straight-line basis. As a result of the Amendment, the Company recorded $0.1 million of the remaining unamortized deferred financing costs related to the Tranche 1 delayed draw to interest expense as of September 30, 2023. Interest expense for the three months and six months ended September 30, 2023 was $1.0 million and $2.1 million.

The summary of obligations under the term loan as of September 30, 2023 and March 31, 2023 consisted of the following (in thousands):
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September 30, 2023March 31, 2023
Principal loan balance$30,453 $30,222 
Facility charge and diligence fee(293)(315)
Unamortized issuance costs(1,308)(1,410)
Accumulated end of term fee309 151 
      Long term debt, net $29,161 $28,648 



The annual principal payments due under the Loan Agreement as of September 30, 2023 and March 31, 2023 were as follows:

September 30, 2023March 31, 2023
2024  
2025  
2026  
202713,438 13,438 
Thereafter18,701 18,701 
Total$32,139 $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
As of September 30, 2023 and March 31, 2023, 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 stock 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 10) and the exercise of the outstanding warrants to purchase shares of common stock as follows:
September 30, 2023March 31, 2023
Stock options, issued and outstanding9,155,387 7,454,828 
Restricted stock units2,189,837 1,351,280 
Stock options and restricted stock units, future issuance2,064,858 2,209,597 
Employee stock purchase plan, available for future grants2,738,208 2,076,603 
Pre-IPO warrants to purchase common stock497,344 497,344 
Pre-funded warrants7,561,583 9,484,238 
     Total shares of common stock reserved for future issuance24,207,217 23,073,890 
Undesignated preferred stock
As of September 30, 2023, 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 September 30, 2023.
ATM program
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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 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.
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 could 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, through the Agent, as the Company’s sales agent. During the three and six months ended September 30, 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.
On August 3, 2023, the 2022 Sales Agreement was terminated by the execution by the Company and Leerink Partners LLC (formerly known as SVB Securities LLC) (the "Current Agent") of a new sales agreement (the "2023 Sales Agreement"). Under the 2023 Sales Agreement, the Company may sell, from time to time, at its option, up to an aggregate of $250.0 million of share of the Company's common stock, $0.001 par value shares (the "Shares"), through the Current Agent, as the Company's sales agent.
Any Shares to be offered and sold under the 2023 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 an automatically effective registration statement on Form S-3 filed by the Company with the Securities and Exchange Commission on August 3, 2023 for an offering 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 2023 Sales Agreement, the Current 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 Current 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 Current Agent with customary indemnification rights.
During the three and six months ended September 30, 2023, the Company did not issue or sell any shares under the 2023 Sales Agreement. The Company cannot provide any assurances that it will issue any additional Shares pursuant to the 2023 Sales Agreement.
Equity offerings
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 $242.6 million after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $16.1 million.
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 7,561,583 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 described below in Note 11.
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During the six months ended September 30, 2023, a holder of the Company's pre-funded warrants exercised 1,922,655 of its pre-funded warrants and the Company issued 1,922,655 shares of common stock in exchange thereof.
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
September 30,
Six Months Ended
September 30,
2023202220232022
Research and development$4,447 $2,529 $7,745 $5,143 
Selling, general and administrative4,667 4,463 10,216 9,043 
$9,114 $6,992 $17,961 $14,186 

     The following table summarizes stock-based compensation expense by award type for the three and six months ended September 30, 2023 and 2022:
Three Months Ended
September 30,
Six Months Ended September 30,
2023202220232022
Stock options$5,688 $4,845 $11,302 $10,004 
Restricted stock units3,426 2,147 6,659 4,182 
$9,114 $6,992 $17,961 $14,186 
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 September 30, 2023. 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
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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 9,484,238 shares issuable upon exercise of those pre-funded warrants as of March 31, 2023, as described in Note 9 to these consolidated financial statements, or such lesser amount as determined by the Board. On April 1, 2023, the number of shares reserved for issuance under the 2018 Plan automatically increased by 2,646,422 shares pursuant to the terms of the 2018 Plan and based on total number of shares of common stock outstanding on March 31, 2023. As of September 30, 2023, 2,064,858 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, 2023, the number of shares reserved for issuance under the ESPP automatically increased by 661,605, for a total of 2,738,208 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
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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.
In September 2023, 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 83,330 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
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
September 30,
Six Months Ended
September 30,
2023202220232022
Risk-free interest rate4.34 %3.08 %3.69 %2.61 %
Expected term (in years)6.16.16.06.0
Expected volatility72.7 %74.5 %73.9 %75.5 %
Expected dividend yield0 %0 %0 %0 %
Stock options
The following table summarizes the Company’s stock option activity:
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Number of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term (Years)
Aggregate
Intrinsic
Value
Outstanding as of March 31, 20237,454,828 $17.24 6.88$31,244 
Granted2,064,526 $18.08 
Exercised(163,356)$10.76 
Cancelled(200,611)$24.73 
Outstanding as of September 30, 20239,155,387 $17.38 6.78$27,858 
Options exercisable as of September 30, 20235,400,346 $15.28 5.60$26,556 
Options vested and expected to vest as of September 30, 20239,155,387 $17.38 6.78$27,858 
As of September 30, 2023, there was $46.4 million of unrecognized compensation cost related to unvested common stock options, which is expected to be recognized over a weighted average period of 2.7 years.
The weighted average grant-date fair value of stock options granted during the six months ended September 30, 2023 and 2022 was $12.19 and $12.20, respectively. The aggregate intrinsic value of stock options exercised during the six months ended September 30, 2023 was $1.3 million.
Restricted stock units
A summary of the changes in the Company's RSUs during the three months ended September 30, 2023 is as follows:
Number of Restricted SharesWeighted
Average
Grant Date Fair Value
Outstanding as of March 31, 20231,351,280 24.38 
Granted1,216,516 18.11 
Vested(297,019)25.36 
Cancelled(80,940)21.70 
Outstanding as of September 30, 20232,189,837 20.86 
As of September 30, 2023, there was $39.4 million of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 3.0 years.
11 Net loss per share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows:
Three Months Ended September 30,Six Months Ended September 30,
2023202220232022
Numerator:
Net loss $(60,044)$(43,102)$(109,599)$(85,355)
Denominator:
Weighted average common shares outstanding, basic and diluted66,582,280 54,770,291 66,475,577 54,492,395 
Net loss per share, basic and diluted$(0.90)$(0.79)$(1.65)$(1.57)
The 7,561,583 shares of the Company's common stock issuable upon exercise of Pre-Funded Warrants described in Note 9 to these consolidated financial statements are included as outstanding common stock in the calculation of basic and diluted net loss per share.
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The Company’s potentially dilutive securities, which include stock options and warrants to purchase shares of common stock that resulted from the conversion of warrants to purchase shares of series seed preferred stock existing before the Company's IPO, 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 and Six Months Ended September 30,
20232022
Options to purchase common stock9,155,387 7,413,466 
Unvested restricted stock units2,189,837 1,263,341 
Warrants to purchase common stock497,344 497,344 
11,842,568 9,174,151 

12 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 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 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 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 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.
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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.
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.
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. As a result of this notice from, and the ongoing communications with, Regeneron, we have not recorded any cost-sharing reimbursements from Regeneron 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 since Regeneron informed us that Regeneron’s reimbursement of CERPASS study costs have completed. The Company does not expect any further reimbursements from Regeneron related to the initial study plan of June 2018.
The Company did not record any costs as an offset to research and development expenses during the six months ended September 30, 2023, and recorded $1.1 million during the six months ended September 30, 2022. During the six months ended September 30, 2023 and 2022, the Company received payments under the terms of the agreement from Regeneron of $0.0 million and $2.0 million, respectively. No receivables from Regeneron were booked in connection with this agreement as of September 30, 2023 or March 31, 2023.
13 Collaboration and other arrangements
Roche
In December 2022, the Company announced that it had entered into a Master Clinical Trial Collaboration and Supply Agreement with Roche in relation to its RP2 and RP3 programs in colorectal cancer, or CRC, and hepatocellular carcinoma, or HCC. Under the agreement, the companies will collaborate in two 30 patient cohort signal finding studies in third-line, or 3L, CRC and two 15 patient cohort signal finding studies in second-line, or 2L, HCC. Under the terms of the agreement, the companies will share costs and Roche will supply its currently approved drugs, atezolizumab and bevacizumab for 2L HCC and 3L CRC combined with RP3. Roche will also supply atezolizumab and bevacizumab for 2L HCC and 3L CRC combined with RP2. The Company has retained the responsibility of operating the clinical trials as well as retaining all the rights to the development and commercialization of the Company's product candidates. The agreement may be terminated by either party upon sixty (60) days prior written notice to the other party.
The agreement with Roche 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 Roche in connection with this agreement as an offset to research and development expense within the consolidated statement of operations.
During the three and six months ended September 30, 2023 and 2022, the Company did not make any payments to Roche under the terms of the agreement. The Company recorded $1.0 million and $1.7 million as an offset to research and development expenses during the three and six months ended September 30, 2023, respectively. The Company did not record any costs as an offset to research and development expenses during the three and six months ended September 30, 2022. During
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the six months ended September 30, 2023 and 2022, the Company received payments under the terms of the agreement from Roche of $0.9 million and $0.0 million, respectively. As of September 30, 2023 and March 31, 2023, the Company recorded $1.7 million and $0.9 million as receivables from Roche in connection with this agreement, respectively.
Incyte

In July 2023, the Company entered into a Clinical Trial Collaboration and Supply Agreement with Incyte Corporation, or Incyte. Under the agreement, the companies will collaborate in a signal finding study in which Incyte will initiate and sponsor a clinical trial of INCB99280 (oral PD-L1 inhibitor) and RP1 in approximately 40 patients with unresectable, high risk CSCC in the neoadjuvant setting. Under the terms of the agreement, the Company will supply Incyte with RP1 for the study and share costs of the study equally with Incyte. The agreement may be terminated by either party upon (i) a material breach not reasonably cured within thirty (30) days; (ii) the discontinuation of development of its clinical drug candidate; (iii) the unethical or illegal business practices of the other party; or (iv) if the parties have not agreed on the protocol or budget within ninety (90) days of the effective date of the agreement. In addition, the Company may terminate the agreement upon the inappropriate or unsafe use of the RP1 product candidate. During the three and six months ended September 30, 2023, the Company did not make any payments to, or receive any payments from, Inctye under the terms of the agreement. Additionally, no costs were recorded to research and development expenses during the three and six months ended September 30, 2023 related to this agreement.
Amgen

In August 2023 the Company entered into a Settlement Agreement with Amgen and mutually agreed to terminate the Company's challenges to Amgen's patents. In connection with the Settlement Agreement, the Company entered into a License and Covenant Agreement with Amgen in which the Company agreed to pay Amgen low single-digit royalty payments on net sales of its products that, but for the license, could be found to infringe a valid Amgen patent on a country-by-country and product-by-product basis.
14 Commitments and contingencies
Leases
The table below presents the lease-related costs which are included in the consolidated statements of operations for the three and six months ended September 30, 2023 and 2022:
Three Months Ended September 30,Six Months Ended September 30,
2023202220232022
Lease cost
Finance lease costs:
Amortization of right-to-use asset$607 $607 $1,214 $1,214 
Interest on lease liabilities542 550 1,086 1,102 
Operating lease costs281 252 561 511 
Total lease cost$1,430 $1,409 $2,861 $2,827 
The following table summarizes the classification of lease costs in the consolidated statement of operations for the three and six months ended September 30, 2023 and 2022 as follows:
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Three Months Ended September 30,Six Months Ended September 30,
2023202220232022
Finance Lease Costs
   Research and development$607 $518 $1,214 $1,035 
   Selling, general and administrative 89  179 
Other income (expense)542 550 1,086 1,102 
Operating Lease Costs
Research and development228 103 457 213 
   Selling, general and administrative53 149 104 298 
Total lease cost$1,430 $1,409 $2,861 $2,827 
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 September 30, 2023:
September 30, 2023
Operating leasesFinancing leaseTotal
2024 (remaining six months)$568 $1,335 $1,903 
20251,143 2,718 3,861 
20261,152 2,799 3,951 
20271,120 2,883 4,003 
20281,071 2,969 4,040 
Thereafter1,891 35,054 36,945 
Total lease payments6,945 47,758 54,703 
Less: interest1,755 21,371 23,126 
Total lease liabilities$5,190 $26,387 $31,577 
The following table provides lease disclosure as of September 30, 2023 and March 31, 2023:
September 30, 2023March 31, 2023
Leases
Right-to-use operating lease asset$4,882 $5,208 
Right-to-use finance lease asset38,451 39,665 
Total lease assets$43,333 $44,873 
Operating lease liabilities, current$1,138 $1,118 
Finance lease liabilities, current2,678 2,639 
Operating lease liabilities, non-current4,052 4,389 
Finance lease liabilities, non-current23,709 23,965 
Total lease liabilities$31,577 $32,111 
The following table provides lease disclosure for the three months ended September 30, 2023 and 2022:
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Six Months Ended September 30,
20232022
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$528 $466 
Operating cash flows from finance leases$1,086 $1,102 
Financing cash flows from finance leases$217 $163 
Right-to-use asset obtained in exchange for new operating lease liabilities$ $ 
Weighted-average remaining lease term - operating leases6.1years7.1years
Weighted-average remaining lease term - financing leases15.8years16.8years
Weighted-average discount rate - operating leases10.2 %9.8 %
Weighted-average discount rate - financing leases8.3 %8.3 %
The variable lease costs and short-term lease costs were insignificant for the three and six months ended September 30, 2023 and 2022.
Manufacturing commitments
The Company has entered into an agreement with a contract manufacturing organization to provide clinical trial products. As of September 30, 2023 and March 31, 2023, the Company had committed to minimum payments under these arrangements totaling $1.0 million and $1.0 million, respectively.
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 September 30, 2023 or March 31, 2023.
Legal proceedings
The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.
15 Income taxes

The income tax (benefit) for the three months ended September 30, 2023 was $(0.2) million compared to $0.0 million for the three months ended September 30, 2022. The income tax (benefit) booked during the three months ended September 30, 2023 directly offsets the income tax provision booked during the three months ended June 30, 2023 primarily due to a decrease in forecasted income in the United States. The Company has not recorded any income tax provision (benefit) for the losses incurred based upon the weight of available evidence, that it is more likely than not that our losses will not be realized.
16 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:
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September 30, 2023March 31, 2023
United States$6,559 $5,836 
United Kingdom1,886 1,643 
$8,445 $7,479 

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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, 2023, included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.
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 oncolytic immunotherapies. Our proprietary 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 novel, 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 ends 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 establishing a major skin cancer franchise. We have completed 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.,
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or Regeneron. CERPASS is a registration directed clinical trial evaluating RP1 in combination with cemiplimab, an anti-PD-1 therapy developed by Regeneron, versus cemiplimab alone. Regeneron has granted to us a non-exclusive royalty-free license to cemiplimab for use in this trial, is supplying cemiplimab at no cost and funded one-half of the clinical trial costs up to the amount agreed in the first study plan. CERPASS enrolled 211 patients with locally advanced or metastatic CSCC who are naïve to anti-PD1 therapy. An additional 20 patients were also dosed with RP1 made at our in-house manufacturing facility. The CERPASS protocol evaluates complete response, or CR rate, and overall response rate, or ORR, as its two independent 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. As previously reported, we met with the FDA in the first quarter and discussed the rationale for the changes to the study design we made in 2020 reducing the study size from 240 to 180 patients and adding CR as a dual independent primary endpoint (the study subsequently over enrolled with 211 patients randomized, as reported in November 2022). No changes were made to the protocol as a result of the meeting. The independent review process is expected to complete shortly triggering a defined timeline to data release in early December. Assuming positive primary analysis data is generated, including demonstrating overall clinical benefit, we continue to expect to make a Biologics License Application submission for RP1 in Q2 2024.

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. The leading tumor specific cohort in the IGNYTE trial is our 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. We are also continuing enrollment into the cohorts of patients with anti-PD-1 failed non-melanoma skin cancers, or NMSC, which includes patients with both naïve and anti-PD-1 failed disease, including CSCC.

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. In December 2022, we reported data from the first 75 patients with at least six months follow-up. The data snapshot based on investigator response showed a 20% CR rate and a 36% ORR with activity across all disease stages and strong durability. In January 2023, we completed target enrollment of 125 patients with patients in screening at that time continuing to be enrolled. We completed enrollment in this cohort in March 2023, ultimately enrolling 140 patients. In June 2023, further updated data from the initial 75 patients was presented at the American Society of Clinical Oncology, or ASCO, showing RP1 combined with nivolumab continued to demonstrate deep and durable responses with a well-tolerated safety profile and no progression in responding patients since the prior data snapshot. The updated data also showed overall response rate (ORR) of 37.4%, with clinically meaningful activity across the range of anti-PD1 failed cutaneous melanoma settings enrolled, including in patients with moderate-high tumor burden and visceral disease. We remain on track to announce snapshot data for all patients (N=140) in early December 2023 by which point all patients will have had at least 6 months follow up and at which time we also expect to present the design of a confirmatory study agreed with the FDA to support the potential approval of RP1 in anti-PD1 failed melanoma via the accelerated approval pathway. Planning for the confirmatory study is underway to ensure it has commenced ahead of any BLA submission. The per protocol primary analysis will take place 12 months post the last patient enrolled and, accordingly, we plan to submit a BLA in Q3 2024.

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 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 (N=12) 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 skin cancers beyond melanoma. Recruitment remains ongoing, with a data update expected from the first 30 patients with at least 6 months follow up in December 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, kidney, heart, lung, and hematopoietic cell transplant patients transplant recipients with skin cancers. In November 2023 we presented initial data
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from the ARTACUS clinical trial of RP1 monotherapy in solid organ transplant recipients with skin cancers at the Society for Immunotherapy of Cancer’s (SITC) 38th Annual Meeting. The data included 23 evaluable patients with CSCC (n=20) and Merkel cell carcinoma (n=3), demonstrating an overall response rate (ORR) of 34.5% and a confirmed complete response rate of 21% (CR). RP1 monotherapy was well tolerated in these patients and the safety profile was similar to that observed in our other RP1 clinical trials in patients who are not immune suppressed. No immune-mediated adverse events or evidence of allograft rejection were observed.

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. 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. We plan to present updated data from this cohort of metastatic uveal melanoma patients during a Plenary Session at the 20th Annual International Society for Melanoma Research Congress on November 8, 2023.

Enrollment continues in our clinical trial designed to evaluate RP3 alone and combined with anti-PD-1 therapy in advanced solid tumor patients, focusing on enrolling patients with gastro-intestinal cancers, breast cancer, lung cancer and head and neck cancer. In December 2022, the Company presented data from its Phase 1 trial of RP3 in combination with nivolumab (N=5) in patients with multiple soft tissue sarcomas including in leiomyosarcoma, osteosarcoma, chondrosarcoma, and epithelioid sarcomas who have all failed standard of care. At the data cut-off date, 3 of 5 patients had sufficient follow-up for response assessment, and all three were responding to therapy in settings with no viable alternative treatment option, indicating the potential utility of RP3 in treating this difficult to treat tumor type.

Enrollment in the Phase 1 program with both RP2 and RP3 is materially complete. Any additional Phase 2 development programs not already announced which are driven by data from the full Phase 1 data and other opportunistic considerations are expected to be announced in early 2024.

We continue to plan for, and are initiating and conducting, our previously announced Phase 2 development program for RP2 and/or RP3. As previously announced, our initial signal finding single arm Phase 2 clinical trials are addressing 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 studies in other tumor types intended to follow. As we announced in December 2022, our signal finding studies in HCC and CRC are being developed in combination with atezolizumab and bevacizumab under a supply and cost share clinical collaboration arrangement with Roche Holding AG, or Roche. Our signal finding studies in SCCHN are planned to be developed in combination with nivolumab under our collaboration agreement with BMS.

In CRC, we have initiated the clinical trial investigating two signal finding cohorts of 30 patients each in collaboration with Roche. The first cohort is enrolling 3L patients to be treated with atezolizumab combined with bevacizumab and RP2 and the second cohort is enrolling 3L patients to be treated with atezolizumab and bevacizumab and RP3. We believe that data with both RP2 and RP3 in CRC will allow the comparative efficacy of RP2 and RP3 to be evaluated in a particularly difficult to treat patient population.

In HCC, two signal finding cohorts of 15 patients each will be enrolled in collaboration with Roche. The first cohort will enroll 2L patients treated with standard of care, or SOC, atezolizumab combined with bevacizumab and RP3, and the second cohort will enroll 2L patients treated with atezolizumab combined with bevacizumab and RP2. This clinical trial has recently initiated.

In SCCHN, the trial will be conducted under our collaboration with BMS. This study is intended to include two cohorts of patients, the first with locally advanced disease is planned to enroll approximately 100 patients
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randomized 1:1 to either SOC chemotherapy combined with radiation, or SOC combined with RP3 followed by adjuvant nivolumab therapy. The second, signal finding cohort, will enroll 30 patients with recurrent or metastatic SCCHN with low PD-L1 levels (CPS<20) who will be treated with chemotherapy, nivolumab and RP3. Due to the global shortage of cisplatin and carboplatin, initiation of this study has been on hold.

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, 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 $849.1 million in net proceeds to fund our operations, of which $101.2 million was from our IPO, $706.0 million was from four separate follow-on offerings, or the Public Offerings, that we closed in November 2019, June 2020, October 2020 and December 2022, respectively, and $41.9 million was from at-the-market offerings. We sold 7,407,936 shares of common stock in our IPO, an aggregate of 20,430,480 shares of our common stock and pre-funded warrants to purchase 9,484,238 shares of common stock in the Public Offerings, and 2,313,997 shares of common stock through our at-the-market facilities.
Our net losses were $60.0 million and $43.1 million for the three months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $595.1 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 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, protect and defend our intellectual property portfolio;
hire and retain additional clinical, quality control, scientific and general and administration personnel;
acquire or in-license other drugs, technologies or intellectual property rights; and
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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 September 30, 2023, we had cash and cash equivalents and short-term investments of $496.8 million. Based on our current operating plan, 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.”
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.
These costs may be partially offset by cost-sharing arrangements under collaboration agreements that we may enter from time to time.
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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 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. Non-employee costs associated with our manufacturing facility including depreciation, amortization and facility costs are appropriately allocated to development programs based on the percentage of time spent per 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, protect and defend 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 debt obligations
Interest expense on debt obligations consists of the amortization of debt discount and cash paid for interest under the     loan agreement with Hercules.
Interest expense on finance lease liability
Interest expense on finance lease liability consists of amortization of finance charges under our financing lease.
Other (expense) income, net
Other income (expense), net consists primarily of realized and unrealized foreign currency transaction gains and losses.
Income taxes
During the six months ended September 30, 2023 and 2022, the Company has not recorded any income tax provision (benefit) for the losses we incurred based upon the weight of available evidence, that it is more likely than not that the Company’s losses will not be realized.
The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate (“AETR”), adjusted for the effect of discrete items arising in that quarter. The impact of such inclusions could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter.
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The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets both in the United States and United Kingdom, which primarily consist of net operating loss carryforwards. The Company has considered its history of cumulative net losses, estimated future taxable income as well as prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As a result, as of September 30, 2023 and March 31, 2023, the Company has recorded a full valuation allowance against its net deferred tax assets.
Results of operations
Comparison of the three months ended September 30, 2023 and 2022
The following chart summarizes our results of operations for the three months ended September 30, 2023 and 2022:
Three Months Ended
September 30,
20232022Change
(Amounts in thousands)
Operating expenses:
Research and development$49,101 $28,834 $20,267 
Selling, general and administrative14,730 12,745 1,985 
Total operating expenses63,831 41,579 22,252 
Loss from operations(63,831)(41,579)(22,252)
Other income (expense):
Research and development incentives443 574 (131)
Investment income6,049 1,112 4,937 
Interest expense on finance lease liability(542)(550)
Interest expense on debt obligations(955)— (955)
Other (expense) income(1,409)(2,659)1,250 
Total other income (expense), net3,586 (1,523)5,109 
Loss before income taxes$(60,245)$(43,102)$(17,143)
Income tax (benefit)$(201)$— $(201)
Net loss$(60,044)$(43,102)$(16,942)
Research and development expenses
Research and development expenses for the three months ended September 30, 2023 were $49.1 million, compared to $28.8 million for the three months ended September 30, 2022. The following table summarizes our research and development expenses for the three months ended September 30, 2023 and 2022:
Three Months Ended
September 30,
20232022Change
Direct research and development expenses by program:
     RP116,623 9,531 7,092 
  RP22,895 552 2,343 
  RP34,156 2,482 1,674 
Unallocated research and development expenses:— 
      Personnel related (including stock-based compensation)20,677 12,495 8,182 
   Other4,750 3,774 976 
Total research and development expenses$49,101 $28,834 $20,267 
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. In addition, during the second quarter, the Company focused approximately two-thirds of
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manufacturing efforts on RP1 drug product fills. Clinical development expenses increased versus the prior year in preparation of primary data release and a potential BLA filing. More specifically, CRO and investigator costs, as well as RP1 imaging costs, account for approximately $7.8 million of the increase in clinical development costs year over year.
In addition, the changes in our direct research and development expenses between our product candidates is primarily associated with 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 of $9.2 million in our unallocated expenses was due to a $8.2 million increase in personnel-related costs and $1.0 million increase in other expenses. The increase in personnel-related costs included a $6.3 million increase in payroll and fringe benefits and a stock-based compensation increase of $1.9 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 September 30, 2023 and 2022 included stock-based compensation expense of $4.4 million and $2.5 million, respectively. Furthermore, the change in other expenses is primarily driven by an increase of approximately $0.4 million in consulting costs, a $0.4 million increase in conferences and exhibitions, and a $0.2 million net increase in operating and lab supplies during the quarter as compared to the prior year. These costs are somewhat offset by a decrease in other variable costs of $0.3 million. These changes are in line with increased overall clinical development costs and clinical trial activities.
Selling, general and administrative expenses
Selling, general and administrative expenses were $14.7 million for the three months ended September 30, 2023, compared to $12.7 million for the three months ended September 30, 2022. The increase of $2.0 million is primarily the result of an increase of $1.1 million in personnel related costs, including a stock-based compensation increase of $0.2 million, and an increase of $0.9 million in payroll and fringe benefits. The increase in personnel related costs was driven by the continued hiring of additional personnel in our selling, general and administrative functions, focusing on additional pre-launch planning and initial build of the Company's commercial infrastructure. Additionally, there is a net increase of $0.9 million in sales and marketing and other variable costs, which is driven by external spend increases in building and preparation for sales and marketing programs, and market research.
Total other income (expense), net
Other net income was $3.6 million for the three months ended September 30, 2023, compared to a net expense of $1.5 million for the three months ended September 30, 2022. The net change of $5.1 million is primarily attributable to an increase in investment income of $4.9 million as a result of higher interest rates during the quarter, as well as a decrease in expense of $1.2 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 British Pound Sterling to the United States Dollar, specifically on intercompany and other non-functional currency transactions. This income is partially offset by an increase in interest expense of approximately $1.0 million on debt obligations related to the Hercules Loan Agreement which we did not incur in the prior year.
Income tax (benefit) provision
The income tax (benefit) for the three months ended September 30, 2023 was $0.2 million compared to $0.0 million for the three months ended September 30, 2022. The income tax (benefit) booked during the three months ended September 30, 2023 directly offsets the income tax provision booked during the three months ended June 30, 2023 primarily due to a decrease in forecasted income in the United States. The Company has not recorded any income tax provision (benefit) for the losses incurred based upon the weight of available evidence, that it is more likely than not that our losses will not be realized.
Comparison of the six months ended September 30, 2023 and 2022
The following chart summarizes our results of operations for the six months ended September 30, 2023 and 2022:
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Six Months Ended
September 30,
20232022Change
(Amounts in thousands)
Operating expenses:
Research and development$89,538 $58,312 $31,226 
Selling, general and administrative29,941 24,143 5,798 
Total operating expenses119,479 82,455 37,024 
Loss from operations(119,479)(82,455)(37,024)
Other income (expense):
Research and development incentives836 1,425 (589)
Investment income12,235 1,455 10,780 
Interest expense on finance lease liability(1,086)(1,102)16 
Interest expense on debt obligations(2,070)— (2,070)
Other (expense) income(35)(4,678)4,643 
Total other income (expense), net9,880 (2,900)12,780 
Loss before income taxes(109,599)(85,355)(24,244)
Income tax provision— — — 
Net loss$(109,599)$(85,355)$(24,244)
Research and development expenses
<