SEC Filing | Replimune

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repl-20231231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended December 31, 2023


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

For the transition period from to

Commission file number 001-38596

REPLIMUNE GROUP, INC.

(Exact name of registrant as specified in its charter)


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

500 Unicorn Park Drive

Suite 303

Woburn MA 01801

(Address of principal executive offices)

(Zip Code)

(781) 222-9600

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

REPL

The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

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

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

Yes ☒ No ☐

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


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

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

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

No ☒

The number of shares of the registrant’s Common Stock, par value $0.001 per share, outstanding as of February 5, 2024 was 61,387,786.

Table of Conte nts

REPLIMUNE GROUP, INC.

FORM 10-Q

Table of Contents


			Page No.
PART I FINANCIAL INFORMATION			3

	Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3

		Condensed Consolidated Balance Sheets	3

		Condensed Consolidated Statements of Operations	4

		Condensed Consolidated Statements of Comprehensive Loss	5

		Condensed Consolidated Statements of Stockholders’ Equity	6

		Condensed Consolidated Statements of Cash Flows	7

		Notes to Unaudited Condensed Consolidated Financial Statements	8

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

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

	Item 4.	Controls and Procedures	38

PART II OTHER INFORMATION			40

	Item 1.	Legal Proceedings	40

	Item 1A.	Risk Factors	40

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

	Item 3.	Defaults Upon Senior Securities	76

	Item 4.	Mine Safety Disclosure	76

	Item 5.	Other Information	76

	Item 6.	Exhibits	76

SIGNATURES			78

Table of Conte nts

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


	December 31, 2023		March 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	97,672	$	146,590
Short-term investments	368,679		436,796
Research and development incentives receivable	4,295		2,939
Prepaid expenses and other current assets	8,518		6,278
Total current assets	479,164		592,603
Property, plant and equipment, net	9,473		7,479
Restricted cash	1,636		1,636
Right-to-use asset - operating leases	4,813		5,208
Right-to-use asset - financing leases	37,844		39,665
Total assets	$	532,930	$	646,591

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	3,903	$	5,364
Accrued expenses and other current liabilities	30,886		24,704
Operating lease liabilities, current	1,163		1,118
Financing lease liabilities, current	2,698		2,639
Total current liabilities	38,650		33,825
Operating lease liabilities, non-current	3,955		4,389
Financing lease liabilities, non-current	23,561		23,965
Long term debt, net of discount	44,434		28,648
Other liabilities, non-current	793		472
Total liabilities	$	111,393	$	91,299
Commitments and contingencies (Note 14)
Stockholders' equity
Common stock, $0.001 par value; 150,000,000 shares authorized as of December 31, 2023 and March 31, 2023; 61,387,786 and 56,676,313 shares issued and outstanding as of December 31, 2023 and March 31, 2023, respectively	61		57
Additional paid-in capital	1,062,949		1,034,994
Accumulated deficit	(646,207)		(485,488)
Accumulated other comprehensive income	4,734		5,729
Total stockholders' equity	421,537		555,292
Total liabilities and stockholders' equity	$	532,930	$	646,591

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

Table of Conte nts

REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	42,847	$	30,261	$	132,384	$	88,573
Selling, general and administrative	13,693		11,369		43,633		35,512
Total operating expenses	56,540		41,630		176,017		124,085
Loss from operations	(56,540)		(41,630)		(176,017)		(124,085)
Other income (expense):
Research and development incentives	415		607		1,251		2,032
Investment income	5,686		2,675		17,922		4,130
Interest expense on finance lease liability	(540)		(548)		(1,626)		(1,650)
Interest expense on debt obligations	(1,012)		(941)		(3,083)		(941)
Other income (expense)	1,344		147		1,307		(4,531)
Total other income (expense), net	5,893		1,940		15,771		(960)
Loss before income taxes	$	(50,647)	$	(39,690)	$	(160,246)	$	(125,045)
Income tax provision	473		$	—	$	473	$	—
Net loss	$	(51,120)	$	(39,690)	$	(160,719)	$	(125,045)
Net loss per common share, basic and diluted	$	(0.77)	$	(0.69)	$	(2.42)	$	(2.25)
Weighted average common shares outstanding, basic and diluted	66,645,691		57,857,132		66,532,488		55,618,052

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

Table of Conte nts

REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

(Unaudited)


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Net loss	$	(51,120)	$	(39,690)	$	(160,719)	$	(125,045)
Other comprehensive loss:
Foreign currency translation (loss) gain	(1,288)		158		(1,285)		4,225
Net unrealized gain on short-term investments, net of tax of $0	534		650		290		487
Comprehensive loss	$	(51,874)	$	(38,882)	$	(161,714)	$	(120,333)

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

Table of Conte nts

REPLIMUNE GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)


	Common stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total stockholders’ equity
	Shares	Amount
Balances as of March 31, 2023	56,676,313	$	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 warrants	1,922,655	—		—		—		—		—
Exercise of stock options	96,146	—		1,209		—		—		1,209
Vesting of RSUs	281,211	—		—		—		—		—
Stock-based compensation expense	—	—		8,846		—		—		8,846
Net loss	—	—		—		(49,555)		—		(49,555)
Balances as of June 30, 2023	58,976,325	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 options	67,210	1		549		—		—		550
Vesting of RSUs	15,808	1		—		—		—		1
Stock-based compensation expense	—	—		9,114		—		—		9,114
Net loss	—	—		—		(60,044)		—		(60,044)
Balances as of September 30, 2023	59,059,343	59		1,054,712		(595,087)		5,488		465,172


Foreign currency translation adjustment	—	—		—		—		(1,288)		(1,288)
Unrealized gain on short-term investments	—	—		—		—		534		534
Exercise of pre-funded warrants	2,279,967	2		(4)		—		—		(2)

Vesting of RSUs	48,476	—		—		—		—		—
Stock-based compensation expense	—	—		8,241		—		—		8,241
Net loss	—	—		—		(51,120)		—		(51,120)
Balances as of December 31, 2023	61,387,786	$	61	$	1,062,949	$	(646,207)	$	4,734	$	421,537

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

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

Table of Conte nts

REPLIMUNE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine Months Ended December 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(160,719)	$	(125,045)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	26,201		21,209
Depreciation	1,950		1,919
Net amortization of premiums and discounts on short-term investments	(9,515)		(1,782)
Noncash interest expense	786		235
Unrealized foreign currency transaction (gains) losses	(1,307)		—
Changes in operating assets and liabilities:
Research and development incentives receivable	(1,249)		812
Prepaid expenses and other current assets	(2,211)		(396)
Operating lease, right-of-use-asset	437		382
Finance lease, right-of-use-asset	1,821		1,821
Accounts payable	(1,505)		357
Accrued expenses and other current liabilities	6,123		5,625
Operating lease liabilities	(433)		(391)
Other non-current liabilities	320		—
Net cash used in operating activities	(139,301)		(95,254)
Cash flows from investing activities:
Purchases of property, plant and equipment and software capitalization	(3,922)		(2,019)
Purchase of short-term investments	(381,115)		(433,911)
Proceeds from sales and maturities of short-term investments	459,037		316,180
Net cash provided by investing activities	74,000		(119,750)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of underwriting fees and discounts	—		150,102
Proceeds from issuance of prefunded warrants to purchase common stock, net of underwriting fees and discounts	—		92,778
Proceeds from issuance of common stock through ATM sales, net of offering costs	—		37,438
Proceeds from long-term debt	15,000		30,000
Payment of debt issuance costs	—		(1,846)
Principal payment of finance lease obligation	(345)		(262)
Proceeds from exercise of stock options	1,758		3,170
Net cash provided by financing activities	16,413		311,380
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(30)		4,343
Net (decrease) increase in cash, cash equivalents and restricted cash	(48,918)		100,719
Cash, cash equivalents and restricted cash at beginning of period	148,226		107,584
Cash, cash equivalents and restricted cash at end of period	$	99,308	$	208,303

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	2,036		—
Cash paid for income taxes	300		—

Supplemental disclosure of non-cash investing and financing activities:
Common stock issuance costs included in accrued expenses	—		249
Purchases of property and equipment included in accounts payable	127		19

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

Table of Conte nts

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.

The Company's proprietary oncolytic immunotherapy product candidates, the RPx product candidates, are based on a novel, engineered strain of herpes simplex virus 1, or HSV-1, backbone with added payloads intended to maximize immunogenic cell death and the induction of a systemic anti-tumor immune response. The Company currently has three RPx product candidates, RP1, RP2 and RP3. RP1 is currently under development in multiple clinical trials, the most advanced being the anti-PD1 failed melanoma cohort of the IGNYTE clinical trial. RP2 is currently in clinical development with planning underway for a potentially registration enabling clinical trial in uveal melanoma. As reported in December 2023, our randomized, controlled Phase-2 clinical trial of RP1 with cutaneous squamous cell carcinoma, referred to as CERPASS or the CERPASS trial, did not meet either of the two primary endpoints and development efforts on RP3 have been deprioritized.

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 $51.1 million and $39.7 million for the three months ended December 31, 2023 and 2022, respectively, and net losses of $160.7 million and $125.0 million for the nine months ended December 31, 2023 and 2022, respectively. In addition, as of December 31, 2023, the Company had an accumulated deficit of $646.2 million. The Company expects to continue to generate operating losses for the foreseeable future. As of the issuance date of these consolidated financial statements, the Company expects that its cash and cash equivalents and short-term investments will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance of these consolidated financial statements.

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

Table of Conte nts

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 December 31, 2023, the consolidated statements of operations, of comprehensive loss and of stockholders’ equity for the three and nine months ended December 31, 2023 and 2022 and the consolidated statements of cash flows for the nine months ended December 31, 2023 and 2022 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of December 31, 2023 and the results of its operations for the three and nine months ended December 31, 2023 and 2022 and its cash flows for the nine months ended December 31, 2023 and 2022. The financial data and other information disclosed in these consolidated notes related to the three and nine months ended December 31, 2023 and 2022 are unaudited. The results for the three and nine months ended December 31, 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 nine months ended December 31, 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 December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	—	$	63,715	$	—	$	63,715

Short-term investments
US Government Agency bonds	—		216,058		—		216,058
US Treasury bonds	—		152,621		—		152,621
	$	—	$	432,394	$	—	$	432,394


	Fair Value Measurements as of March 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
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 nine months ended December 31, 2023 and 2022, there were no transfers between levels.

Valuation of cash equivalents and short-term investments

Table of Conte nts

Money market funds, U.S. Government Agency bonds and U.S. Treasury bonds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. Cash equivalents consisted of money market funds at December 31, 2023 and money market funds at March 31, 2023.

4. Short-term investments

As of December 31, 2023 and March 31, 2023, the Company's available-for-sale investments by type consisted of the following:


	December 31, 2023
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Credit Losses		Fair value
US Government agency bonds	$	215,974	$	188	$	(104)	$	—	$	216,058
US Treasury bonds	152,478		153		(10)		—		152,621
Total	$	368,452	$	341	$	(114)	$	—	$	368,679


	March 31, 2023
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Credit Losses		Fair value
US Government agency bonds	240,371		187		(203)		$	—	240,355
US Treasury bonds	196,488		77		(124)		—		196,441
Total	$	436,859	$	264	$	(327)	$	—	$	436,796

As of December 31, 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:


	December 31, 2023		March 31, 2023
Office equipment	$	1,464	$	1,240
Computer equipment	1,975		1,806
Plant and laboratory equipment	10,309		9,186
Leasehold improvements	1,880		1,706
Capitalized software	1,991		—
Construction in progress	1,046		783
Total property, plant and equipment	18,665		14,721
Less: Accumulated depreciation	(9,192)		(7,242)
Property, plant and equipment, net	$	9,473	$	7,479

Depreciation expense was $0.7 million and $2.0 million for the three and nine months ended December 31, 2023 and $0.7 million and $1.9 million for the three and nine months ended December 31, 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:

Table of Conte nts


	December 31, 2023		March 31, 2023
Accrued research and development costs	$	16,521	$	11,261
Accrued compensation and benefits costs	10,195		9,909
Accrued professional fees	609		540
Other	3,561		2,994
Total accrued expenses and other current liabilities	$	30,886	$	24,704

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.

A second amendment was made to the Loan Agreement (the "Second Amendment") on December 22, 2023 pursuant to which the Company agreed to draw a term loan advance in an aggregate principal amount not less than $15.0 million, provided that the aggregate amount of the term loan advances made under tranche 2 do not exceed $15.0 million on or prior to December 31, 2023, which reflects a decrease of $30.0 million from the $45.0 million per the Amendment noted above. In addition, the third loan tranche advance under the Second Amendment was increased from $25.0 million to $30.0 million and the availability of the tranche was extended until March 31, 2025, the fourth tranche advance was increased from $35.0 million to $50.0 million and the availability of the tranche was extended until March 31, 2026, and the fifth tranche advance was increased from $40.0 million to $50.0 million and the availability of the tranche was extended until September 15, 2026, subject to the terms and conditions of the Loan Agreement. The total aggregate maximum principal amount to be drawn under the Loan Agreement remains as up to $200.0 million. The Company evaluated the Second Amendment as a modification under appropriate accounting guidance, and based on our analysis and the immaterial change in cash flows on current outstanding debt, it was determined that there was no material accounting impact. Upon closing of the Second Amendment, the Company drew down the tranche 2 amount of $15.0 million.

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.

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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 $0.4 million as of December 31, 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 December 31, 2023. Interest expense for the three months and nine months ended December 31, 2023 was $1.0 million and $3.1 million.

The summary of obligations under the term loan as of December 31, 2023 and March 31, 2023 consisted of the following (in thousands):


	December 31, 2023		March 31, 2023
Principal loan balance	$	45,576	$	30,222
Facility charge and diligence fee	(281)		(315)
Unamortized issuance costs	(1,255)		(1,410)
Accumulated end of term fee	394		151
Long term debt, net	$	44,434	$	28,648

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


	December 31, 2023		March 31, 2023
2024	—		—
2025	—		—
2026	—		—
2027	20,145		13,438
Thereafter	27,769		18,701
Total	$	47,914	$	32,139

The table of future payments of long-term debt excludes the end of term charge of $2.2 million, which is due upon the maturity of the loan

8 Stockholders’ equity

Common stock

As of December 31, 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.

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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:


	December 31, 2023	March 31, 2023
Stock options, issued and outstanding	8,833,069	7,454,828
Restricted stock units	2,040,997	1,351,280
Stock options and restricted stock units, future issuance	2,487,540	2,209,597
Employee stock purchase plan, available for future grants	2,738,208	2,076,603
Pre-IPO warrants to purchase common stock	497,344	497,344
Pre-funded warrants	5,281,616	9,484,238
Total shares of common stock reserved for future issuance	21,878,774	23,073,890

Undesignated preferred stock

As of December 31, 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 December 31, 2023.

ATM program

On August 11, 2020, the Company and the SVB Leerink LLC (the "Agent") entered into a sales agreement, which was subsequently amended on October 21, 2020 (as amended, the “2020 Sales Agreement”), pursuant to which the Company could sell, from time to time, at its option, up to an aggregate of $62.5 million of shares of the Company’s common stock, $0.001 par value per share, through the Agent, as the Company’s sales agent.

During the 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 nine months ended December 31, 2022, pursuant to the 2022 Sales Agreement, the Company issued and sold an aggregate of 340,000 shares of its common stock, resulting in gross proceeds of $6.7 million, before deducting fees of $0.3 million.

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.

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During the three and nine months ended December 31, 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 5,281,616 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.

During the nine months ended December 31, 2023, a holder of the Company's pre-funded warrants exercised 4,202,622 of its pre-funded warrants and the Company issued 4,202,622 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 December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Research and development	$	3,784	$	2,600	$	11,529	$	7,743
Selling, general and administrative	4,457		4,423		14,672		13,466
	$	8,241	$	7,023	$	26,201	$	21,209

The following table summarizes stock-based compensation expense by award type for the three and nine months ended December 31, 2023 and 2022:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Stock options	$	5,245	$	4,811	$	16,546	$	14,815
Restricted stock units	2,996		2,212		9,655		6,394
	$	8,241	$	7,023	$	26,201	$	21,209

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,

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including officers and directors who were also employees. Non-statutory stock options were granted under the 2015 Plan to employees, members of the board of directors, outside advisors and consultants of the Company.

2017 Equity Compensation Plan

In July 2017, in conjunction with reorganization by Replimune Limited, pursuant to which each shareholder thereof exchanged their outstanding shares in Replimune Limited for shares in Replimune Group, Inc., on a one-for-one basis (the "Reorganization"), the 2015 Plan was terminated, and all awards were cancelled with replacement awards issued under the 2017 Equity Compensation Plan (the “2017 Plan”). Subsequent to the Reorganization, no additional grants have been or will be made under the 2015 Plan and any outstanding awards under the 2015 Plan have continued, and will continue with their original terms. The Company concluded that the cancellation of the 2015 Plan and issuance of replacement awards under the 2017 Plan was a modification with no change in the material rights and preferences and therefore no recorded change in the fair value of each respective award.

The Company’s 2017 Plan provides for the Company to grant incentive stock options or non-statutory stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. Incentive stock options were granted under the 2017 Plan only to the Company’s employees, including officers and directors who were also employees. Restricted stock awards and non-statutory stock options were granted under the 2017 Plan to employees, officers, members of the board of directors, advisors and consultants of the Company. The maximum number of common shares that may be issued under the 2017 Plan was 2,659,885, of which none remained available for future grants as of December 31, 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

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 December 31, 2023, 2,487,540 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

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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 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

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dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

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


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Risk-free interest rate	4.55	%	3.93	%	3.72	%	2.78	%
Expected term (in years)	6.1		6.1		6.0		6.0
Expected volatility	72.5	%	73.7	%	73.9	%	75.3	%
Expected dividend yield	0	%	0	%	0	%	0	%

Stock options

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


	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of March 31, 2023	7,454,828	$	17.24	6.88	$	31,244
Granted	2,132,151	$	17.92
Exercised	(163,356)	$	10.76
Cancelled	(590,554)	$	21.70
Outstanding as of December 31, 2023	8,833,069	$	17.23	6.67	$	6,040
Options exercisable as of December 31, 2023	5,521,235	$	15.46	5.42	$	6,039
Options vested and expected to vest as of December 31, 2023	8,833,069	$	17.23	6.67	$	6,040

As of December 31, 2023, there was $38.6 million of unrecognized compensation cost related to unvested common stock options, which is expected to be recognized over a weighted average period of 2.5 years.

The weighted average grant-date fair value of stock options granted during the nine months ended December 31, 2023 and 2022 was $12.08 and $12.64, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended December 31, 2023 was $1.3 million.

Restricted stock units

A summary of the changes in the Company's RSUs during the nine months ended December 31, 2023 is as follows:


	Number of Restricted Shares	Weighted Average Grant Date Fair Value
Outstanding as of March 31, 2023	1,351,280	24.38
Granted	1,261,601	17.93
Vested	(345,495)	25.38
Cancelled	(226,389)	21.23
Outstanding as of December 31, 2023	2,040,997	20.57

As of December 31, 2023, there was $33.9 million of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 2.8 years.

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11 Net loss per share

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


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Numerator:
Net loss	$	(51,120)	$	(39,690)	$	(160,719)	$	(125,045)
Denominator:
Weighted average common shares outstanding, basic and diluted	66,645,691		57,857,132		66,532,488		55,618,052
Net loss per share, basic and diluted	$	(0.77)	$	(0.69)	$	(2.42)	$	(2.25)

The 5,281,616 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.

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 Nine Months Ended December 31,
	2023	2022
Options to purchase common stock	8,833,069	7,510,458
Unvested restricted stock units	2,040,997	1,353,745
Warrants to purchase common stock	497,344	497,344
	11,371,410	9,361,547

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.

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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.

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 nine months ended December 31, 2023, and recorded $1.1 million during the nine months ended December 31, 2022. During the nine months ended December 31, 2023 and 2022, the Company received payments under the terms of the agreement from Regeneron of $0.0 million and $3.1 million, respectively. No receivables from Regeneron were booked in connection with this agreement as of December 31, 2023 or March 31, 2023.

13 Collaboration and other arrangements

Roche

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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 nine months ended December 31, 2023 and 2022, the Company did not make any payments to Roche under the terms of the agreement. The Company recorded $0.8 million and $2.6 million as an offset to research and development expenses during the three and nine months ended December 31, 2023, respectively. The Company did not record any costs as an offset to research and development expenses during the three and nine months ended December 31, 2022. During the nine months ended December 31, 2023 and 2022, the Company received payments under the terms of the agreement from Roche of $1.7 million and $0.0 million, respectively. As of December 31, 2023 and March 31, 2023, the Company recorded $1.8 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 nine months ended December 31, 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 nine months ended December 31, 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 nine months ended December 31, 2023 and 2022:

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	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Lease cost
Finance lease costs:
Amortization of right-to-use asset	$	607	$	607	$	1,821	$	1,821
Interest on lease liabilities	540		548		1,626		1,650
Operating lease costs	279		252		840		763
Total lease cost	$	1,426	$	1,407	$	4,287	$	4,234

The following table summarizes the classification of lease costs in the consolidated statement of operations for the three and nine months ended December 31, 2023 and 2022 as follows:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Finance Lease Costs
Research and development	$	607	$	518	$	1,821	$	1,553
Selling, general and administrative	—		89		—		268
Other income (expense)	540		548		1,626		1,650
Operating Lease Costs
Research and development	224		103		681		316
Selling, general and administrative	55		149		159		447
Total lease cost	$	1,426	$	1,407	$	4,287	$	4,234

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 December 31, 2023:


	December 31, 2023
	Operating leases		Financing lease		Total
2024 (remaining three months)	$	289	$	668	$	957
2025	1,166		2,718		3,884
2026	1,175		2,799		3,974
2027	1,141		2,883		4,024
2028	1,089		2,969		4,058
Thereafter	1,936		35,053		36,989
Total lease payments	6,796		47,090		53,886
Less: interest	1,678		20,831		22,509
Total lease liabilities	$	5,118	$	26,259	$	31,377

The following table provides lease disclosure as of December 31, 2023 and March 31, 2023:

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	December 31, 2023		March 31, 2023
Leases
Right-to-use operating lease asset	$	4,813	$	5,208
Right-to-use finance lease asset	37,844		39,665
Total lease assets	$	42,657	$	44,873

Operating lease liabilities, current	$	1,163	$	1,118
Finance lease liabilities, current	2,698		2,639
Operating lease liabilities, non-current	3,955		4,389
Finance lease liabilities, non-current	23,561		23,965
Total lease liabilities	$	31,377	$	32,111

The following table provides lease disclosure for the nine months ended December 31, 2023 and 2022:


	Nine Months Ended December 31,
	2023				2022
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	724			$	717
Operating cash flows from finance leases	$	1,626			$	1,651
Financing cash flows from finance leases	$	345			$	262
Right-to-use asset obtained in exchange for new operating lease liabilities	$	—			$	—
Weighted-average remaining lease term - operating leases	5.9			years	6.9			years
Weighted-average remaining lease term - financing leases	15.6			years	16.6			years
Weighted-average discount rate - operating leases	10.3		%		10.0		%
Weighted-average discount rate - financing leases	8.3		%		8.3		%

The variable lease costs and short-term lease costs were insignificant for the three and nine months ended December 31, 2023 and 2022.

Manufacturing commitments

The Company has entered into an agreement with a contract manufacturing organization to provide clinical trial products. As of December 31, 2023 and March 31, 2023, the Company had committed to minimum payments under these arrangements totaling $0.9 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 December 31, 2023 or March 31, 2023.

Legal proceedings

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

15 Income taxes

The Company’s income tax provision and effective tax rate for the three months ended December 31, 2023 was $0.5 million and 0.9%, respectively. The Company’s income tax provision and effective tax rate for the three months ended December 31, 2022 was $0.0 million and 0.0%, respectively. The income tax provision and effective tax rate for the three months ended December 31, 2023 is primarily due to forecasted U.S. taxable income for the year that is not fully offset by available net operating loss carryforwards.

The Company's income tax provision and effective tax rate for the nine months ended December 31, 2023 was $0.5 million and 0.3%, respectively. The Company’s income tax provision and effective tax rate for the nine months ended December 31, 2022 was $0.0 million and 0.0%, respectively. The income tax provision and effective tax rate for the nine months ended December 31, 2023 is primarily due to forecasted U.S. taxable income for the year that is not fully offset by available net operating loss carryforwards.

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, future reversals of existing taxable temporary differences, estimated future taxable income and prudent 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 December 31, 2023 and March 31, 2023, the Company has recorded a full valuation allowance against its net deferred tax assets.

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:


	December 31, 2023		March 31, 2023
United States	$	7,853	$	5,836
United Kingdom	1,620		1,643
	$	9,473	$	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 is intended to have unique dual local and systemic activity 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. Our product candidates are 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.

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Our leading clinical trial of RP1 is our IGNYTE trial, a multi-cohort Phase 1/2 clinical trial being conducted in 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. The leading tumor specific cohort in the IGNYTE trial is our registration directed Phase 2 expansion cohort enrolling patients with anti-PD-1 failed cutaneous melanoma who are being treated with RP1 in combination with nivolumab. In December 2023, we reported the full data set of 156 patients (140 patients from the registration-directed expansion cohort and 16 anti-PD1 failed cutaneous melanoma patients from the prior phase 2 cohort) with an overall response rate (ORR) of 31.4% and a complete response rate (CR) of 12%. RP1 combined with nivolumab continues to be well-tolerated, with mainly Grade 1-2 “on target” side effects, observed. Following a Type C meeting with the U.S. Food and Drug Administration (FDA), a confirmatory study design concept consisting of a 2-arm randomized trial with physician’s choice of treatment as a comparator arm in anti-PD1 failed melanoma patients was agreed. The FDA requested that the Phase 3 confirmatory trial be underway at the time of a BLA submission under the accelerated approval pathway. The FDA also indicated that all patients should be followed for at least 12 months and have undergone central review by RECIST v1.1. A BLA submission for RP1 in combination with nivolumab in anti-PD1 failed melanoma is planned for 2H 2024.

In our non-melanoma skin cancer, or NMSC, cohort of the IGNYTE clinical trial, we provided a data update in December 2023 from the first 30 patients with at least 6 months of follow up including patients with CSCC, Merkel cell carcinoma (MCC), basal cell carcinoma, and angiosarcoma in this cohort. The data showed that treatment with RP1 in combination with nivolumab led to an ORR of 30% which is consistent with data from the anti-PD1 failed melanoma cohort with approximately one-third of patients responding and 60% demonstrating clinical benefit. The combination of RP1 and nivolumab was well tolerated in this patient population with a safety profile consistent with the overall experience seen with this treatment regimen to date.

Furthering development of our RP1 clinical candidate, we 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 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 ORR of 34.5% and a CR of 21%. 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.

As reported in December, our randomized, controlled Phase-2 clinical trial of RP1 with cutaneous squamous cell carcinoma, or CSCC, referred to as CERPASS or the CERPASS trial, under agreement with our partner Regeneron did not meet either of the two primary endpoints. RP1 in combination with cemiplimab increased the CRR versus cemiplimab alone (38.1% vs. 25%, p=0.040), which was just short of the required threshold for statistical significance in this study. Notably, among the 83 patients with locally advanced disease, the complete response rate in the RP1 plus cemiplimab group was 48.1% versus 22.6% in the cemiplimab only group. The ORR was comparable between the two study groups (52.5% for RP1 plus cemiplimab vs. 51.4% for cemiplimab alone, p=0.692). RP1 in com-bination with cemiplimab also increased duration of response (DOR) as compared to cemiplimab alone. The trial will continue as planned to assess DOR, progression free survival (PFS) and overall survival (OS) with greater maturity.

We are also developing or have been 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 continue the development of our clinical candidate RP2 with a focus on establishing a rare cancer franchise. Notably, as previously reported, from our Phase-1 clinical trial of RP2 alone and in combination with nivolumab, we have seen durable responses from a monotherapy cohort in a variety of difficult to treat tumors as well as in combination with anti-PD1 and in particular in patients with uveal melanoma. In November 2023, we presented updated data from a cohort of metastatic uveal melanoma patients during a Plenary Session at the 20th Annual International Society for Melanoma Research Congress. The updated data showed RP2 led to an ORR of 29.4 percent (5 of 17 patients; one of the responding patients was treated with RP2 monotherapy and four of the responding patients were treated with RP2 combined with nivolumab), including responses in patients with liver, lung, and bone metastases. The median DOR at the data cutoff was 11.47 months (range of 2.78 to 21.22 with responses ongoing). Nearly all patients (15 of 17, 88.2%) in the study had progressed on or after immunotherapy with 12 of 17 patients (70.6%) having previously received both anti-PD1 and anti-CTLA-4 therapies, including four of the responding

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patients. RP2 was generally well tolerated both as monotherapy and in combination with nivolumab with no additive adverse events observed. The most common grade 1 or 2 treatment related adverse events (TRAEs) overall in both cohorts were pyrexia, chills, fatigue, hypotension and pruritis. Six patients had grade 3 TRAEs, including two cases of hypotension. There were no grade 4 or 5 TRAEs. Based on the data in this population, planning is underway for a potentially registration enabling study of RP2 in advanced uveal melanoma.

As previously announced, our RP2/3 development in squamous cell carcinoma of the head and neck (SCCHN) and colorectal cancer (CRC) have been discontinued, and the development program in hepatocellular carcinoma (HCC) has been limited to the 2L setting and will use RP2 rather than RP3. Although we have discontinued or are modifying these trials, we are continuing to treat patients who were already in screening or enrolled in these trials before the trials were discontinued.

RP1, RP2 and RP3 are administered by direct injection into solid tumors, guided either visually or by ultrasound, computerized tomography 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 $51.1 million and $39.7 million for the three months ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $646.2 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 fluctuate from period to period depending upon the Company's development programs and priorities. We expect to continue to incur costs in connection with our ongoing development activities, including further advancement of any preclinical activities and clinical trials of our product candidates across our platform, 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;

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•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

•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 December 31, 2023, we had cash and cash equivalents and short-term investments of $466.4 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;

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•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.

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;

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•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.

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

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During the nine months ended December 31, 2023, the Company recorded an income tax provision of $0.5 million primarily due to forecasted U.S. taxable income for the year that is not fully offset by available net operating loss carryforwards. During the nine months ended December 31, 2022, the Company did not recorded any income tax provision due to losses incurred and based upon the weight of available evidence, that it is more likely than not that the Company's loses will not be realized.

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, future reversals of existing taxable temporary differences, 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 December 31, 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 December 31, 2023 and 2022

The following chart summarizes our results of operations for the three months ended December 31, 2023 and 2022:


	Three Months Ended December 31,
	2023		2022		Change
	(Amounts in thousands)
Operating expenses:
Research and development	$	42,847	$	30,261	$	12,586
Selling, general and administrative	13,693		11,369		2,324
Total operating expenses	56,540		41,630		14,910
Loss from operations	(56,540)		(41,630)		(14,910)
Other income (expense):
Research and development incentives	415		607		(192)
Investment income	5,686		2,675		3,011
Interest expense on finance lease liability	(540)		(548)		8
Interest expense on debt obligations	(1,012)		(941)		(71)
Other income	1,344		147		1,197
Total other income (expense), net	5,893		1,940		3,953
Loss before income taxes	$	(50,647)	$	(39,690)	$	(10,957)
Income tax provision	$	473	$	—	$	473
Net loss	$	(51,120)	$	(39,690)	$	(11,430)

Research and development expenses

Research and development expenses for the three months ended December 31, 2023 were $42.8 million, compared to $30.3 million for the three months ended December 31, 2022. The following table summarizes our research and development expenses for the three months ended December 31, 2023 and 2022:

Table of Conte nts


	Three Months Ended December 31,
	2023	2022	Change
Direct research and development expenses by program:
RP1	12,525	10,176