10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2023

OR

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

 

Commission File Number: 001-40881

 

Pyxis Oncology, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

83-1160910

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

321 Harrison Avenue

Boston, Massachusetts

02118

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 221-9059

 

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

 

PYXS

 

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

As of May 10, 2023, the registrant had 38,245,287 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

Summary Risk Factors

1

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months ended March 31, 2023 and 2022

4

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months ended March 31, 2023 and 2022

5

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2023 and 2022

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II.

OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

82

Item 3.

Defaults Upon Senior Securities

82

Item 4.

Mine Safety Disclosures

82

Item 5.

Other Information

82

Item 6.

Exhibits

83

Signatures

84

i


 

SUMMARY RISK FACTORS

You should consider carefully the risks described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. References to “Pyxis Oncology,” the “Company,” “we,” “us,” and “our” in this section titled “Summary Risk Factors” refer to Pyxis Oncology, Inc. and its wholly owned subsidiary. A summary of the risks that could materially and adversely affect our business, financial condition, operating results and prospects include the following:

We are a clinical stage biopharmaceutical company with a limited operating history and have incurred significant losses since our inception. We expect to incur losses over at least the next several years and may never achieve or maintain profitability.
We will require substantial additional capital to finance our operations, obtain regulatory approval for our product candidates, and commercialize our product candidates. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce or eliminate one or more of our research and product development programs or future commercialization efforts.
We are heavily dependent on the success of PYX-201 and PYX-106, which are in the early stages of development, and if PYX-201 and/or PYX-106 are not successful in clinical trials or do not receive regulatory approval or licensure or are not successfully commercialized, our business will be materially and adversely affected.
Our product candidates may fail in development or suffer delays that materially and adversely affect their commercial viability. If we or our existing or future collaborators are unable to initiate and complete clinical development of, obtain regulatory approval or licensure for or commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.
Our preclinical studies and clinical trials may fail to demonstrate adequately the safety, purity and potency of any of our product candidates, which would prevent or delay development, regulatory approval or licensure and commercialization.
Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approval or licensure or commercialize these programs on a timely basis or at all.
We face competition from entities that have developed or may develop product candidates for cancer, including companies developing novel treatments and technology platforms. If these companies develop technologies or product candidates more rapidly than we do or if their technologies are more effective, our ability to develop and successfully commercialize product candidates may be adversely affected.
Clinical testing and product development is a lengthy and expensive process with an uncertain outcome. We may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the clinical testing and the development and commercialization of our product candidates.
The regulatory licensure and approval processes of the FDA and other comparable regulatory authorities are lengthy, time-consuming and inherently unpredictable and, if we are ultimately unable to obtain marketing licensure or approval for our product candidates, our business will be substantially harmed.
If we fail to attract and retain qualified senior management and key scientific personnel, our business may be materially and adversely affected.
We face risks related to health epidemics and outbreaks, including the COVID-19 pandemic, which could significantly disrupt our preclinical studies and clinical trials, and therefore our receipt of necessary regulatory licensure or approvals could be delayed or prevented.

 

1


 

We rely on third parties to manufacture our product candidates. Any failure by a third party manufacturer to produce acceptable raw materials or product candidates for us or to obtain authorization from the FDA or comparable foreign regulatory authorities relating thereto may delay or impair our ability to initiate or complete our clinical trials, obtain regulatory licensure or approvals or commercialize approved products.
If we are unable to obtain and maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, or if our patents are insufficient to protect our product candidates for an adequate amount of time, or if we are unable to obtain adequate protection for our proprietary know-how, we may not be able to compete effectively in our markets.
If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our product candidates or we could lose certain rights to grant sublicenses.
Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. If we breach our University of Chicago, Pfizer, or Biosion license agreements or any of the other agreements under which we acquired, or will acquire, intellectual property rights covering our product candidates, we could lose the ability to continue the development and commercialization of the related product candidate(s).
We are subject to stringent and changing obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions, litigation, fines and penalties, a disruption of our business operations, including our clinical trials, harm to our reputation, and other adverse effects on our business or prospects.
Our internal computer systems, or those of any of our existing or future CROs, manufacturers, other contractors, consultants, or collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of or destruction of our proprietary and confidential data, employee data or personal data, which could result in additional costs, significant liabilities, harm to our reputation and material disruption of our operations.
If the market opportunities for any product that we develop are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PYXIS ONCOLOGY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

53,059

 

 

$

179,293

 

Marketable debt securities, short-term

 

 

96,290

 

 

 

 

Restricted cash

 

 

1,472

 

 

 

1,472

 

Prepaid expenses and other current assets

 

 

5,361

 

 

 

5,847

 

Total current assets

 

 

156,182

 

 

 

186,612

 

Property and equipment, net

 

 

13,163

 

 

 

11,165

 

Operating lease right-of-use assets

 

 

13,458

 

 

 

13,602

 

Total assets

 

$

182,803

 

 

$

211,379

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,025

 

 

$

7,097

 

Accrued expenses and other current liabilities

 

 

6,363

 

 

 

24,537

 

Operating lease liabilities, current portion

 

 

1,213

 

 

 

 

Total current liabilities

 

 

11,601

 

 

 

31,634

 

Operating lease liabilities, net of current portion

 

 

19,039

 

 

 

18,921

 

Total liabilities

 

 

30,640

 

 

 

50,555

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, par value $0.001 per share, 10,000,000 shares authorized; zero shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.001 par value per share; 190,000,000 shares authorized; 36,974,396 and 35,110,016 shares issued as of March 31, 2023 and December 31, 2022, respectively, 36,918,371 and 34,958,730 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

 

 

37

 

 

 

34

 

Additional paid-in capital

 

 

383,108

 

 

 

373,225

 

Accumulated other comprehensive income

 

 

696

 

 

 

 

Accumulated deficit

 

 

(231,678

)

 

 

(212,435

)

Total stockholders’ equity

 

 

152,163

 

 

 

160,824

 

Total liabilities and stockholders’ equity

 

$

182,803

 

 

$

211,379

 

 

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

3


 

PYXIS ONCOLOGY, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

11,901

 

 

$

20,071

 

General and administrative

 

 

9,053

 

 

 

11,318

 

Total operating expenses

 

 

20,954

 

 

 

31,389

 

Loss from operations

 

 

(20,954

)

 

 

(31,389

)

Other income, net:

 

 

 

 

 

 

Interest and investment income

 

 

1,673

 

 

 

9

 

Sublease income

 

 

38

 

 

 

 

Total other income, net

 

 

1,711

 

 

 

9

 

Net loss

 

$

(19,243

)

 

$

(31,380

)

Net loss per common share - basic and diluted

 

$

(0.54

)

 

$

(0.97

)

Weighted average shares of common stock outstanding - basic and diluted

 

 

35,351,671

 

 

 

32,316,689

 

Other comprehensive income:

 

 

 

 

 

 

Net unrealized gain on marketable debt securities

 

 

696

 

 

 

 

Other comprehensive income

 

 

696

 

 

 

 

Comprehensive loss

 

$

(18,547

)

 

$

(31,380

)

 

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

4


 

PYXIS ONCOLOGY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in Capital

 

 

Accumulated Deficit

 

 

Accumulated Other Comprehensive Income

 

 

Total Stockholders’ Equity

 

Balance at December 31, 2022

 

 

34,958,730

 

 

$

34

 

 

$

373,225

 

 

$

(212,435

)

 

$

 

 

$

160,824

 

Issuance of common stock to Pfizer Inc. (Refer to Note 6)

 

 

1,811,594

 

 

 

2

 

 

 

4,998

 

 

 

 

 

 

 

 

 

5,000

 

Vesting of restricted common stock

 

 

148,047

 

 

 

1

 

 

 

1

 

 

 

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,884

 

 

 

 

 

 

 

 

 

4,884

 

Net unrealized gains on marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

696

 

 

 

696

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(19,243

)

 

 

 

 

 

(19,243

)

Balance at March 31, 2023

 

 

36,918,371

 

 

$

37

 

 

$

383,108

 

 

$

(231,678

)

 

$

696

 

 

$

152,163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in Capital

 

 

Accumulated Deficit

 

 

Accumulated Other Comprehensive Income

 

 

Total Stockholders’ Equity

 

Balance at December 31, 2021

 

 

32,222,881

 

 

$

32

 

 

$

352,999

 

 

$

(91,718

)

 

$

 

 

$

261,313

 

Stock options exercised

 

 

51,118

 

 

 

 

 

 

176

 

 

 

 

 

 

 

 

 

176

 

Vesting of restricted common stock

 

 

100,908

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,404

 

 

 

 

 

 

 

 

 

3,404

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(31,380

)

 

 

 

 

 

(31,380

)

Balance at March 31, 2022

 

 

32,374,907

 

 

$

32

 

 

$

356,580

 

 

$

(123,098

)

 

$

 

 

$

233,514

 

 

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

5


 

PYXIS ONCOLOGY, INC.

Condensed Consolidated Statements of Cash Flows (In thousands)

(Unaudited)

 

Three Months Ended March 31,

 

 

2023

 

 

2022

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(19,243

)

 

$

(31,380

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

190

 

 

 

158

 

Stock-based compensation

 

 

4,884

 

 

 

3,404

 

Non-cash lease expense

 

 

144

 

 

 

232

 

Accretion of discount on marketable debt securities

 

 

(607

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

486

 

 

 

(232

)

Other assets, noncurrent

 

 

 

 

 

(340

)

Accounts payable

 

 

(753

)

 

 

(9,896

)

Accrued expenses and other current liabilities

 

 

(13,273

)

 

 

10,540

 

Operating lease liabilities

 

 

1,331

 

 

 

(165

)

Net cash used in operating activities

 

 

(26,841

)

 

 

(27,679

)

Investing activities

 

 

 

 

 

 

Purchase of marketable debt securities

 

 

(94,987

)

 

 

 

Purchase of property and equipment

 

 

(4,406

)

 

 

(146

)

Net cash used in investing activities

 

 

(99,393

)

 

 

(146

)

Financing activities

 

 

 

 

 

 

Proceeds from the exercise of stock options

 

 

 

 

 

176

 

Net cash provided by financing activities

 

 

 

 

 

176

 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(126,234

)

 

 

(27,649

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

180,765

 

 

 

276,316

 

Cash, cash equivalents and restricted cash at end of period

 

$

54,531

 

 

$

248,667

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash received for interest

 

$

915

 

 

$

 

Cash paid for taxes

 

$

20

 

 

$

 

Noncash investing and financing activities:

 

 

 

 

 

 

Property and equipment in accounts payable and accrued expenses

 

$

2,261

 

 

$

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

$

53,059

 

 

$

247,087

 

Restricted cash

 

 

1,472

 

 

 

1,580

 

Total cash, cash equivalents and restricted cash shown in the statement of
   cash flows

 

$

54,531

 

 

$

248,667

 

 

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

6


 

PYXIS ONCOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

Nature of Business

Pyxis Oncology, Inc. (the “Company”), a Delaware corporation, was founded in June 2018 and launched its operations in July 2019. The Company is a clinical stage company focused on defeating difficult-to-treat cancers. The Company is efficiently building next-generation therapeutics that hold the potential for mono and combination therapies. The Company's therapeutic candidates are designed to directly kill tumor cells and to address the underlying pathologies created by cancer that enable its uncontrollable proliferation and immune evasion. The Company's antibody-drug conjugates ("ADCs") and immuno-oncology ("IO") programs employ novel and emerging strategies to target a broad range of solid tumors resistant to current standards of care.

The Company has one operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of assessing performance and allocating resources.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Company’s fiscal year ends on December 31 and its first three fiscal quarters end on March 31, June 30 and September 30. The accompanying condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

In the opinion of management, the unaudited condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods. The results for the three months ended March 31, 2023 are not necessarily indicative of those expected for the year ending December 31, 2023 or for any future period. The condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the related notes thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2023.

Liquidity

As of March 31, 2023, the Company had an accumulated deficit of $231.7 million. The Company has incurred losses and negative cash flows from operations since inception, including net losses of $19.2 million and $31.4 million for the three months ended March 31, 2023 and 2022, respectively.

The Company has not generated any revenue to date and does not anticipate generating any revenues unless and until it successfully completes development and obtains regulatory approval for its current or any future product candidates. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future as the Company continues to expand its research and development programs and develop its product candidates.

The Company currently expects that its existing cash, cash equivalents and short-term investments of $149.3 million as of March 31, 2023 will fund its operating expenses and capital requirements at least twelve months from the date these unaudited consolidated financial statements are issued. Additional funding may be necessary to fund future clinical and preclinical activities.

The Company plans to continue to fund its losses from operations and capital funding needs through public or private equity, convertible or debt financing or other sources. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

 

7


 

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expense, and related disclosures. The Company regularly evaluates estimates and assumptions related to assets, liabilities, stock-based compensation, operating leases, assessment of the useful lives of property and equipment, marketable debt securities, and research and development costs. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates and there may be changes to management’s estimates in future periods.

Risks and Uncertainties

The Company is subject to risks common to early-stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, regulatory approvals, dependence on key suppliers for active ingredients and third-party service providers such as contract research and manufacturing organizations, protection of intellectual property rights and the ability to make milestone, royalty or other payments due under any license, collaboration or supply agreements.

Concentration of Credit Risks

Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and cash equivalents, restricted cash, and short-term investments. The Company is exposed to credit risk from its deposits of cash in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company maintains insured cash sweep accounts where balances are maintained in interest bearing demand accounts. The Company has not realized any losses on these deposits.

Significant Accounting Policies

Other than the new accounting policy for "Investments", detailed below, there have been no other changes to the Company’s significant accounting policies disclosed in “Note 2 – Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2023.

Investments

Short-term investments consist of U.S. Treasury securities with original maturities greater than three months. The Company may sell investments at any time for use in current operations even if the investments have not yet reached maturity. As a result, the Company classifies its investments as current assets. All investments have been classified as available-for-sale marketable debt securities. Marketable debt securities are recorded at fair value, with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income (loss) in stockholders’ equity (deficit) and a component of total comprehensive loss in the condensed consolidated statements of operations and comprehensive loss, until realized. The fair value of these securities is determined based upon quoted market prices or pricing models for similar securities at period end. Premiums paid or discounts received at the time of purchase of marketable securities, are amortized to interest and investment income over the terms of the related securities. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities sold.

At each reporting date the Company will evaluate available-for-sale marketable debt securities in an unrealized loss position, using the discounted cash flow model, to determine whether the unrealized loss or any potential credit losses should be recognized in net loss. For available-for-sale marketable debt securities in an unrealized loss position, the Company will assess (i) whether it intends to sell, or (ii) it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If the aforementioned criteria is met, such marketable debt security’s amortized cost basis will be written down to its fair value through earnings along with any existing allowance for credit losses. For available-for-sale marketable debt securities that do not meet this criteria, the Company will evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, underlying credit ratings, and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded as an allowance in interest income.

There have been no impairment or credit losses recognized during the periods presented in the accompanying condensed consolidated statements of operations and comprehensive loss.

 

8


 

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses on available-for-sale debt securities to be recorded through an allowance for credit losses instead of as a reduction in the amortized cost basis of the securities. On January 1, 2023, the Company adopted ASU 2016-13, which did not have a material effect on the Company's financial position, results of operations, or cash flows.

Recently Issued Accounting Pronouncements

Recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to, have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

3. Fair Value Measurements

The carrying amounts of the Company’s financial instruments, including prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value due to their relatively short maturities. The Company’s financial instruments consist of Level I assets which consist primarily of highly liquid money market funds and U.S. Treasury securities that are included in marketable debt securities.

The following tables set forth the fair value of the Company’s financial instruments subject to fair value measurements on a recurring basis and the level of inputs used in such measurements in accordance with the FASB ASC 820 hierarchy (in thousands):

 

 

 

March 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

48,929

 

 

$

-

 

 

$

-

 

 

$

48,929

 

Restricted Cash

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

1,472

 

 

 

-

 

 

 

-

 

 

 

1,472

 

Marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

96,290

 

 

 

-

 

 

 

-

 

 

 

96,290

 

Total

 

$

146,691

 

 

$

-

 

 

$

-

 

 

$

146,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash Equivalents

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

177,279

 

 

$

-

 

 

$

-

 

 

$

177,279

 

Restricted Cash

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

1,472

 

 

 

-

 

 

 

-

 

 

 

1,472

 

Total

 

$

178,751

 

 

$

-

 

 

$

-

 

 

$

178,751

 

Money market funds and U.S. Treasury securities are classified as Level 1 within the fair value hierarchy, as they are valued using quoted prices in active markets. There were no transfers of financial instruments among Level 1, Level 2, and Level 3 during the periods presented.

 

 

 

9


 

4. Marketable Debt Securities

Marketable debt securities, all of which were classified as available-for-sale, consist of the following (in thousands):

 

 

 

March 31, 2023

 

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Aggregate
Fair Value

 

Marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

95,594

 

 

$

696

 

 

$

-

 

 

$

96,290

 

Total

 

$

95,594

 

 

$

696

 

 

$

-

 

 

$

96,290

 

As of December 31, 2022, the Company did not have marketable debt securities.

As of March 31, 2023, the remaining contractual terms of the U.S. Treasury securities are less than 12 months.

Interest and Investment Income

Interest and investment income consists of the following (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Interest income

 

$

1,066

 

 

$

9

 

Accretion of discount, net

 

 

607

 

 

 

-

 

Total interest and investment income

 

$

1,673

 

 

$

9

 

 

5. Joint Venture

In March 2021, the Company entered into definitive transaction agreements with Alloy Therapeutics, Inc. (“Alloy”) and Voxall Therapeutics, LLC (“Voxall”), to finance and operate Voxall, a joint venture company formed in collaboration with Alloy to leverage the Company’s technology and Alloy’s ATX-Gxplatform and antibody discovery services. Voxall granted to the Company and Alloy, 50% of the voting membership units of Voxall in exchange for certain initial contributions.

The Company accounted for the investment in Voxall under the equity method of accounting. Voxall has incurred losses since inception and the Company has recognized its share of losses of Voxall only to the extent of the carrying value of its investment in Voxall and the promissory note issued by Voxall, which aggregated to $0.2 million for the year ended December 31, 2021. The Company has not recognized any further losses of Voxall during the three months ended March 31, 2023 and 2022. The remaining unabsorbed loss will be offset against future income, if any. As the Company has no commitment to fund the losses of the equity method investment, the carrying value of the equity method investment has not been reduced below zero.

6. Licensing Agreements

The University of Chicago Agreement

In April 2020, the Company entered into a license agreement (the “University License Agreement”), as well as a sponsored research agreement, with the University of Chicago (the “University”). Under the terms of the license, the Company has the global right to develop and commercialize products that are covered by a valid claim of a licensed patent, incorporate or use the licensed know-how and materials or are known to assess, modulate or utilize the activity of certain specified biological targets. In partial consideration for the license from the University, the Company issued to the University 48,919 shares of its common stock in 2020.

Pursuant to the University License Agreement, the Company is obligated to pay potential development and commercial milestones as well as running royalties on net sales of licensed products at varying rates.

The Company assessed the milestone and royalty events under University License Agreement as of March 31, 2023 and 2022, and determined that no such amounts were required.

 

10


 

Pfizer Inc. Agreement

In December 2020, the Company entered into a license agreement (as amended, the “Pfizer License Agreement”) with Pfizer Inc. (“Pfizer”) for worldwide development and commercialization rights to ADC product candidates directed to certain licensed targets, including PYX-201 and PYX-203, and products containing the ADC product candidates. The Company’s rights are exclusive with respect to certain patents owned or controlled by Pfizer covering the licensed ADCs. Pfizer has also granted the Company a non-exclusive license to use Pfizer’s ADC technology (“FACT”) platform. The initial licensed targets include CD123 and extra domain B (EDB of fibronectin) and the Company has the option to expand the scope of its license to add additional licensed targets that have not been licensed to a third party or are not the subject of a Pfizer ADC development program. The Pfizer License Agreement became effective in March 2021 and the Company paid a combined $25.0 million for the license fee, consisting of an upfront cash payment of $5.0 million and issued 12,152,145 shares of Series B convertible preferred stock, which was converted into 1,911,015 shares of its common stock upon the initial public offering ("IPO") in October 2021, with a value of $20.0 million to Pfizer.

On October 6, 2022, the Company entered into an amended and restated license agreement (the “A&R License Agreement”) with Pfizer, which amends and restates the Pfizer License Agreement. Pursuant to the A&R License Agreement, Pfizer granted to the Company exclusive worldwide rights under Pfizer’s FACT Platform technology to develop and commercialize ADC product candidates directed to certain licensed targets, including PYX-201 and PYX-203, and products containing the ADC product candidates. Additional ADC targets may be licensed for a nominal upfront payment and milestones. In accordance with the terms of the A&R License Agreement, the Company issued 2,229,654 shares of its common stock in October 2022, paid $8.0 million to Pfizer in January 2023 and issued 1,811,594 shares of its common stock in March 2023.

Further, pursuant to the A&R License Agreement, the Company is obligated to pay future contingent payments including development, regulatory and commercial milestones as well as running royalties on net sales of licensed products at varying rates. The Company assessed the milestone and royalty events under A&R License Agreement as of March 31, 2023 and 2022, and determined that no such amounts were required.

LegoChem Biosciences, Inc. Agreements

In December 2020, the Company entered into a license agreement (the “LegoChem License Agreement”) and an opt-in, investment and additional consideration agreement (the “Opt-In Agreement”) with LegoChem Biosciences, Inc. (“LegoChem”). Pursuant to the LegoChem License Agreement, the Company obtained a worldwide (other than Korea) license for development and commercialization rights for LCB67, an ADC product candidate targeting DLK-1, and products containing the licensed compound. Additionally, the Company may purchase certain initial quantities of licensed products from LegoChem for an estimated cost of $7.0 million. No amounts were due and payable related to the manufacturing of the initial quantities of licensed product as of March 31, 2023.

Further, the Company is obligated to make future contingent payments including development, regulatory and commercial milestones as well as running royalties on net sales of licensed products at varying rates. The Company assessed the milestone and royalty events under LegoChem License Agreement as of March 31, 2023 and 2022, and determined that no such amounts were required.

License Agreement with Biosion USA, Inc.

On March 28, 2022, the Company entered into a license agreement (the “Biosion License Agreement”) with Biosion USA, Inc. ("Biosion"), pursuant to which the Company obtained an exclusive, worldwide (other than Greater China (mainland China, Hong Kong, Macau and Taiwan)) license for development, manufacturing and commercialization rights for BSI-060T, a Siglec-15 targeting antibody, an IO product candidate (now referred to as PYX-106), and products containing the licensed compound.

Pursuant to the Biosion License Agreement, the Company paid an upfront license fee of $10.0 million in March 2022, which was recorded as research and development expenses. Further, the Company is also obligated to pay future contingent payments including development, regulatory and commercial milestones and, if products are launched, the Company will pay Biosion tiered royalties on net sales of licensed products in varying royalty rates ranging from low single digits to low teens. The Company is also obligated to pay Biosion a percentage of certain sublicensing revenue ranging from mid-double to low-double digits based on the stage of development of the licensed product at the time of entering into the applicable sublicense.

The Company assessed the milestone and royalty events involving Biosion as of March 31, 2023 and 2022 and determined that no such amounts were required

 

11


 

7. Stockholders' Equity

Shelf Registration Statement and "At-the-Market" Offering Program

On November 1, 2022, the Company filed a registration statement on Form S-3 with the SEC for the issuance of common stock, preferred stock, warrants, debt securities, rights and units up to an aggregate of $250.0 million. On November 14, 2022, the registration statement was declared effective by the SEC. The registration statement includes an at-the-market ("ATM") offering program for the sale of up to $125.0 million of shares of the Company's common stock.

See Note 14, Subsequent Events for further discussion of the status of the Company’s ATM offering program.

Preferred Stock

There were no issued and outstanding shares of preferred stock as of March 31, 2023 and December 31, 2022.

Common Stock

Voting, dividend and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock.

Voting—Each holder of outstanding shares of common stock shall be entitled to one vote in respect of each share.

Reserved Shares— The Company reserved the following shares of common stock for issuance:

 

 

March 31, 2023

 

 

December 31, 2022

 

Stock options outstanding

 

 

5,706,777

 

 

 

5,720,415

 

Unvested restricted stock awards and units

 

 

5,747,172

 

 

 

3,015,387

 

Stock options available for issuance

 

 

600,127

 

 

 

1,697,166

 

Employee stock purchase plan

 

 

1,103,624

 

 

 

752,524

 

Total

 

 

13,157,700

 

 

 

11,185,492

 

 

8. Stock-Based Compensation

2022 Equity Inducement Plan

On July 1, 2022, the Company’s board of directors approved the 2022 Equity Inducement Plan (the “2022 Plan”), which became effective on that date. The 2022 Plan allows the Company to make equity-based incentive awards to its officers and employees without stockholder approval pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules, or any successor rule relating to inducement awards. Unless earlier terminated by the Board, 2022 Plan will terminate on the tenth anniversary of the effective date. The Company has initially reserved 1,400,000 shares of its common stock for the issuance of awards under the 2022 Plan. As of March 31, 2023, options to purchase 468,205 shares of common stock and 374,560 restricted stock units were outstanding under the 2022 Plan and 557,235 shares remained available for future issuance under the 2022 Plan.

2021 Equity and Incentive Plan

On September 27, 2021, the Company’s board of directors and stockholders approved the 2021 Equity and Incentive Plan (the “2021 Plan”), which became effective on October 7, 2021, when the Company’s registration statement was declared effective by the SEC. The 2021 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors and consultants. The Company has initially reserved 3,852,807 shares of its common stock for the issuance of awards under the 2021 Plan. The number of shares of common stock reserved for issuance under the 2021 Plan will automatically increase annually on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2022, and continuing until (and including) the fiscal year ending December 31, 2031 by the lesser of (i) 5% of the total number of shares of common stock outstanding on December 31st of the immediately preceding fiscal year and (ii) the number of shares as may be determined by the board of directors. As a result of the evergreen provision of the 2021 Plan, the Company added an additional 1,755,501 shares of common stock to the 2021 Plan as of January 1, 2023. The maximum number of shares of common stock that may be issued pursuant to the exercise of incentive options under the 2021 Plan is 7,705,614. Unless earlier terminated by the Board, 2021 Plan will terminate on the tenth anniversary of the effective date. As of March 31, 2023, options to purchase 2,668,559 shares of common stock and 4,471,264 restricted stock units were outstanding under the 2021 plan and 42,892 shares remained available for future issuance under the 2021 plan.

 

12


 

2019 Equity Incentive Plan

In 2019, the Company established the 2019 Equity and Incentive Plan (the "2019 Plan"), under which the Company is allowed to grant options and restricted stock to its employees and non-employees. The maximum number of shares of common stock reserved for issuance under the 2019 Plan is 4,042,408 shares. Options granted under the 2019 Plan include incentive stock options that can be granted only to the Company’s employees and non-statutory stock options that can be granted to the Company’s employees, consultants, advisors and directors. The 2019 Plan also permits the Company to issue restricted stock awards. Unless earlier terminated by the Board, the 2019 Plan will terminate on the tenth anniversary of the effective date. As of March 31, 2023, options to purchase 2,570,013 shares of common stock and 832,873 restricted stock units were outstanding under the 2019 Plan and zero shares remained available for future issuance under the 2019 Plan.

2021 Employee Stock Purchase Plan

On September 27, 2021, the Company’s board of directors and stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective on October 7, 2021, when the Company’s registration statement was declared effective by the SEC. The 2021 ESPP initially reserved and authorized the issuance of up to a total of 424,595 shares of common stock to participating employees. The number of shares of common stock reserved for issuance under the ESPP will automatically increase annually on the first day of each fiscal year, beginning with the fiscal ye