Verastem Oncology
Annual Report 2023

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-K For the fiscal year ended December 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35403 Verastem, Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 117 Kendrick Street, Suite 500 Needham, Massachusetts (Address of principal executive offices) 27-3269467 (I.R.S. Employer Identification No.) 02494 (Zip Code) Securities registered pursuant to Section 12(b) of the Act: Registrant’s telephone number, including area code: (781) 292-4200 Title of each class Common Stock, $0.0001 par value Trading Symbol(s) VSTM Name of each exchange on which registered The Nasdaq Capital Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ⌧ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ⌧ No 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). ⌧ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issues financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2023 was $186,689,509. The number of shares outstanding of the registrant’s common stock as of March 13, 2024 was 25,295,495 Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A relating to the Registrant’s Annual General Meeting of Shareholders, to be held on May 23, 2024 will be incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2023. DOCUMENTS INCORPORATED BY REFERENCE Table of Contents TABLE OF CONTENTS PART I Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 1C. Cybersecurity Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities Item 6. Reserved Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Consolidated Financial Statements and Supplementary Data Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Item 9C. Disclosure Regarding Foreign Jurisdictions PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accountant Fees and Services PART IV Item 15. Exhibits and Financial Statement Schedules Item 16. Form 10-K Summary EXHIBIT INDEX SIGNATURES 4 36 74 74 75 75 75 76 77 78 89 89 90 90 91 91 91 91 91 91 92 93 93 94 98 2 Table of Contents FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements related to present facts or current conditions or historical facts, contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial position, including our ability to continue as a going concern through one year from the date of the audited financial statements for the year ended December 31, 2023, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. Such statements relate to, among other things, the development and activity of our programs and product candidates, avutometinib (rapidly accelerated fibrosarcoma (“RAF”)/ mitogen-activated protein kinase kinase (“MEK”) program) and defactinib (focal adhesion kinase (“FAK”) program), the structure of our planned and pending clinical trials, the potential clinical value of our clinical trials, and the timeline and indications for clinical development, regulatory submissions and commercialization of activities. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees of future performance and our actual results could differ materially from the results discussed in the forward-looking statements we make. Applicable risks and uncertainties include the risks and uncertainties, among other things, regarding: the success in the development and potential commercialization of our product candidates, including avutometinib in combination with other compounds, including defactinib, LUMAKRAS® and others; the uncertainties inherent in research and development, such as negative or unexpected results of clinical trials, the occurrence or timing of applications for our product candidates that may be filed with regulatory authorities in any jurisdictions; whether and when regulatory authorities in any jurisdictions may approve any such applications that may be filed for our product candidates, and, if approved, whether our product candidates will be commercially successful in such jurisdictions; our ability to obtain, maintain and enforce patent and other intellectual property protection for our product candidates; the scope, timing, and outcome of any legal proceedings; decisions by regulatory authorities regarding trial design, labeling and other matters that could affect the timing, availability or commercial potential of our product candidates; whether preclinical testing of our product candidates and preliminary or interim data from clinical trials will be predictive of the results or success of ongoing or later clinical trials; that the timing, scope and rate of reimbursement for our product candidates is uncertain; that third- party payors (including government agencies) may not reimburse; that there may be competitive developments affecting our product candidates; that data may not be available when expected; that enrollment of clinical trials may take longer than expected; that our product candidates will cause adverse safety events and/or unexpected concerns may arise from additional data or analysis, or result in unmanageable safety profiles as compared to their levels of efficacy; that our product candidates may experience manufacturing or supply interruptions or failures; that any of our third party contract research organizations, contract manufacturing organizations, clinical sites, or contractors, among others, who we rely on fail to fully perform; that we face substantial competition, which may result in others developing or commercializing products before or more successfully than we do which could result in reduced market share or market potential for our product candidates; that we will be unable to successfully initiate or complete the clinical development and eventual commercialization of our product candidates; that the development and commercialization of our product candidates will take longer or cost more than planned, including as a result of conducting additional studies; that we may not have sufficient cash to fund our contemplated operations; that we may not attract and retain high quality personnel; that we or Chugai Pharmaceutical, Co., Ltd. (“Chugai”) will fail to fully perform under the avutometinib license agreement; that our target market for our product candidates might be smaller than we are presently estimating; that Secura Bio, Inc. (“Secura”) will fail to fully perform under the asset purchase agreement with Secura Bio, Inc., including in relation to milestone payments; that we will not see a return on investment on the payments we have and may continue to make pursuant to the collaboration and option agreement with GenFleet Therapeutics (Shanghai), Inc. (“GenFleet”) or that GenFleet will fail to fully perform under the agreement; that we may be unable to obtain adequate financing in the future through product licensing, co-promotional arrangements, public or private equity, debt financing or otherwise; that we will not pursue or submit regulatory filings for our product candidates; and that our product candidates will not receive regulatory approval, become commercially successful products, or result in new treatment options being offered to patients. Other risks and uncertainties include those identified under the heading “Risk Factors” in this Annual Report on Form 10-K, and in any subsequent filings with the Securities and Exchange Commission (“SEC”). As a result of these and other factors, we may not achieve the plans, intentions or expectations disclosed in our forward- looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. The forward-looking statements contained in this Annual Report on Form 10-K reflect our views as of the date hereof. We do not assume and specifically disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 3 Table of Contents Item 1. Business OVERVIEW PART I We are a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to advancing new medicines for patients battling cancer. Our pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/MEK inhibition and FAK inhibition. Our most advanced product candidates, avutometinib and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, but not limited to low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), pancreatic cancer, colorectal cancer (“CRC”), and melanoma. We believe that avutometinib may be beneficial as a therapeutic, as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors, or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies. Avutometinib is an orally available first-in-class unique small molecule RAF/MEK clamp that inhibits the ras sarcoma (“RAS”)/RAF/MEK, ERK mitogen activated pathway kinase (“MAPK”) pathway which is involved in cell proliferation, migration, transformation, and survival of tumor cells. In contrast to other MEK-only inhibitors, avutometinib is a dual RAF/MEK clamp that blocks MEK kinase activity and induces the formation of dominant negative RAF-MEK complexes preventing phosphorylation of MEK by A-Raf proto-oncogene, serine/threonine kinase (“ARAF”), B-Raf proto-oncogene serine/threonine kinase (“BRAF”) and C-raf proto-oncogene serine/threonine kinase (“CRAF”). MEK-only inhibitors (e.g. trametinib) may have limited efficacy because they induce MEK phosphorylation (“pMEK”) by relieving extracellular-signal-regulated-kinase (“ERK”)-dependent feedback inhibition of RAF. By inhibiting RAF- mediated phosphorylation of MEK, avutometinib has the advantage of not inducing pMEK. This unique mechanism of avutometinib enables it to inhibit ERK signaling more effectively and may confer enhanced therapeutic activity against MAPK pathway-driven cancers. We use the term “RAMP” to refer to our RAF and MEK Program. Avutometinib has been shown to inhibit MAPK pathway signaling and proliferation of tumor cell lines harboring MAPK pathway alterations including Kirsten rat sarcoma viral oncogene homolog (“KRAS”), neuroblastoma rat sarcoma viral oncogene homolog (“NRAS”), and BRAF mutations, among others. Avutometinib has demonstrated strong antitumor activity as monotherapy and in combination with (i) agents targeting parallel pathways (e.g. inhibitors of FAK, CDK4/6 and mTOR), (ii) agents targeting other nodes in the MAPK pathway (e.g. anti-EGFR, SOS1, KRAS G12C, and KRAS G12D inhibitors), (iii) chemotherapy, and (iv) anti-PD-1. Avutometinib, alone or in combination with defactinib, has received orphan drug designation for the treatment of all patients with LGSOC in the United States. Defactinib is an oral small molecule inhibitor of FAK and proline-rich tyrosine kinase (“PYK2”) that is currently being evaluated as a potential combination therapy for various solid tumors. FAK and PYK2 are members of the same family of nonreceptor protein tyrosine kinases that integrate signals from integrin and growth factor receptors to regulate cell proliferation, survival, migration, and invasion. Defactinib targets malignant cells both directly and through modulation of the tumor microenvironment. Preclinical research by our scientists and collaborators at world-renowned research institutions has indicated that FAK inhibition delays tumor progression in cancer models, which was associated with reduced stromal density and immunosuppressive cell populations. Furthermore, it has been shown that activation of FAK is a putative adaptive resistance mechanism to MAPK pathway inhibition, supporting the clinical evaluation of avutometinib in combination with defactinib for treatment of cancers harboring MAPK pathway alterations. Defactinib has received orphan drug designation in ovarian cancer in the United States, the European Union, and Australia. The combination of avutometinib and defactinib has been found to be clinically active in patients with KRAS mutant and KRAS wild-type recurrent LGSOC and has received breakthrough designation from the U.S. Food & Drug Administration (the “FDA”) for the treatment of all patients with recurrent LGSOC, regardless of KRAS status, after one or more prior lines of therapy including platinum-based chemotherapy. 4 Table of Contents In the fourth quarter of 2020, we commenced a registration-directed trial investigating avutometinib as a monotherapy and in combination with defactinib for the treatment of patients with recurrent LGSOC entitled RAMP 201 study. The RAMP 201 study is an adaptive two-part multicenter, parallel cohort, randomized, open label trial to evaluate the efficacy and safety of avutometinib alone and in combination with defactinib in patients with recurrent LGSOC. The combination of avutometinib and defactinib has been declared the go-forward treatment regimen based on a higher rate of confirmed objective responses in a planned interim analysis with prespecified criteria, acknowledging the demonstrated contribution of defactinib. An abstract highlighting updated interim results from Part A (selection phase) of our RAMP 201 study was presented in a Poster Discussion Session at the American Society of Clinical Oncology (“ASCO”) annual meeting that took place on June 2-6, 2023 in Chicago, Illinois (data cutoff April 6, 2023). In this data cut from Part A of the RAMP 201 study, 31 patients with recurrent LGSOC were treated with the combination of avutometinib and defactinib, of which 29 were evaluable for efficacy with a minimum follow-up of 12 months and 13 patients remained on study treatment. Overall, patients were heavily pretreated with a median of 4 prior systemic regimens (up to 11), including prior platinum-based chemotherapy, endocrine therapy and bevacizumab in most patients and prior MEK inhibitor therapy in about 13% of patients. Confirmed objective response rates (“ORR”) by blinded independent central review of 45% (13/29; 95% CI: 26%-64%) were observed. Tumor shrinkage was observed in the majority of patients, 86% (25/29). Further, three out of four patients who received prior MEK inhibitors responded to the combination. Among the patients with KRAS mutant LGSOC, the ORR was 60% (9/15) in the combination arm. Among the patients with KRAS wild-type LGSOC, the ORR was 29% (4/14) in the combination arm. The median time to response was 5.5 months (range 1.6-14.7 months). The median duration of response and median progression free survival have not been reached. We plan to present full data from Parts A and Part B of the RAMP 201 study at a scientific medical conference in the first half of 2024. In December 2023, we announced initiation of a confirmatory Phase 3 trial to evaluate the combination of avutometinib and defactinib for the treatment of patients with recurrent LGSOC entitled RAMP 301. RAMP 301 is a randomized global confirmatory trial, which will evaluate the efficacy and safety of avutometinib and defactinib versus standard chemotherapy or hormonal therapy in patients with recurrent LGSOC. RAMP 301 is the confirmatory study required by the FDA for the combination of avutometinib and defactinib to potentially receive full approval for the treatment of recurrent LGSOC. We intend to submit an accelerated approval new drug application (“NDA”) with the FDA in the first half of 2024 for the combination of avutometinib and defactinib based on mature data from the RAMP 201 study, together with the results of the investigator-initiated Phase 1 FRAME trial. We also intend to initiate discussions with global regulatory authorities, including those in Europe and Japan with the objective of ultimately seeking approval for the combination in additional regions. In September 2021, we entered into a clinical collaboration agreement with Amgen, Inc. (“Amgen”) to evaluate the combination of avutometinib with Amgen’s KRAS G12C inhibitor LUMAKRAS® (sotorasib) in a Phase 1/2 study entitled RAMP 203. The Phase 1/2 trial will evaluate the safety, tolerability and efficacy of avutometinib in combination with LUMAKRAS in patients with KRAS G12C NSCLC who have not been previously treated with a KRAS G12C inhibitor, as well as in patients who have progressed on a KRAS G12C inhibitor. The trial will build on preclinical data showing a deeper blockade of MAPK pathway signaling resulting in enhanced anti-tumor efficacy with the combination of LUMAKRAS (KRAS G12C inhibition) and avutometinib (RAF/MEK inhibition) relative to either agent alone. The RAMP 203 study has progressed to the recommended Phase 2 dose of 4 mg avutometinib in combination with 960 mg of LUMAKRAS and to initiation of Part B dose expansion in patients who are G12C inhibitor treatment naïve and in patients who experienced disease progression on prior G12C monotherapy. In October 2023, we announced initial safety and pharmacokinetics results, as well as preliminary efficacy results, from the RAMP 203 study which were presented at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics on October 11-15, 2023 in Boston, Massachusetts. These preliminary results showed a confirmed ORR of 25% (3/12) across efficacy- evaluable patients and seen in both KRAS G12C inhibitor resistant (14.3%; 1/7) and naïve (40%; 2/5) patients. In January 2024, the 5 Table of Contents FDA granted fast track designation for combination of avutometinib and LUMAKRAS for the treatment of patients with KRAS G12C-mutant metastatic NSCLC who have received at least one prior systemic therapy and have not been previously treated with a KRAS G12C inhibitor. Based on stronger tumor regressions in KRAS G12C-mutant NSCLC preclinical models when a FAK inhibitor is added along with G12C inhibitor and avutometinib, we plan to add defactinib to the RAMP 203 study. We plan to provide data updates from the RAMP 203 study in the middle of 2024. In November 2021, we entered into a clinical collaboration agreement with Mirati Therapeutics, Inc. (“Mirati”) to evaluate the combination of avutometinib with Mirati’s KRAS G12C inhibitor KRAZATI® (adagrasib) in a Phase 1/2 trial entitled RAMP 204. The Phase 1/2 trial will evaluate the safety, tolerability and efficacy of avutometinib in combination with KRAZATI in patients with KRAS G12C NSCLC who have progressed on a KRAS G12C inhibitor. The trial will build on preclinical data showing a deeper blockade of MAPK pathway signaling resulting in enhanced anti-tumor efficacy with the combination of KRAZATI (KRAS G12C inhibition) and avutometinib (RAF/MEK inhibition) relative to either agent alone. The RAMP 204 study is open and enrolling. Dose escalation is ongoing. We plan to provide data updates from RAMP 204 in the middle of 2024. In May 2022, we received the first “Therapeutic Accelerator Award” from the Pancreatic Cancer Network (“PanCAN”) for up to $3.8 million. The grant is expected to support a Phase 1b/2 clinical trial of avutometinib in combination with defactinib entitled RAMP 205. This Phase 1b/2 trial is evaluating the safety, tolerability and efficacy of avutometinib and defactinib in combination with GEMZAR® (gemcitabine) and ABRAXANE® (Nab-paclitaxel) in patients with previously untreated metastatic adenocarcinoma of the pancreas. The RAMP 205 trial is evaluating whether combining avutometinib (to target mutant KRAS which is mutated in more than 90% of pancreatic adenocarcinomas) and defactinib (to reduce stromal density and adaptive resistance to avutometinib) to the standard GEMZAR/ABRAXANE regimen improves outcomes for patients with this type of pancreatic cancer. In August 2022, PanCAN agreed to provide us with an additional $0.5 million for the collection and translational analysis of patient samples. The RAMP 205 trial is open and enrolling. Dose escalation is ongoing. We plan to provide initial safety and efficacy results from RAMP 205 in the first half of 2024. Furthermore, avutometinib and defactinib are currently being investigated in combination with immunotherapeutic and other agents through investigator sponsored trials (“ISTs”) for the treatment of various solid tumors, including, but not limited to, CRC, gynecological cancer with MAPK pathway alterations, breast cancer, thyroid cancer and melanoma. In August 2023, we entered into a collaboration and option agreement (the “GenFleet Agreement”) with GenFleet pursuant to which GenFleet granted us options to obtain exclusive development and commercialization rights worldwide outside of mainland China, Hong Kong, Macau, and Taiwan (the “GenFleet Territory”) for up to three oncology programs targeting RAS pathway driven cancers (the “GenFleet Options”). We may exercise our GenFleet Options on a program-by- program basis. The collaboration builds on the strengths of both companies in oncology small molecule drug development, enabling us to partner our clinical development and regulatory expertise with GenFleet’s accomplished discovery capabilities. This synergistic collaboration includes our experience and established network of collaborators, including scientific and clinical experts in RAS biology and RAS pathway-driven cancers and GenFleet’s accomplishments with its KRAS G12C inhibitor program. In December 2023, we announced the selection of an oral KRAS G12D inhibitor with a potential best-in-class profile as the lead program from our collaboration with GenFleet. The lead oncology discovery program is an orally bioavailable, potent and selective small molecule KRAS G12D inhibitor entitled GFH375/VS-7375. GenFleet plans to file an investigational new drug application (“IND”) in China in the first half of 2024 and initiate the Phase 1 clinical trial of GFH375/VS-7375 in the second half of 2024. 6 Table of Contents OUR FOCUS We are focused on the development and commercialization of anticancer kinase inhibitors for optimized efficacy and safety – primarily as orally available drugs and drug candidates that are designed to treat various forms of cancer. Cancer is a group of diseases characterized by the uncontrolled growth and spread of abnormal cells. The American Cancer Society estimated that in the United States in 2023, over 1.9 million new cases of cancer were diagnosed and more than 600,000 people died from the disease. Current treatments for cancer include surgery, radiation therapy, chemotherapy, hormonal therapy, immunotherapy, cell therapy, and targeted therapy. Notwithstanding years of intensive research and clinical use, these current treatments often fail to cure cancer and often cause side effects. For example, conventional chemotherapy works by stopping tumor growth by disrupting the cell cycle leading to cell death. Chemotherapies are effective at killing cancer cells because cancer cells generally grow more rapidly than normal cells. However, chemotherapies also target fast-growing normal cells of the body, such as blood cells, hair follicles, and the cells lining the mouth, stomach, and intestines. As a result, they have a range of side effects and although the treatments may succeed at initially decreasing tumor burden, they ultimately fail to kill all the cancer cells and/or to effectively disrupt the tumor microenvironment, potentially resulting in eventual disease progression. Accordingly, cancer remains one of the world’s most serious health problems and is the second most common cause of death in the United States after heart disease. For example, the National Cancer Institute’s Surveillance, Epidemiology, and End Results Program (“NCI”; “SEER”) reported that in 2023 there were approximately 19,710 new cases of ovarian cancer, 238,340 new cases of lung cancer, 64,050 new cases of pancreatic cancer, and 153,020 new cases of colorectal cancer in the United States. With the application of new technologies and key discoveries, we believe that we are now entering an era of cancer research characterized by a more sophisticated understanding of the biology of cancer. We believe that the potential of oral, targeted therapies, along with the rapidly advancing field of immunotherapy, or using the body’s immune system to fight cancer, present the opportunity to develop more effective cancer treatments. We leverage our expertise in translational research and deep understanding of cancer treatment pathways as well as strategic partnerships to identify, develop and deliver effective options to address unmet needs. We believe the best way for us to help patients living with cancer is by advancing newly emerging mechanisms of the disease and developing novel therapies that target these mechanisms. Despite significant advances in the treatment of cancer, unmet needs persist. KRAS has long been one of the most elusive cancer-causing proteins. KRAS mutant tumors are present in about 30% of all human cancers, have historically presented a difficult treatment challenge, and are often associated with significantly worse prognosis. Since the discovery of KRAS almost four decades ago, researchers have persistently tried to develop therapies that effectively block the cancer-promoting effects of KRAS mutation. Sotorasib (LUMAKRAS) and adagrasib (KRAZATI) are the first agents to directly target KRAS G12C and received FDA approval for patients with KRAS G12C NSCLC in 2021 and 2022, respectively. Challenges associated with identifying new treatment options for these types of cancers include resistance to single agents, identifying tolerable combination regimens with MEK inhibitors, and new KRAS inhibitors in development addressing only a minority of all KRAS mutated cancers. Our focus is targeting cancer cells both directly and indirectly by way of the tumor microenvironment. Low Grade Serous Ovarian Cancer (“LGSOC”) LGSOC is a slow-growing cancer with a high mortality rate. It is estimated that approximately 70% of LGSOC tumors are driven by mutations in MAPK pathway-associated genes, with approximately 30% of patients harboring KRAS mutations and an additional approximately 40% of patients harboring mutations in other MAPK pathway associated genes. There are an estimated 6,000 patients in the United States and 80,000 worldwide living with this disease. Approximately half of those diagnosed are in their 20s-40s. LGSOC has a median survival rate of 10 years, with 85% of patients experiencing recurrence and enduring severe pain and complications as the disease progresses. Despite low response rates, chemotherapy continues to be the standard of care for this disease. Most prior 7 Table of Contents research has focused on high grade serous ovarian cancer (“HGSOC”). However, LGSOC is clinically, histologically and molecularly unique from HGSOC with limited treatments available. Currently, avutometinib is being evaluated in combination with defactinib for the treatment of patients with recurrent LGSOC (i) in a Phase 2 registration directed study entitled RAMP 201, (ii) in a Phase 3 confirmatory trial entitled RAMP 301 and (iii) in an IST entitled FRAME. Avutometinib is also being investigated in combination with defactinib in ISTs to assess efficacy in other gynecological cancers with MAPK pathway mutations (e.g. high-grade and mucinous ovarian cancers, endometrial and cervical cancers). Non-Small Cell Lung Cancer (“NSCLC”) Lung cancer is the leading cause of cancer-related death in the United States and worldwide. Approximately 85% of lung cancers are NSCLC with the remaining 15% of lung cancers being small cell lung cancer. Adenocarcinoma and squamous cell carcinoma are the most common subtypes of NSCLC, accounting for 50% and 30% of NSCLC cases, respectively, with the remaining NSCLC cases being large cell carcinomas, mixed or rare histologies. Adenocarcinomas most frequently have molecular alterations that can be targeted with oral therapies. The most frequent molecular alterations are mutations in the KRAS gene (approximately 25% of adenocarcinomas) of which KRAS G12C is most common (approximately 13% of adenocarcinomas). Several tyrosine kinase inhibitors are in development for patients with KRAS G12C NSCLC of which the KRAS G12C inhibitors LUMAKRAS (sotorasib) and KRAZATI (adagrasib) are currently approved. LUMAKRAS and KRAZATI monotherapy have relatively low response rates and short times to progression and thus, number of agents are being combined with these G12C inhibitors including avutometinib in RAMP 203 and RAMP 204, respectively. Currently, avutometinib is being evaluated (i) in combination with Amgen’s KRAS-G12C inhibitor LUMAKRAS in a Phase 1/2 study in patients with KRAS G12C mutant NSCLC entitled RAMP 203, and (ii) in combination with Mirati’s KRAZATI in patients with KRAS G12C mutant NSCLC in a Phase 1/2 trial entitled RAMP 204. Pancreatic Cancer In 2023, the NCI estimated that pancreatic cancer was the tenth most common cancer diagnosed in the United States and that the disease represented the third leading cause of cancer-related death in the country. Pancreatic cancer often has a poor prognosis, even when diagnosed early. Pancreatic cancer typically spreads rapidly and is seldom detected in its early stages, which is a major reason why it is a leading cause of cancer death. Signs and symptoms may not appear until pancreatic cancer is so advanced that complete surgical removal is not possible. Pancreatic cancer is one of the few cancers where survival has not improved significantly during the past 40 years. The NCI estimates that the number of new incidences of pancreatic cancer was 13.3 per 100,000 people per year based on 2016-2020 cases. Pancreatic cancer has a very high mortality rate with approximately 88% of patients dying within five years of their initial diagnosis based on the five-year relative survival rate from 2013 to 2019. The median age for diagnosis is 70 with the disease affecting males slightly more than females. The prognosis for pancreatic cancer is extremely poor as shown by the survival rate, which indicates the need for new treatments. Chemotherapy or chemotherapy plus radiation is offered to patients whose tumors are unable to be removed surgically. Immuno-oncology agents have not demonstrated a significant improvement in treatment outcome for patients with pancreatic cancer. The limited impact of chemotherapies and immunotherapies to improve the outcome may be due to the dense stroma that is prevalent in pancreatic tumors and the tumor microenvironment. Activating mutations in KRAS represent a key initiating event in pancreatic cancer. KRAS mutations occur in up to 95% of pancreatic cancer, with KRAS G12D, G12V and G12R occurring in approximately 37%, 28% and 13% of patients, respectively. Furthermore, pancreatic cancer typically presents with high stromal density, comprised of fibroblasts and dense extracellular matrix, which is thought to limit the penetration of cytotoxic drugs and T cells into pancreatic tumors. Thus, there is a strong scientific rationale for combining avutometinib (to target mutant KRAS) and defactinib (to reduce stromal density and adaptive resistance to avutometinib) to the standard GEMZAR/ABRAXANE regimen with the objective of increasing response rate and survival. Currently, avutometinib is being evaluated in combination with defactinib + gemcitabine/nab- paclitaxel for the treatment of patients with advanced pancreatic cancer in a Phase 1b/2 clinical trial entitled RAMP 205. 8 Table of Contents Colorectal Cancer (“CRC”) CRC, also known as bowel cancer, colon cancer, or rectal cancer, is the development of cancer from the colon or rectum (parts of the large intestine). According to the American Cancer Society, one in 23 men and one in 26 women will be diagnosed with CRC in their lifetime. CRC is the second leading cause of cancer death among people in the United States. The NCI estimates that the number of new incidences of CRC was 36.6 per 100,000 men and women per year based on 2016-2020 cases and the five-year relative survival rate from 2013 to 2019 for patients with CRC was approximately 65%. The individual likelihood of survival depends on how advanced the cancer is, whether all the cancer can be removed with surgery, and the person's overall health. Treatments used for colorectal cancer may include some combination of surgery, radiation therapy, chemotherapy and targeted therapy. Cancers that are confined within the wall of the colon may be curable with surgery, while cancer that has spread widely is usually not curable, with management being directed towards improving quality of life and symptoms. KRAS mutations are present in approximately 45% of CRC and predict lack of response to anti-EGFR antibodies such as cetuximab. Although clinical trials of the KRAS G12C inhibitors LUMAKRAS (sotorasib) and KRAZATI (adagrasib) in combination with anti-EGFR antibodies in KRAS G12C CRC have shown promising activity, KRAS G12C only occurs in 3% of CRCs. Thus, novel therapies are needed for patients with CRC harboring other KRAS mutations including KRAS G12D and KRAS G12V which represent 13% and 9%, respectively. It has been shown that simultaneous targeting of multiple nodes in the MAPK pathway may be necessary for deep and durable response, supporting the clinical evaluation of avutometinib in combination with anti-EGFR for patients with KRAS mutant CRC. Currently, avutometinib in combination with the anti-EGFR antibody cetuximab is being evaluated for the treatment of patients with advanced KRAS mutant CRC in an IST. Melanoma In 2023, the NCI estimated melanoma cancer was diagnosed in approximately 97,610 patients or 21.0 cases per 100,000 people based on 2016-2020 cases. The NCI estimates the five year survival rate from 2013-2019 was approximately 94% Melanoma is a type of skin cancer that develops in melanocytes. Melanocytes are in the deep layer of the epidermis between the layer of basal cells. Melanocytes make a pigment called melanin. This gives skin its natural color. The pigment helps to protect the body from ultraviolet light (UV radiation) from the sun. Melanoma is most common at body sites that have received intense, intermittent sun/UV exposure. Melanoma is dangerous and aggressive due to its ability to spread to other organs rapidly if it is not treated at an early stage. About 30% of melanomas begin in existing moles, but the rest start in normal skin. The five types of standard treatment for melanoma are surgery, chemotherapy, radiation therapy, immunotherapy and targeted therapy. In patients with melanoma, mutations in the MAPK pathway occur mainly in BRAF (52%), NRAS (28%), and NF1 (14%) Although several selective BRAF inhibitors are FDA-approved alone or in combination with MEK inhibitors for melanomas with BRAF V600E/K, there is still a need for agents to improve response rate, duration of response, and tolerability. Furthermore, there are no targeted therapy options for patients with BRAF V600E melanoma following progression on BRAF + MEK inhibitor combination and immune checkpoint inhibitors. Currently, avutometinib plus defactinib, with or without the BRAF inhibitor encorafenib, is being evaluated for the treatment of patients with brain metastases from cutaneous melanoma in an IST. OUR STRATEGY With the combination of avutometinib and defactinib, we seek to utilize a multi-faceted approach to treat cancer by directly targeting the cancer cells, enhancing anti-tumor immunity, modulating the local tumor microenvironment, and overcoming mechanisms of adaptive resistance to MAPK pathway inhibition. Our goal is to build a leading biopharmaceutical company focused on the development and commercialization of novel drugs that use a multi-faceted approach to improving outcomes for patients with cancer. Key elements of our strategy to achieve this goal are: ● Establishing avutometinib as the backbone of therapy for MAPK pathway-driven tumors. 9 Table of Contents ● Assessing synergy of avutometinib with other agents in preclinical models to prioritize for clinical development. It is becoming well established that blockade of multiple nodes in the MAPK pathway or co- targeting the MAPK pathway and relevant parallel pathways or resistance pathways may be necessary for maximal depth and duration of anti-tumor response. We are assessing combinations of avutometinib with (i) agents targeting other nodes in the MAPK pathway (e.g. KRAS G12C, KRAS G12D, anti-EGFR and SOS1 inhibitors), (ii) agents targeting parallel pathways that may mediate resistance to MAPK pathway inhibition (e.g. FAK, mTOR and CDK4/6 inhibitors), (iii) chemotherapy, and (iv) anti-PD-1. These studies may lead to discussions with other companies and clinical investigators with the objective of assessing high priority combinations in the clinic. ● Continuing to develop and explore avutometinib in combination with defactinib and execute on the registration-directed RAMP 201 study. The combination of avutometinib with defactinib has been selected vs. avutometinib monotherapy as the go-forward treatment for patients with recurrent LGSOC regardless of KRAS status, acknowledging the demonstrated contribution of defactinib. Avutometinib is also being investigated in combination with defactinib in ISTs to assess efficacy in other gynecological cancers with MAPK pathway mutations (e.g. high-grade and mucinous ovarian cancers, endometrial and cervical cancers). ● Execute on our confirmatory trial RAMP 301 required by the FDA for the combination of avutometinib and defactinib to potentially receive full approval for treatment of patients with recurrent LGSOC. We intend to submit an Accelerated Approval NDA for the combination of avutometinib and defactinib based on mature data from the RAMP 201 study, together with the results of the investigator-initiated FRAME trial in the first half of 2024. ● Expanding the indications in which avutometinib may be used alone and in combination with other agents. We have entered into clinical collaboration agreements with both Amgen and Mirati to evaluate avutometinib in patients with KRAS G12C NSCLC in combination with Amgen’s KRAS G12C inhibitor LUMAKRAS (sotorasib) in a study entitled RAMP 203 or in combination with Mirati’s KRAS G12C inhibitor KRAZATI (adagrasib) in a trial entitled RAMP 204. Avutometinib is also being investigated in combination with defactinib + GEMZAR/ABRAXANE in patients with frontline pancreatic cancer in a trial entitled RAMP 205. Additionally, ISTs and preclinical studies are in progress to prioritize additional cancer indications and approaches to expand the potential clinical development of our product candidates. Avutometinib is being investigated in combination with the anti-EGFR antibody cetuximab in KRAS mutant CRC, in combination with abemacicilib and fulvestrant in breast cancer, and in combination with the BRAF inhibitor encorafenib in BRAF V600E melanoma through ISTs. ● Continue to advance three oncology discovery programs targeting RAS/MAPK pathway-driven cancers with GenFleet for which we have three exclusive GenFleet Options that may be exercised on a program-by- program basis. The lead oncology discovery program is an orally bioavailable, potent and selective small molecule KRAS G12D inhibitor entitled GFH375/VS-7375. GenFleet plans to file an IND in China in the first half of 2024 and initiate the Phase 1 clinical trial of GFH375/VS-7375 in the second half of 2024. ● Consider the acquisition or in-licensing of rights to additional agents. We may pursue the acquisition or in- license of rights to additional agents from third parties that may supplement our internal programs and allow us to initiate clinical development of a diverse pipeline of agents more quickly. ● We may seek third-party collaborators for the eventual commercialization of our product candidates both in the U.S. and around the world. 10 Table of Contents OUR PRODUCT CANDIDATES AND PIPELINE Our pipeline product candidates currently consist of avutometinib as a monotherapy and in combination with defactinib and other agents which continue to be evaluated in the clinic for the treatment of a variety of cancer types. The following table represents the status of our pipeline: 1 FDA breakthrough therapy designation 2 FDA fast track designation RAMP 301 Study = NCT06072781 RAMP 201 Study = NCT04625270 RAMP 203 Study = NCT05074810 RAMP 204 Study = NCT05375994 RAMP 205 Study = NCT05669482 FRAME Study = NCT03875820 IST in MAPK pathway-driven gynecological cancer = NCT05512208 IST in mesonephric gynecologic cancer = NCT05787561 IST in KRAS mutant CRC = NCT05200442 IST in ER+ breast cancer = NCT05608252 IST in thyroid cancer = NCT06007924 The status of our development programs in the table above represents the ongoing phase of development and does not correspond to the completion of a particular phase. Drug development involves a high degree of risk and investment, and the status, timing, and scope of our development programs are subject to change. Important factors that could adversely affect our drug development efforts are discussed in the “Risk Factors” section of this Annual Report on Form 10-K. Avutometinib and defactinib Avutometinib is an investigational oral first-in-class unique small molecule RAF/MEK clamp that inhibits the MAPK pathway which is involved in cell proliferation, migration, transformation, and survival of tumor cells. In contrast to other MEK-only inhibitors, avutometinib is a dual RAF/MEK clamp that blocks MEK kinase activity and induces the formation of dominant negative RAF-MEK complexes preventing phosphorylation of MEK by ARAF, BRAF and CRAF. MEK-only inhibitors (e.g., trametinib) paradoxically induce pMEK by relieving extracellular-signal-regulated-kinase (ERK)-dependent feedback inhibition of RAF which may limit their efficacy. By inhibiting RAF-mediated phosphorylation of MEK, avutometinib has the advantage of not inducing pMEK. This unique mechanism of avutometinib enables more effective inhibition of ERK signaling and may confer enhanced 11 Table of Contents therapeutic activity against MAPK pathway-driven cancers. Avutometinib, alone or in combination with defactinib, has received orphan drug designation for the treatment of all patients with LGSOC in the United States. Defactinib is an oral small molecule inhibitor of FAK and PYK2 that is currently being evaluated as a potential combination therapy for various solid tumors. FAK and PYK2 are members of the same family of nonreceptor protein tyrosine kinases that integrate signals from integrin and growth factor receptors to regulate cell proliferation, survival, migration, and invasion. Defactinib targets malignant cells both directly and through modulation of the tumor microenvironment. Preclinical research by our scientists and collaborators at world-renowned research institutions has indicated that FAK inhibition delays tumor progression in cancer models, which was associated with reduced stromal density and immunosuppressive cell populations. Furthermore, it has been shown that activation of FAK is a putative adaptive resistance mechanism to MAPK pathway inhibition, supporting the clinical evaluation of avutometinib in combination with defactinib for treatment of cancers harboring MAPK pathway alterations. Defactinib has received orphan drug designation in ovarian cancer in the United States, the European Union, and Australia. The combination of avutometinib and defactinib has received breakthrough designation from the FDA for the treatment of patients with recurrent LGSOC, regardless of KRAS status, after one or more prior lines of therapy, including platinum-based chemotherapy. Phase 3 Study (known as RAMP (RAF and MEK Program) 301 Study) Confirmatory Trial of Avutometinib and Defactinib in Recurrent LGSOC The RAMP 301 study is an international collaboration between The GOG Foundation, Inc. and the European Network of Gynaecological Oncological Trial groups sponsored by us. The trial is expected to enroll 270 patients who will be randomized to either the combination of avutometinib and defactinib or investigator’s choice chemotherapy (pegylated liposomal doxorubicin, paclitaxel, or topotecan) or hormone therapy (letrozole or anastrozole). The primary endpoint is progression free survival by Blinded Independent Central Review. Secondary endpoints include ORR, duration of response , disease control rate, safety and tolerability, patient reported outcomes, and overall survival. RAMP 301 is a global study with enrollment open in the U.S. and Australia and enrollment planned in Canada, the United Kingdom, Europe, and Korea. RAMP 301 is the confirmatory study required by the FDA for the combination of avutometinib and defactinib to potentially receive full approval for the treatment of patients with recurrent LGSOC. We intend to submit an Accelerated Approval NDA for the combination of avutometinib and defactinib based on mature data from RAMP 201 study, together with the results of the investigator-initiated FRAME trial in the first half of 2024. In July 2023, we announced we finalized with the FDA the design of RAMP 301 and, in December 2023, we initiated the RAMP 301 study. Phase 2 Study (known as RAMP (RAF and MEK Program) 201 Study) Registration-Directed Study of Avutometinib and Defactinib in Recurrent LGSOC The RAMP 201 study that was initiated in November 2020 is a registration-directed clinical study of avutometinib and defactinib in patients with recurrent LGSOC. The RAMP 201 Study is an international adaptive two-part multicenter, parallel cohort, randomized, open label study to evaluate the efficacy and safety of avutometinib alone and in combination with defactinib in patients with recurrent LGSOC. The objective of Part A (selection phase) of the RAMP 201 study was to select the go-forward regimen between avutometinib monotherapy or the combination of avutometinib and defactinib being studied in Part B (expansion phase). In addition, the efficacy was assessed in both KRAS mutant and KRAS wild-type LGSOC. Part B (expansion phase) of the study is examining efficacy and safety parameters of the regimen selected. Part A randomized eligible patients to avutometinib monotherapy (n=33) or the combination of avutometinib and defactinib (n=31). The combination of avutometinib and defactinib has been declared the go-forward treatment regimen based on a higher rate of confirmed objective responses in a planned interim analysis with prespecified criteria. 12 Table of Contents We plan to present full data from Parts A and Part B of the RAMP 201 study at a scientific medical conference in first half of 2024. Updated Phase 2 RAMP 201 Study Results in Patients with LGSOC Part A (May 2023) An abstract highlighting updated interim results from Part A of the RAMP 201 study was presented in a Poster Discussion Session at the American Society of Clinical Oncology (ASCO) annual meeting that took place on June 2-6, 2023, in Chicago, Illinois (data cutoff April 6, 2023). In this data cut from Part A of the RAMP 201 study, 31 patients with recurrent LGSOC were treated with the combination of avutometinib and defactinib, of which 29 were evaluable for efficacy with a minimum follow-up of 12 months and 13 patients remained on study treatment. Overall, patients were heavily pretreated with a median of four prior systemic regimens (up to 11), including prior platinum-based chemotherapy, endocrine therapy and bevacizumab in most patients and prior MEK inhibitor therapy in about 13% of patients. Confirmed ORR by blinded independent central review of 45% (13/29; 95% CI: 26%-64%) were observed. Tumor shrinkage was observed in the majority of patients, 86% (25/29). Further, three out of four patients who received prior MEK inhibitors responded to the combination. Among the patients with KRAS mutant LGSOC, the ORR was 60% (9/15) in the combination arm. Among the patients with KRAS wild-type LGSOC, the ORR was 29% (4/14) in the combination arm. The median time to response was 5.5 months (range 1.6-14.7 months). The median duration of response and median progression free survival have not been reached. The safety profile was consistent with previously reported safety data. The most common treatment-related adverse events for the combination in all treated patients (n=81) were nausea and vomiting, diarrhea, blood creatine phosphokinase (CPK) increased, peripheral edema, vision blurred, dermatitis acneiform and rash, fatigue, and dry skin, most of which were mild to moderate. The discontinuation rate, due to adverse events, was 12% in the study overall to date (4.9% due to elevated blood CPK). Efficacy and Safety Data of Avutometinib and Defactinib in Recurrent LGSOC in Heavily Pretreated Patient Population (November 2023) The results of a planned subgroup analysis of Part A of the RAMP 201 study were presented in an oral presentation during a plenary session at the Annual Global Meeting of the International Gynecologic Cancer Society (IGCS 2023) from November 5-7, 2023 in Seoul, Korea. This planned subgroup analysis was performed to assess efficacy (confirmed ORR via blinded independent central review per RECIST v1.1) and safety in prior lines of therapy (“LoT”) (1-3 LoT, ≥4 LoT). The analysis also evaluated efficacy in the context of best response to most recent prior treatment in the metastatic/recurrent setting. In the combination arm of the RAMP 201 study, the observed ORRs were consistent across patients who received 1-3 (45.5%, 5/11, 95% CI 17-77) and ≥4 (44.4%, 8/18, 95% CI 22-69) lines of therapy. Prior to enrollment in the RAMP 201 study, only 2/23 (8.7%) patients responded to their last prior treatment in the metastatic/recurrent setting, whereas the combination of avutometinib and defactinib yielded an ORR of 43.5% (10/23) in this subgroup. The safety profiles of avutometinib and defactinib were similar in the less and more heavily pretreated subgroups and both analyses were consistent with previously reported safety data. The majority of treatment-emergent adverse events were mild to moderate. Phase 1/2 Study (FRAME) Investigating the Combination of Avutometinib and Defactinib in Patients with KRAS Mutant Cancers and Subsequent Analyses The FRAME study is an open-label, investigator-initiated study that is designed to assess safety, dose response and preliminary efficacy of the combination of avutometinib and defactinib in patients with KRAS mutant solid tumors, including LGSOC (including KRAS mutant and KRAS wild-type), KRAS mutant NSCLC, KRAS 13 Table of Contents G12V NSCLC, KRAS mutant CRC, pancreatic cancer, and RAS/RAF mutant endometrial cancer. The FRAME study is being led by Dr. Udai Banerji and is being conducted in the United Kingdom. In this study, avutometinib was administered using a twice-weekly dose escalation schedule and was administered three out of every four weeks. Defactinib was administered using a twice-daily dose escalation schedule, also three out of every four weeks. Dose levels were assessed in three cohorts: cohort 1 (avutometinib 3.2 mg, defactinib 200 mg); cohort 2a (avutometinib 4 mg, defactinib 200 mg); and cohort 2b (avutometinib 3.2 mg, defactinib 400 mg). The recommended Phase 2 dose was determined to be avutometinib 3.2 mg plus defactinib 200 mg. Updated Phase 1/2 FRAME Study Results in Patients with LGSOC (September 2023) In September 2023 we presented updated FRAME study efficacy data at the 5th Annual RAS-Target Development Summit in Boston Massachusetts (data cutoff July 2023) showing an ORR of 42% (11 of 26) in evaluable patients with LGSOC. Among patients with KRAS mutant LGSOC (n=12), the ORR was 58% (7 of 12), compared to patients with KRAS wild-type LGSOC (n=12), the ORR was 33% (4 of 12). Across all LGSOC patients, the median duration of response was 26.9 months (95% CI: 8.5-47.3) while median progression free survival was 20.0 months (95% CI: 11.1-31.2). As of the July 2023 data cutoff date, 19% of patients (5 of 26) were still on study treatment with a minimum follow-up of 17 months. Phase 1/2 Trial (known as RAMP (RAF and MEK Program) 203 Study) of Avutometinib in Combination with Amgen’s LUMAKRAS (sotorasib) in Patients with KRAS G12C NSCLC In September 2021, we entered into a clinical collaboration agreement with Amgen to evaluate the combination of avutometinib with Amgen’s KRAS G12C inhibitor LUMAKRAS (sotorasib) in a Phase 1/2 study entitled RAMP 203. The Phase 1/2 trial will evaluate the safety, tolerability and efficacy of avutometinib in combination with LUMAKRAS in patients with KRAS G12C NSCLC who have not been previously treated with a KRAS G12C inhibitor as well as in patients who have progressed on a KRAS G12C inhibitor. The study is investigating the potential benefits of a more complete vertical blockade of the MAPK pathway with the combination of avutometinib (RAF/MEK inhibition) with LUMAKRAS (KRAS G12C inhibition) in KRAS G12C locally advanced or metastatic NSCLC. The RAMP 203 study has advanced to cohort 2 of 4 mg avutometinib in combination with 960 mg of LUMAKRAS. In January 2024, the FDA granted fast track designation for combination of avutometinib and LUMAKRAS for the treatment of patients with KRAS G12C-mutant metastatic NSCLC who have received at least one prior systemic therapy and have not been previously treated with a KRAS G12C inhibitor. In October 2023 we presented the initial safety, pharmacokinetics, and recommended Phase 2 dose at the AACR- NCI-EORTC Internal Conference on Molecular Targets and Cancer Therapeutics on October 11-15, 2023 in Boston, Massachusetts (data cutoff September 2023). The confirmed ORR was 25% (3/12) across efficacy-evaluable patients and seen in both KRAS G12C inhibitor resistant (14.3%; 1/7) and naïve (40%; 2/5) patients. The pharmacokinetic profile of avutometinib in combination with sotorasib was similar to results in monotherapy studies. No drug-drug interactions were observed between avutometinib and sotorasib. Avutometinib 4.0 mg orally twice per week 21/28 days + sotorasib 960 mg orally once per day 28/28 days was selected as recommended phase 2 dose based on dose limiting toxicity assessment. Enrollment of patients with KRAS G12C-mutant NSCLC who are either naïve to or previously treated with a KRAS G12C inhibitor is ongoing in the expansion phase of the RAMP 203 study. Based on stronger tumor regressions in KRAS G12C-mutant NSCLC preclinical models when a FAK inhibitor is added along with G12C inhibitor and avutometinib, we plan to add defactinib to the RAMP 203 study. We plan to provide data updates from the RAMP 203 study in the middle of 2024. Phase 1/2 Trial (known as RAMP (RAF and MEK Program) 204 Study) of Avutometinib in Combination with Mirati’s KRAZATI (adagrasib) in Patients with KRAS G12C NSCLC In November 2021, we entered into a clinical collaboration agreement with Mirati to evaluate the combination of avutometinib with Mirati’s KRAS G12C inhibitor KRAZATI (adagrasib) in a Phase 1/2 trial entitled 14 Table of Contents RAMP 204. The Phase 1/2 trial is evaluating the safety, tolerability and efficacy of avutometinib in combination with KRAZATI in patients who have progressed on a KRAS G12C inhibitor. The trial will build on preclinical data showing deeper blockade of MAPK pathway signaling resulting in enhanced anti-tumor efficacy with the combination of KRAZATI (KRAS G12C inhibition) and avutometinib (RAF/MEK inhibition) relative to either agent alone. The RAMP 204 study is open and enrolling. We plan to provide data updates from RAMP 204 in the middle of 2024. Phase 1/2 Trial (known as RAMP (RAF and MEK Program) 205 Study) of Avutometinib Plus Defactinib in Combination With Gemcitabine/Nab-Paclitaxel In May 2022, we received the first “Therapeutic Accelerator Award” from PanCAN for up to $3.8 million. The grant is expected to support a Phase 1b/2 clinical trial of avutometinib in combination with defactinib entitled RAMP 205. This Phase 1b/2 trial is evaluating the safety, tolerability and efficacy of GEMZAR (gemcitabine) and ABRAXANE (Nab- paclitaxel) in combination with avutometinib and defactinib in patients with previously untreated metastatic adenocarcinoma of the pancreas. The RAMP 205 study is evaluating whether combining avutometinib (to target mutant KRAS which is mutated in more than 90% of pancreatic tumors) and defactinib (to reduce stromal density and adaptive resistance to avutometinib) to the standard GEMZAR/ABRAXANE regimen improves outcomes for patients with pancreatic cancer. The RAMP 205 study is open and enrolling. Dose escalation is ongoing. We plan to provide initial safety and efficacy results from the RAMP 205 study in the first half of 2024. INTELLECTUAL PROPERTY We strive to protect the proprietary technology that we believe is important to our business, including seeking and maintaining patents intended to cover our product candidates and compositions, their methods of use and processes for their manufacture, and any other aspects of inventions that are commercially important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. We plan to continue to expand our intellectual property estate by filing patent applications directed to compositions, methods of treatment and patient selection created or identified from our ongoing development of our product candidates. Our success will depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also rely on know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position. We seek to obtain domestic and international patent protection, and endeavor to promptly file patent applications for new commercially valuable inventions. The patent positions of biopharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and patent scope can be reinterpreted by the courts after issuance. Moreover, many jurisdictions permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors. Because patent applications in the United States and certain other jurisdictions are maintained in secrecy for 18 months or potentially even longer, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings or derivation proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention. 15 Table of Contents Patents Our patent portfolio includes issued and pending applications worldwide. These patent applications fall into two categories: (1) RAF/MEK inhibition program; and (2) FAK inhibition program. RAF/MEK inhibition program We have exclusively licensed a portfolio of four patent families owned by Chugai Pharmaceutical Co., Ltd. (“Chugai”). The first patent family has claims directed to the composition of matter of avutometinib, and includes granted patents in the United States, Australia, Brazil, Canada, China, Europe, Japan, Korea, Israel, and New Zealand that are expected to expire in February of 2027. The second patent family has claims directed to methods of making avutometinib and includes granted patents in Europe, Japan, and the United States that are expected to expire in September of 2032. The third patent family has claims directed to a dosing protocol of avutometinib, and includes a granted patent in the United States that is expected to expire in November of 2038, granted patents in Russia and Taiwan, and pending patent applications in the United States, Australia, Brazil, Canada, China, Europe, Hong Kong, Japan, Korea, Mexico, and Singapore. Patents that issue in this family will have a statutory expiration date in May of 2038. The fourth patent family covers a method of using avutometinib in combination with a FAK inhibitor, such as defactinib, for treating a patient, and includes a granted patent in the United States that is expected to expire in September of 2040 and pending patent applications in Australia, Brazil, Canada, China, Eurasia, Europe, Hong Kong, Indonesia, Japan, Korea, Mexico, Malaysia, New Zealand, Singapore, the United States, and Taiwan. In addition to the issued and pending patent applications exclusively licensed from Chugai, we own one patent family covering solid forms of avutometinib, which includes one granted patent in the United States that is expected to expire in December of 2042 and a pending patent application in the United States and an international application. We also own ten patent families covering methods of using a dual RAF/MEK inhibitor for treating a patient. The first, second, and third patent families cover methods of using a dual RAF/MEK inhibitor in combination with another therapeutic agent such as a KRAS G12C inhibitor or an immunotherapeutic agent for treating a patient, and are pending in the United States and worldwide. The fourth patent family covers a method of using a dual RAF/MEK inhibitor to treat a patient with certain mutations, and is pending in the United States and worldwide. We also have six patent families covering methods of using a dual RAF/MEK inhibitor in combination with another therapeutic agent for treating a patient, which are pending as international applications. One of the six patent families is co-owned with Francis Crick Institute; and another of the six patent families is co-owned with the University of North Carolina at Chapel Hill. Any U.S. patents that will issue in the ten families will have a statutory expiration date ranging from January of 2041 to May of 2043. FAK inhibition program We have exclusively licensed a portfolio of patent applications owned by Pfizer, Inc. (“Pfizer”), which are directed to FAK inhibitor compounds and methods of their use, for example in cancer. One patent family is related generally to defactinib. This patent family includes issued patents having claims covering defactinib generically and specifically. For example, US 7,928,109 covers the composition of matter of defactinib specifically, and US 8,247,411 covers the composition of matter of defactinib generically. Also included are issued and pending patent applications having claims directed to methods of treatment and methods of making defactinib. For example, US 8,440,822 and US 10,450,297 cover methods of making defactinib. Any U.S. patents that have issued or will issue in this family will have a statutory expiration date in April of 2028. Related cases have been granted worldwide, including Australia, Europe, Brazil, Mexico, India, Hong Kong, Canada, China, Korea, Israel, New Zealand, South Africa, Singapore, Taiwan, Thailand, and Japan. In addition to the issued and pending patent applications exclusively licensed from Pfizer, we own three patent families covering defactinib. One family is directed to compositions (e.g., oral dosage forms) of defactinib and certain methods of use. Any U.S. patents that will issue in this family will have a statutory expiration date in January of 2035. Patent applications in this family are pending worldwide, including in the United States, Thailand, and China, and have been granted in Australia, Brazil, Canada, Europe, Hong Kong, Israel, Mexico, Japan, Korea, New Zealand, Singapore, and South Africa. The second family is directed to methods of using a FAK inhibitor, such as defactinib, in combination with a MEK inhibitor for treating a patient. Any U.S. patents that will issue in this family will have a statutory expiration date in February of 2035. Patent applications in this family have been granted 16 Table of Contents worldwide, including the United States, Japan, Hong Kong, and Europe. The third family is directed to methods of using a FAK inhibitor, such as defactinib, in combination with an immunotherapeutic agent. Any U.S. patents that have issued or will issue in this family will have a statutory expiration date in June of 2036. Patent applications in this family are pending worldwide, including for example in Europe, New Zealand, Brazil, Korea, Israel, Canada, Japan, and Hong Kong, and have been granted in the United States, Australia, China, Eurasia, Mexico, Singapore, and South Africa. Our licensed portfolio of patent applications from Pfizer also includes four families of patent applications directed to VS-6062 and related methods of use. The patent families include issued and pending patent applications having claims directed to VS-6062, methods of manufacture, and pharmaceutical salts. Patents have issued in these families in the United States that will expire in December of 2023, April of 2025, and November of 2028, respectively. Related cases have been granted worldwide, including in Australia, Canada, China, Japan, and Europe. Stanford University has an option to certain United States rights in VS-6062. Patent Term The base term of a U.S. patent is 20 years from the filing date of the earliest-filed non-provisional patent application from which the patent claims priority. The term of a U.S. patent can be lengthened by patent term adjustment, which compensates the owner of the patent for administrative delays at the U.S. Patent and Trademark Office. In some cases, the term of a U.S. patent is shortened by terminal disclaimer that reduces its term to that of an earlier-expiring patent. The term of a United States patent may be eligible for patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act, to account for at least some of the time the drug is under development and regulatory review after the patent is granted. With regard to a drug for which FDA approval is the first permitted marketing of the active ingredient, the Hatch-Waxman Act allows for extension of the term of one United States patent that includes at least one claim covering the composition of matter of an FDA-approved drug, an FDA-approved method of treatment using the drug, and/or a method of manufacturing the FDA-approved drug. The extended patent term cannot exceed the shorter of five years beyond the non-extended expiration of the patent or 14 years from the date of the FDA approval of the drug. Some foreign jurisdictions, including Europe and Japan, have analogous patent term extension provisions, which allow for extension of the term of a patent that covers a drug approved by the applicable foreign regulatory agency. LICENSES AND COMMERCIAL AGREEMENTS GenFleet Therapeutics Inc. On August 24, 2023, we entered into the GenFleet Agreement, pursuant to which GenFleet granted us the GenFleet Options. We may exercise our GenFleet Options on a program-by-program basis. In December 2023, we announced the lead oncology discovery program is an orally bioavailable, potent and selective small molecule KRAS G12D inhibitor entitled GFH375/VS-7375. We made an upfront payment of $2.0 million to GenFleet in September 2023 and will provide $1.5 million of research support over the first three years of the GenFleet Agreement. In addition, pursuant to the GenFleet Agreement, upon achievement of certain development and commercial milestones, and upon us exercising all three GenFleet Options, GenFleet will be entitled to receive payments of up to $622.0 million. We have also agreed to pay GenFleet royalties on net sales of licensed products in the GenFleet Territory ranging from the mid to high single digits. We may terminate the GenFleet Agreement in its entirety or on a program-by-program basis by providing 90 days written notice to GenFleet. Either party may terminate the GenFleet Agreement in its entirety or on a program-by-program and country-by-country basis, with 60 days’ written notice for the other party’s material breach if such party fails to cure the breach. Either party may also terminate the GenFleet Agreement in its entirety upon certain insolvency events involving the other party. 17 Table of Contents Secura Bio, Inc. On August 10, 2020, we and Secura signed an Asset Purchase Agreement (the “Secura APA”) and on September 30, 2020, the transaction closed. Pursuant to the Secura APA, we sold to Secura our exclusive worldwide license for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib. The sale included certain intellectual property related to duvelisib in oncology indications, certain existing duvelisib inventory, claims and rights under certain contracts pertaining to duvelisib. Pursuant to the Secura APA, Secura assumed all operational and financial responsibility for activities that were part of the duvelisib oncology program, including all commercialization efforts related to duvelisib in the United States and Europe, as well as our ongoing duvelisib clinical trials. Further, Secura assumed all obligations with existing collaboration partners developing and commercializing duvelisib, which include Yakult Honsha Co., Ltd. (“Yakult”), CSPC Pharmaceutical Group Limited (“CSPC”), and Sanofi. Additionally, Secura assumed all royalty payment obligations due under the amended and restated license agreement with Infinity Pharmaceuticals, Inc. (“Infinity”). Pursuant to the terms of the Secura APA, Secura has paid us an up-front payment of $70.0 million, and has agreed to pay us (i) regulatory milestone payments up to $45.0 million, consisting of a payment of $35.0 million upon receipt of regulatory approval of COPIKTRA in the United States for the treatment of peripheral T-cell lymphoma (“PTCL”) and a payment of $10.0 million upon receipt of the first regulatory approval for the commercial sale of COPIKTRA in the European Union for the treatment of PTCL, (ii) sales milestone payments of up to $50.0 million, consisting of $10.0 million when total worldwide net sales of COPIKTRA exceed $100.0 million, $15.0 million when total worldwide net sales of COPIKTRA exceed $200.0 million and $25.0 million when total worldwide net sales of COPIKTRA exceed $300.0 million, (iii) low double-digit royalties on the annual aggregate net sales above $100.0 million in the United States, European Union, and the United Kingdom of Great Britain and Northern Ireland and (iv) 50% of all royalty, milestone and sublicense revenue payments payable to Secura under our existing license agreements with Sanofi, Yakult, and CSPC, and 50% of all royalty, and royalty payments payable to Secura under any license or sublicense agreement entered into by Secura in certain jurisdictions. Secura’s royalty obligations remain in effect on a country-by-country basis upon the last to occur (a) 10 years from the first commercial sale of product containing duvelisib in such country or (b) the expiration of all valid patent claims covering products containing duvelisib in such country. In December 2021, Secura announced it had voluntarily withdrawn COPIKTRA (duvelisib) from the U.S. for treatment of patients with relapsed or refractory follicular lymphoma after at least two prior systemic therapies. On June 30, 2022, the FDA issued a drug safety communication warning that resulted from a clinical trial showing a possible increased risk of death with COPIKTRA compared to another medicine to treat chronic blood cancer called leukemia and lymphoma. The clinical trial also found that COPIKTRA was associated with a higher risk of serious side effects, including infections, diarrhea, inflammation of the intestines and lungs, skin reactions, and high liver enzyme levels in the blood. In September 2022, the FDA’s Oncologic Drug Advisory Committee (“ODAC”) voted eight to four against COPIKTRA’s use in patients with relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma after at least two prior therapies citing an unfavorable risk/benefit profile. In September 2022, Secura’s sublicensee, Yakult, announced it had withdrawn its NDA for duvelisib in Japan. Chugai Pharmaceutical Co., Ltd. On January 7, 2020, we entered into a license agreement with Chugai (the “Chugai Agreement”) whereby Chugai granted us an exclusive worldwide license for the development, commercialization, and manufacture of products containing avutometinib. Under the terms of the Chugai Agreement, we received an exclusive right to develop and commercialize products containing avutometinib at our own cost and expense. In February 2020, we paid Chugai a non-refundable payment of $3.0 million. We are further obligated to pay Chugai double-digit royalties on net sales of products containing avutometinib, subject to reduction in certain circumstances. Chugai also obtained opt back rights to develop and commercialize avutometinib (a) in the European Union, and (b) in Japan and Taiwan. Chugai has 18 Table of Contents communicated their intention not to exercise their opt back rights for Japan, Taiwan, or the European Union. Chugai and we have made customary representations and warranties and have agreed to certain customary covenants, including confidentiality and indemnification. Unless earlier terminated, the Chugai Agreement will expire upon the fulfillment of our royalty obligations to Chugai for the sale of any products containing the avutometinib, which royalty obligations expire on a product-by-product and country-by-country basis, upon the last to occur, in each specific country, of (a) expiration of valid licensed patent claims covering such product or (b) 12 years from the first commercial sale of such product in such country. We may terminate the Chugai Agreement upon 180 days’ written notice. Subject to certain limitations, Chugai may terminate the Chugai Agreement upon written notice if we challenge any patent licensed by Chugai to us under the Chugai Agreement. Either party may terminate the license agreement in its entirety with 120 days’ written notice for the other party’s material breach if such party fails to cure the breach. Either party may also terminate the Chugai Agreement in its entirety upon certain insolvency events involving the other party. Pfizer Inc. On July 11, 2012, we entered into a license agreement (the “Pfizer Agreement”) with Pfizer under which Pfizer granted us worldwide, exclusive rights to research, develop, manufacture and commercialize products containing certain of Pfizer’s inhibitors of FAK, including defactinib, for all therapeutic, diagnostic and prophylactic uses in humans. We have the right to grant sublicenses under the foregoing licensed rights, subject to certain restrictions. We are solely responsible, at our own expense, for the clinical development of these products, which is to be conducted in accordance with an agreed- upon development plan. We are also responsible for all manufacturing and commercialization activities at our own expense. Pfizer provided us with an initial quantity of clinical supplies of one of the products for an agreed upon price. Upon entering into the Pfizer Agreement, we made a one-time cash payment to Pfizer in the amount of $1.5 million and issued 192,012 shares of our common stock. Pfizer is also eligible to receive up to $2.0 million in developmental milestones and up to an additional $125.0 million based on the successful attainment of regulatory and commercial sales milestones. Pfizer is also eligible to receive high single to mid-double-digit royalties on future net sales of the products. Our royalty obligations with respect to each product in each country begin on the date of first commercial sale of the product in that country, and end on the later of 10 years after the date of first commercial sale of the product in that country or the date of expiration or abandonment of the last claim contained in any issued patent or patent application licensed by Pfizer to us that covers the product in that country. The Pfizer Agreement will remain in effect until the expiration of all our royalty obligations to Pfizer, determined on a product-by-product and country-by-country basis. So long as we are not in breach of the Pfizer Agreement, we have the right to terminate the license agreement at will on a product-by-product and country-by-country basis, or in its entirety, upon 90 days written notice to Pfizer. Either party has the right to terminate the Pfizer Agreement in connection with an insolvency event involving the other party or a material breach of the Pfizer Agreement by the other party that remains uncured for a specified period of time. If the Pfizer Agreement is terminated by either party for any reason, worldwide rights to the research, development, manufacture and commercialization of the products revert back to Pfizer. COMPETITION The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products. While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. 19 Table of Contents Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology, and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, side effects, convenience, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. There are many generic products currently on the market for the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our therapeutic product candidates are approved, we expect that they will be priced at a significant premium over competitive generic products. The most common methods of treating patients with cancer are surgery, radiation, and drug therapy, including chemotherapy, hormone therapy, immunotherapy, and targeted drug therapy. There are a variety of available drug therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. To the extent our product candidates are ultimately used in combination with or as an adjunct to existing drug or other therapies, our product candidates will not be competitive with them. Some of the currently approved drug therapies are branded and subject to patent protection, and others are available on a generic basis. Many of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. In general, although there has been considerable progress over the past few decades in the treatment of cancer and the currently marketed therapies provide benefits to many patients, these therapies all are limited to some extent in their efficacy and frequency of adverse events, and none of them are successful in treating all patients. As a result, the level of morbidity and mortality from cancer remains high. In addition to currently marketed therapies, there are also a number of products in late stage clinical development to treat cancer. These products in development may provide efficacy, safety, convenience, and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain market approval. RAF/MEK inhibition program There are other companies with approved RAF and/or MEK inhibitors with FDA approval in the market and companies working to develop RAF and/or MEK inhibitor. We believe the following companies have an approved RAF and/or MEK inhibitor: ● Novartis AG, which has received FDA approval for Taflinar ® (dabrafenib), a RAF inhibitor, in combination with Mekinist ® (trametinib), a MEK inhibitor, for treatment of patients with unresectable or metastatic melanoma with BRAF V600E or V600K mutations, adjuvant treatment for melanoma with BRAF V600E or V600K mutations and involvement of lymph nodes following complete resection, metastatic NSCLC with BRAF V600E or V600K mutations and locally advanced or metastatic anaplastic thyroid cancer with BRAF V600E mutation; 20 Table of Contents ● Pfizer, through its acquisition of Array BioPharma, Inc, has received FDA approval for Braftovi ® (encorafenib), a RAF inhibitor, in combination with Mektovi ® (binimetinib), a MEK inhibitor, for treatment of patients with unresectable or metastatic melanoma with a BRAF V600E or V600K mutation. In addition, the FDA has granted approval for Braftovi ® (encorafenib) in combination with Erbitux ® (cetuximab), an anti-EGFR antibody for treatment of adult patients with metastatic CRC with a BRAF V600E mutation; ● Genentech, Inc. a member of the Roche Company, which has received FDA approval for Zelboraf ® (vemurafenib), a RAF inhibitor, in combination with Cotellic ® (cobimetinib), a MEK inhibitor, to treat patients with unresectable or metastatic melanoma with a BRAF V600E or V600K mutation; and ● AstraZeneca and Merck & Co., Inc. has received FDA approval for Koselugo ® (selumetinib), a MEK inhibitor, for the treatment of pediatric patients two years of age and older with neurofibromatosis type 1 (NF1) who have symptomatic inoperable plexiform neurofibromas. FAK inhibition program We understand that InxMed, a clinical-stage biotech company, is developing a FAK small molecule inhibitor program. We believe InxMed is conducting Phase 1 and Phase 2 clinical trials of their product candidate IN10018. MAPK Pathway Inhibitors We understand that there are currently two companies with FDA approval targeting the MAPK pathway in the market. Amgen has received FDA approval for LUMAKRAS (sotorasib) for the treatment of adult patients with KRAS G12C locally advanced or metastatic NSCLC, who have received at least one prior systemic therapy. Mirati has received FDA approval for KRAZATI (adagrasib) for treatment of adult patients with KRAS G12C locally advanced or metastatic NSCLC, who have received at least one prior systemic therapy. We are also aware of other companies in clinical trials developing compounds targeting the MAPK pathway. Such companies include but are not limited to Amgen, Mirati, Revolution Medicines, Inc., SpringWorks Therapeutics, Inc., BeiGene Ltd., Immuneering Corporation, Mapkure, LLC, Erasca, Inc., Relay Therapeutics, Inc. and Kinnate Biopharma, Inc. Oncology In addition, we are aware of companies that have inhibitors addressing our targets of interest some of which have received FDA approval. For example, we understand that AbbVie Inc. has received FDA approval for Elahere for treatment of adult patients with folate receptor alpha positive, platinum-resistant epithelial ovarian, fallopian tube, or primary peritoneal cancer, who have received one to three prior systemic treatment regimens. Our competition also includes hundreds of private and publicly traded companies that operate in the area of oncology but have therapeutics with different mechanisms of action. The oncology market in general is highly competitive, with over 1,000 molecules currently in clinical development. MANUFACTURING We contract with third parties for the manufacture of our product candidates for preclinical studies and clinical trials, and we intend to continue to do so in the future. We currently work with one contract manufacturing organization (“CMO”) for the manufacture of avutometinib drug product, one CMO for the production of avutometinib drug substance, and one CMO for avutometinib drug packaging/labeling. For defactinib, we currently have one CMO for the manufacture of drug product, one CMO for the production of drug substance, and one CMO for drug packaging /labeling. We have development agreements in place with these CMOs and we obtain drug substance, drug product and packaging/labeling services from these CMOs on a purchase order basis. We may elect to pursue relationships with other CMOs for manufacturing of drug product, drug substance, and packaging/labeling for later-stage clinical trials, commercialization or for risk management. We do not own or operate, and currently 21 Table of Contents have no plans to establish, any manufacturing facilities. We have personnel with pharmaceutical development and manufacturing experience who are responsible for the relationships with our CMOs. All of our drug candidates are organic compounds of low molecular weight, generally called small molecules. We select compounds not only on the basis of their potential efficacy and safety, but also for their ease of synthesis and the reasonable cost of their starting materials. We expect to continue to develop drug candidates that can be produced cost- effectively at third-party CMOs. APPLICABLE LAWS AND GOVERNMENT REGULATION Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, import and export of pharmaceutical products, such as those we are developing. United States drug approval process In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal penalties. The process required by the FDA before a drug may be marketed in the United States generally involves the following: ● completion of preclinical laboratory tests, animal studies, and formulation studies in compliance with the FDA’s good laboratory practice regulations and applicable requirements for the humane use of laboratory animals or other applicable requirements; ● submission to the FDA of an investigational new drug (“IND”) application, which must become effective before human clinical trials may begin; ● approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be initiated; ● performance of adequate and well-controlled human clinical trials in accordance with good clinical practices (“GCP”) and other clinical-trial related regulations to establish the safety and efficacy of the proposed drug for each indication; ● submission to the FDA of an NDA and payment of user fees for FDA review of NDA; ● satisfactory completion of an FDA advisory committee review, if applicable; ● satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices (“cGMP”) requirements and to assure that the facilities, methods, and controls are adequate to preserve the drug’s identity, strength, quality and purity; and ● FDA review and approval of the NDA. 22 Table of Contents Preclinical studies Before testing any product candidate in humans, the product candidate must undergo rigorous preclinical testing. Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective thirty days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. Clinical trials Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined: ● Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness. ● Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. ● Phase 3: The drug is administered to an expanded patient population in adequate and well-controlled clinical trials to generate sufficient data to statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product. Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication and are commonly intended to generate additional safety data regarding use of the product in a clinical setting. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a NDA or, in certain circumstances, post-approval, such as in the case of drugs approved under the accelerated approval pathway. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be 23 Table of Contents completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Marketing approval Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to a substantial application user fee, scheduled in 2024 to exceed $4.0 million, and the sponsor of an approved NDA is also subject to annual program fees, based on the number of approved products. These fees are typically adjusted annually. User fee statutory authority expires every five years. The Prescription Drug User Fee Act was re-authorized for an additional five years in 2022 until 2027. Fee waivers are available in certain circumstances, including a waiver of the application fee for an orphan drug application. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in the review of NDAs. Under these goals, the FDA has committed to review most such applications for non-priority products within 10 months after accepting the application for filing, and most applications for priority review products, that is, drugs that the FDA determines represent a significant improvement over existing therapy, within six months after accepting the application for filing. The review process may be extended by the FDA for three additional months to consider certain information or clarification regarding information already provided in the submission. The FDA may also refer applications for novel drugs or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Under the Pediatric Research Equity Act of 2003, as amended and reauthorized by the Food and Drug Administration Amendments Act of 2007 (“FDAAA”), an NDA or supplement to an NDA must contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan drug designation. Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and integrity of the clinical data submitted. The testing and approval process requires substantial time, effort and financial resources, and each may take many years to complete. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties or unanticipated costs in our efforts to develop our product candidates and secure necessary governmental approvals, which could delay or preclude us from marketing our products. 24 Table of Contents After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If the FDA issues a complete response letter, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve the NDA. Even if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. Expedited Development and Review Programs The FDA has various programs, including fast track designation, breakthrough therapy designation, priority review and accelerated approval, which are designed to expedite or facilitate the process for the development and FDA review of drugs and biologics that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs and biologics to patients earlier than under standard FDA review procedures. Fast Track Designation. To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that the product is intended for the treatment of a serious or life-threatening condition for which there is no effective treatment, and demonstrates the potential to address unmet medical needs for the condition. Under the fast track program, the sponsor of a new drug candidate may request the FDA to designate the product for a specific indication as a fast track product concurrent with or after the filing of the IND for the product candidate. The FDA must determine if the product candidate qualifies for fast track designation within 60 days after receipt of the sponsor’s request. In addition to other benefits, such as the ability to use surrogate endpoints and have greater interactions with the FDA, the FDA may initiate review of sections of a fast track product’s NDA before the application is complete. This rolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process. Breakthrough Designation. A drug may be designated as a breakthrough therapy if the drug is intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. The breakthrough therapy designation provides all the benefits of the fast track program, including the eligibility for rolling review. The FDA may take certain administrative actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process, providing timely advice to the product sponsor regarding development and approval, involving more senior staff in the review process, assigning a cross-disciplinary project lead for the review team and taking other steps to aid sponsors in designing the clinical trials. Although breakthrough designation does not affect the regulatory standards for approval, the frequent interactions with the FDA may facilitate a more efficient development program. In addition, the breakthrough designation may be withdrawn by the FDA if the FDA believes that the drug no longer meets the conditions for qualification. 25 Table of Contents Priority Review. Under FDA policies, a product candidate may be eligible for priority review, or review within a six-month time frame, compared to the ten-month time frame for a standard review, from the time a complete application is accepted for filing. Products regulated by the FDA’s Center for Drug Evaluation and Research (CDER) are eligible for priority review if they provide a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. Accelerated Approval. Under the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of one or more Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. The Food and Drug Omnibus Reform Act of 2022 (“FDORA”) signed by President Biden on December 29, 2022 as part of the Consolidated Appropriations Act, 2023 (H.R. 2617) includes numerous reforms to the accelerated approval process for drugs and biologics and enables FDA to require, as appropriate, that a post-approval study be underway prior to granting accelerated approval. FDORA also expands the expedited withdrawal procedures available to FDA to allow the agency to use expedited procedures if a sponsor fails to conduct any required post-approval study of the product with due diligence.” FDORA also adds the failure of a sponsor of a product approved under accelerated approval to conduct with due diligence any required post-approval study with respect to such product or to submit timely reports with respect to such product to the list of prohibited acts in the Food, Drug, and Cosmetic Act. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA. Orphan drugs Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity in that it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. The FDA has historically taken the position that the scope of orphan exclusivity aligns with the approved indication or use of a product, rather than the disease or condition for which the product received orphan designation. However, on September 30, 2021, the U.S. Court of Appeals for the 11th Circuit issued a decision in Catalyst Pharms., Inc. v. Becerra holding that the scope of orphan drug exclusivity must align with the disease or condition for which the product received orphan designation, even if the product’s approval was for a narrower use or indication. It remains to be seen how this decision affects orphan drug exclusivity going forward. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee. The Hatch-Waxman Act Abbreviated New Drug Applications In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’s product or a method of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with 26 Table of Contents Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an abbreviated New Drug Application (“ANDA”). Generally, an ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths, dosage form and route of administration as the listed drug and has been shown to be bioequivalent through in vitro or in vivo testing or otherwise to the listed drug. ANDA applicants are not required to conduct or submit results of preclinical or clinical tests to prove the safety or effectiveness of their drug product, other than the requirement for bioequivalence testing. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug. The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. Specifically, the applicant must certify with respect to each patent that: ● the required patent information has not been filed; ● the listed patent has expired; ● the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or ● the listed patent is invalid, unenforceable or will not be infringed by the new product. A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the NDA or patent holder’s receipt of the Paragraph IV certification, expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant. The ANDA also will not be approved until any applicable non-patent exclusivity period, such as exclusivity for obtaining approval of a new chemical entity, for the referenced product has expired. Federal law provides a period of five years following approval of a drug containing no previously approved active moiety during which ANDAs for generic versions of those drugs cannot be submitted unless the submission contains a Paragraph IV challenge to a listed patent, in which case the submission may be made four years following the original product approval. Federal law provides for a period of three years of exclusivity during which the FDA cannot grant effective approval of an ANDA for the conditions of use covered by the exclusivity, but FDA requires as a condition of approval new clinical trials conducted by or for the sponsor. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication. Under the Best Pharmaceuticals for Children Act, federal law also provides that periods of patent and non-patent marketing exclusivity listed in the Orange Book for a drug may be extended by six months if the NDA sponsor conducts pediatric studies identified by the FDA in a written request. For written requests issued by the FDA after September 27, 2007, the date of enactment of the FDAAA, the FDA must grant pediatric exclusivity no later than nine months prior to the date of expiration of patent or non-patent exclusivity in order for the six-month pediatric extension to apply to that exclusivity period. 27 Table of Contents Combination Therapy Combination therapy is a treatment modality that involves the use of two or more drugs to be used in combination to treat a disease or condition. If those drugs are combined in one dosage form, such as one pill, that is known as a fixed dose combination product and it is reviewed pursuant to the FDA’s Combination Rule at 21 CFR 300.50. The Rule provides that two or more drugs may be combined in a single dosage form when each component contributes to the claimed effects and the dosage of each component (amount, frequency, duration) is such that the combination is safe and effective for a significant patient population requiring such concurrent therapy as defined in the labeling for the drug. But not all combination therapy falls under the category of a fixed dose combination. For example, the FDA recognizes that two drugs in separate dosage forms and in separate packaging, that otherwise might be administered as monotherapy for an indication, also may be used in combination for the same indication. In 2013, the FDA issued guidance to assist sponsors that were developing the range of combination therapies that fall outside the category of fixed dose combinations. That guidance provides recommendations and advice on such topics as: (1) assessment at the outset whether two or more therapies are appropriate for use in combination; (2) guiding principles for nonclinical and clinical development of the combination; (3) options for regulatory pathways to seek marketing approval of the combination; and (4) post-marketing safety monitoring and reporting obligations. Given the wide range of potential combination therapy variations, the FDA indicated it intends to assess each potential combination on a case-by case basis and encouraged sponsors to engage in early and regular consultation with the relevant review division at the agency throughout the development process for its proposed combination. Combination products The FDA regulates combinations of products that cross FDA centers, such as drug, biologic or medical device components that are physically, chemically or otherwise combined into a single entity, as a combination product. The FDA center with primary jurisdiction for the combination product will take the lead in the premarket review of the product, with the other center consulting or collaborating with the lead center. The FDA’s Office of Combination Products (“OCP”) determines which center will have primary jurisdiction for the combination product based on the combination product’s “primary mode of action.” A mode of action is the means by which a product achieves an intended therapeutic effect or action. The primary mode of action is the mode of action that provides the most important therapeutic action of the combination product, or the mode of action expected to make the greatest contribution to the overall intended therapeutic effects of the combination product. Often it is difficult for the OCP to determine with reasonable certainty the most important therapeutic action of the combination product. In those difficult cases, the OCP will consider consistency with other combination products raising similar types of safety and effectiveness questions, or which center has the most expertise to evaluate the most significant safety and effectiveness questions raised by the combination product. A sponsor may use a voluntary formal process, known as a Request for Designation, when the product classification is unclear or in dispute, to obtain a binding decision as to which center will regulate the combination product. If the sponsor objects to that decision, it may request that the agency reconsider that decision. Other regulatory requirements Any drug manufactured or distributed by us pursuant to FDA approvals would be subject to extensive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further 28 Table of Contents assess and monitor the product’s safety and effectiveness after commercialization. Regulatory approval of oncology products often requires that patients in clinical trials be followed for long periods to determine the overall survival benefit of the drug. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain cGMP compliance. Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical trials to assess new safety risks or imposition of distribution or other restrictions under a Risk Evaluation and Mitigation Strategy program. Other potential consequences include, among other things: ● restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; ● fines, warning letters or holds on post-approval clinical trials; ● refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals; ● product seizure or detention, or refusal to permit the import or export of products; or ● consent decrees, corporate integrity agreements, injunctions or the imposition of civil or criminal penalties. The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off label uses may be subject to significant liability. Additional provisions Physician drug samples As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The Prescription Drug Marketing Act (“PDMA”) imposes requirements and limitations upon the provision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugs unless the state licensing program meets certain federal guidelines that include minimum standards for storage, handling and record keeping. In addition, the PDMA sets forth civil and criminal penalties for violations. Other Healthcare Laws In the United States, pharmaceutical manufacturers are subject to numerous other federal, state and local laws designed to, for example, prevent fraud and abuse; promote transparency in interactions with others in the 29 Table of Contents healthcare industry; regulate pricing of drugs and protect the privacy of individual information, some of which may apply only if and when we have marketed products. These laws are enforced by various federal and state enforcement authorities, including but not limited to, the U.S. Department of Justice, and individual U.S. Attorney offices within the Department of Justice, the U.S. Department of Health and Human Services, or HHS, HHS’ various divisions, including but not limited to, the Centers for Medicare & Medicaid Services, or CMS, and the Office of Inspector General, and state boards of pharmacy. We may be subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti- kickback laws and false claims laws, for activities related to past and future sales of any products reimbursable by third party payors such as federal health care programs (including Medicare and Medicaid) or, in some cases, commercial health plans. Anti-kickback laws generally prohibit a pharmaceutical manufacturer from soliciting, offering, receiving, or paying anything of value to generate business, including the purchase, prescription or use of a particular drug. False claims laws generally prohibit anyone from knowingly and willingly presenting, or causing to be presented, any claims for payment for reimbursed drugs or services to third-party payors that are false or fraudulent. Laws and regulations have also been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical manufacturers with marketed products. The laws and regulations generally limit financial interactions between manufacturers and health care providers; require manufacturers to adopt certain compliance standards; require disclosure to the government and public of financial interactions; require disclosure of marketing expenditures or pricing information, regulate drug pricing and/or require the registration of pharmaceutical sales representatives. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, any future activities (if we obtain approval and/or reimbursement from federal healthcare programs for our product candidates) could be subject to challenge. The distribution of drugs and biological products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products. Federal and state consumer protection and unfair competition laws and regulations broadly regulate marketplace activities and that potentially harm consumers and could apply to the activities of pharmaceutical manufacturers. We may be subject to data privacy and security laws in the various jurisdictions in which we operate, obtain or store personally identifiable information. Numerous U.S. federal and state laws govern the collection, use, disclosure and storage of personal information. Various foreign countries also have, or are developing, laws governing the collection, use, disclosure and storage of personal information. Globally, there has been an increasing focus on privacy and data protection issues that may affect our business. Efforts to ensure that our activities comply with applicable healthcare laws and regulations will involve substantial costs. Given the breadth of the laws and regulations, limited guidance for certain laws and regulations and evolving government interpretations of the laws and regulations, governmental authorities may possibly conclude that our business practices may not comply with such laws. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Foreign regulation In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products. Regardless of our current FDA approval or any future FDA approvals we may obtain for a product, we would need to obtain the necessary 30 Table of Contents approvals by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. Pharmaceutical coverage, pricing and reimbursement Significant uncertainty exists as to the coverage and reimbursement status of new drug products. Sales of our product candidates, if approved, will depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health programs such as Medicare and Medicaid, commercial health insurers and managed care organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product once coverage is approved. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the approved drugs for a particular indication. In order to secure coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals. We may also need to provide discounts to purchasers, private health plans or government healthcare programs. Our product candidates may not be considered medically necessary or cost-effective. Even if covered, third party payors may seek to control utilization of our products through various mechanisms (e.g., requiring a prescriber to obtain prior authorization from a health plan before the product will be covered by the health plan or establishing patient copays and deductibles that encourage use of other products over our products). A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Third-party reimbursement may not be sufficient to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement for drug products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular drug product or service does not ensure that other payors will also provide coverage for the drug product, or will provide coverage at an adequate reimbursement rate. Within the United States, FDA-approved drugs could potentially be covered by various government health benefit programs as well as purchased by government agencies. The participation in such programs or the sale of products to such agencies is subject to regulation. The marketability of any of our approved products may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. Medicaid is a joint federal and state program that is administered by the states for low income and disabled beneficiaries. Under the Medicaid Drug Rebate Program, participating manufacturers are required to pay a rebate for each unit of product reimbursed by the state Medicaid programs. The amount of the rebate for each product is set by law and may be subject to an additional discount if certain pricing increases more than inflation. Medicare is a federal program that is administered by the federal government that covers individuals aged 65 and over as well as those with certain disabilities. Oral drugs may be covered under Medicare Part D. Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that do not need to be injected or otherwise administered by a physician). Medicare Part D is administered by private prescription drug plans approved by the U.S. government and each drug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time-to-time. The prescription drug plans negotiate pricing with manufacturers and may condition formulary placement on the availability of manufacturer discounts. Manufacturers with marketed brand name drugs are required to provide discounts on brand name prescription drugs utilized by Medicare Part D beneficiaries, which discounts have changed over time. Drug products are subject to discounted pricing when purchased by federal agencies via the Federal Supply Schedule (“FSS”). FSS participation is required for a drug product to be covered and reimbursed by certain federal agencies and for coverage under Medicaid, Medicare Part B and the Public Health Service (PHS) pharmaceutical pricing program. FSS pricing is negotiated periodically with the Department of Veterans Affairs. FSS pricing is 31 Table of Contents intended not to exceed the price that a manufacturer charges its most-favored non-federal customer for its product. In addition, prices for drugs purchased by the Veterans Administration, Department of Defense (including drugs purchased by military personnel and dependents through the TRICARE retail pharmacy program), Coast Guard, and PHS are subject to a cap on pricing (known as the “federal ceiling price”) and may be subject to an additional discount if pricing increases more than the rate of inflation. To maintain coverage of drugs under the Medicaid Drug Rebate Program, manufacturers are required to extend discounts to certain purchasers under the PHS pharmaceutical pricing program. Purchasers eligible for discounts include hospitals that serve a disproportionate share of financially needy patients, community health clinics and other entities that receive health services grants from the PHS. The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of drugs have been a focus in this effort. Third-party payors are increasingly challenging the prices charged for medical products and services and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. Adoption of such controls and measures, and tightening of existing controls and measures, could limit payments for pharmaceuticals such as the drug candidates that we are developing and could adversely affect our net revenue and results. Pricing and reimbursement schemes vary widely from country to country. Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a drug product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low- priced markets exert competitive pressure that may reduce pricing within a country. There can be no assurance that any country that has price controls or reimbursement limitations for drug products will allow favorable reimbursement and pricing arrangements for any of our products. The marketability of products for which we may receive regulatory approval for commercial sale may suffer if the government and private third-party payors fail to provide adequate coverage and reimbursement, seek to control utilization, or create pressure to provide price concessions, coverage policies, third-party reimbursement rates and drug pricing regulation may change at any time. Even if favorable coverage and reimbursement status is attained for a product, less favorable coverage policies and reimbursement rates may be implemented in the future. New legislation and regulations From time to time, legislation is drafted, introduced and passed in the United States Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing and marketing of pharmaceutical products. For example, in December 2016, Congress enacted and President Obama signed into law the 21st Century Cures Act that amends a number of sections of the FDCA. Additionally, in December 2022, President Biden signed into law the Consolidated Appropriations Act, 2023 (H.R. 2617) that contains important reforms relevant to the FDA, including the FDORA and the Prepare for and Respond to Existing Viruses, Emerging New Threats, and Pandemics Act. In addition to new legislation, FDA regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect of such changes, if any, may be. 32 Table of Contents Additionally, in the United States, federal and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, healthcare, which include initiatives to reduce the cost of healthcare generally and drugs specifically. For example, in March 2010, the United States Congress enacted the Patient Protection and Affordable Care Act (“ACA”) and the Healthcare and Education Reconciliation Act, or the Healthcare Reform Act, which expanded healthcare coverage through Medicaid expansion and the implementation of the individual mandate for health insurance coverage and which included changes to the coverage and reimbursement of drug products under government healthcare programs as well as the imposition of annual fees on manufacturers of branded pharmaceuticals. Beyond the ACA, there are ongoing and widespread healthcare reform efforts, a number of which have focused on regulation of prices or payment for drug products. Drug pricing and payment reform has been a focus of the Biden Administration. For example, federal legislation enacted in 2021 eliminates a statutory cap on Medicaid drug rebate program rebates effective January 1, 2024. For example, federal legislation enacted in 2021 eliminates a statutory cap on Medicaid drug rebate program rebates effective January 1, 2024. As another example, the Inflation Reduction Act ("IRA") of 2022 includes a number of changes intended to address rising prescription drug prices in Medicare Parts B and D, with varying implementation dates. These changes include caps on Medicare Part D out-of-pocket costs, Medicare Part B and Part D drug price inflation rebates, a new Medicare Part D manufacturer discount drug program (replacing the ACA Medicare Part D coverage gap discount program) and a drug price negotiation program for certain high spend Medicare Part B and D drugs (with the first list of drugs announced in 2023). Subsequent to the enactment of the IRA, in 2022, the Biden administration released an executive order directing the Department of Health and Human Services (“HHS”) to report on how the Center for Medicare and Medicaid Innovation (“CMMI”) could be leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. The report was issued in 2023 and proposed various models that CMMI is currently developing which seek to lower the cost of drugs, promote accessibility, and improve quality of care, models are currently still in development. Healthcare reform efforts have been and may continue to be subject to scrutiny and legal challenge. For example, with respect to the ACA, tax reform legislation was enacted that eliminated the tax penalty established for individuals who do not maintain mandated health insurance coverage beginning in 2019 and, in 2021, the U.S. Supreme Court dismissed the latest judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. As another example, revisions to regulations under the federal anti-kickback statute would remove protection for traditional Medicare Part D discounts offered by pharmaceutical manufacturers to pharmacy benefit managers and health plans. Pursuant to court order, the removal was delayed and recent legislation imposed a moratorium on implementation of the rule until January 1, 2032. As further example, the IRA drug price negotiation program has been challenged in litigation filed by various pharmaceutical manufacturers and industry groups. Recently, there has been considerable public and government scrutiny of pharmaceutical pricing and proposals to address the perceived high cost of pharmaceuticals. There have also been efforts at the federal level to implement measures to regulate drug pricing or payment for pharmaceutical products, including legislation on drug importation. There have also been recent state legislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices. We expect continued scrutiny on drug pricing and government price reporting from Congress, agencies, and other bodies. Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our product candidates if approved for sale. We cannot predict the ultimate content, timing or effect of any changes to the Healthcare Reform Act or other federal and state reform efforts. There is no assurance that federal or state healthcare reform will not adversely affect our future business and financial results. HUMAN CAPITAL RESOURCES We believe our employees are among the most important assets to our company and are key to achieving our goals and expectations. Accordingly, we focus significant attention on attracting and retaining talented individuals. To support these objectives, our human resources programs reflect our commitment to our core values (Purposeful, Unwavering, Influential, Insightful and Symbiotic) and are designed to prioritize our employees’ well-being, support 33 Table of Contents their career goals, offer competitive wages and benefits, and enhance our culture through efforts aimed at making the workplace more satisfying, engaging and inclusive. In order to attract qualified applicants to Verastem and retain such employees, we offer a total rewards package consisting of base salary and cash target bonus, a comprehensive benefit package and equity compensation for every employee. Bonus opportunity and equity compensation increase as a percentage of total compensation based on level of responsibility. Actual bonus payout is based on our achievement of corporate goals and individual performance. In addition, many of our employees are stockholders of the company through participation in our Employee Stock Purchase Plan, which aligns the interests of our employees with our stockholders by providing stock ownership on a tax-deferred basis. We also provide for employer matching contributions equal to 100% of employee deferral contributions up to a deferral rate of 6% of eligible compensation to our Section 401(k) retirement savings plan. As of December 31, 2023, we had 73 full-time equivalent employees, including a total of 13 employees with M.D. or Ph.D. degrees, and four part-time employees. Of the full-time equivalent employees, 38 employees are engaged in research and development activities. We consider the intellectual capital of our employees to be an essential driver of our business and key to our success. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good. BUSINESS—EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the name, age and position of each of our executive officers as of February 29, 2024. Name Executive Officers: Daniel Paterson Daniel Calkins Age Position 62 President, Chief Executive Officer 36 Chief Financial Officer Daniel Paterson, age 62, has served as our Chief Executive Officer since August and as our President since June 2019, in addition to serving as our Chief Operating Officer from December 2014 to July 2023, our Chief Business Officer from July 2013 to December 2014 and as our Vice President, Head of Corporate Development and Diagnostics from March 2012 until July 2013. Prior to joining us in March 2012, Mr. Paterson was a consultant in 2011. From 2009 through 2010, Mr. Paterson was the Chief Operating Officer of On-Q-ity. Mr. Paterson was the President and Chief Executive Officer of The DNA Repair Company from 2006 until 2009, when it was acquired by On-Q-ity. Previously, he held senior level positions at IMS Health, CareTools, OnCare, and Axion. Mr. Paterson holds a B.A. in Biology from Boston University, and attended the Northeastern University Graduate Pharmacology program. Daniel Calkins, age 36, has served as our Chief Financial Officer since October 2023, prior to which Mr. Calkins served as our Vice President, Finance from September 2022 to October 2023, our Corporate Controller from March 2020 to September 2022, our Assistant Controller from May 2019 to March 2020, and our Associate Director, SEC Reporting and Technical Accounting from December 2018 to May 2019. Prior to joining us in December 2018, Mr. Calkins held various positions of increasing responsibility at CFGI from May 2013 to December 2018. Prior to CFGI, Mr. Calkins began his career at PwC LLP in the assurance practice. Mr. Calkins holds a B.S. in Accounting from Bryant University and M.S. in Accounting from Northeastern University. OUR CORPORATE INFORMATION We were incorporated under the laws of the State of Delaware in August 2010. Our principal executive offices are located at 117 Kendrick Street, Suite 500, Needham, Massachusetts 02494 and our telephone number is (781) 292-4200. 34 Table of Contents ADDITIONAL INFORMATION We maintain a website at www.verastem.com. We make available, free of charge on our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the SEC. We also make available, free of charge on our website, the reports filed with the SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copies of those filings are provided to us by those persons. The information contained on, or that can be accessed through, our website is not a part of or incorporated by reference in this Annual Report on Form 10-K. 35 Table of Contents ITEM 1A. Risk Factors Investment in our Common Stock involves a high degree of risk. You should carefully consider the risks that are summarized below and discussed in greater detail in the following pages before making an investment decision. If any of the following risks and uncertainties actually occur, our business, financial condition, and results of operations could be negatively impacted, and you could lose all or part of your investment. Summary of Risk Factors ● The approval of our product candidates as single agents or part of a combination therapy for the treatment of certain cancers may be more costly than our prior clinical trials, may take longer to achieve regulatory approval, may be associated with new, more severe or serious and unanticipated adverse events, and may have a smaller market opportunity. ● If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize such candidates, and our ability to generate revenue will be materially impaired. ● If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. ● If serious adverse or unexpected side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates. ● If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented. ● Our approach to the treatment of cancer through cell death, inhibition of tumor growth, and disruption of the tumor microenvironment is relatively unproven, and we do not know whether we will be able to develop any products of significant commercial value. ● We have incurred significant losses since our inception. We may incur losses for the foreseeable future and may never achieve or maintain profitability. ● We will need additional funding. If we are unable to raise capital if needed, we would be forced to delay, reduce, or eliminate our product development programs or commercialization efforts, including for avutometinib. ● Raising additional capital or entering into certain licensing arrangements may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates. ● Preclinical testing and clinical trials of our product candidates may not be successful. If we are unable to obtain marketing approval for or successfully commercialize any of our product candidates, or if we experience significant delays in doing so, our business will be materially harmed. ● We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do. ● We rely in part on third parties to conduct our clinical trials and preclinical testing, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for and commercialize any of our other product candidates. ● We rely on third parties to conduct investigator sponsored clinical trials of our product candidates. Any failure by a third party to meet its obligations with respect to the clinical development of our product candidates may delay or impair our ability to obtain regulatory approval for our product candidates. ● We contract with third parties for the manufacture of our product candidates and for compound formulation research, and these third parties may not perform satisfactorily. ● If we are unable to obtain and maintain patent protection for our products, or if our licensors are unable to obtain and maintain patent protection for the products that we license from them, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected. 36 Table of Contents ● We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses. ● Issued patents covering our products could be found invalid or unenforceable if challenged in court or the U.S. Patent and Trademark Office (“USPTO”) ● We depend on Secura for the achievement and payment of the contingent consideration under the asset purchase agreement between us and Secura pursuant to which we sold the COPIKTRA assets to Secura. If Secura is unsuccessful in developing and commercializing COPIKTRA, we may not receive such payments or otherwise capitalize on the market potential of COPIKTRA. ● Our ability to receive future contingent consideration, including milestone payments and royalties, from the sale of our rights, title, and interest in COPIKTRA to Secura may be adversely affected by lower than expected COPIKTRA sales and Secura’s ability to achieve other developmental and regulatory milestones. Risk Factors Risks Related to the Development of Our Product Candidates. If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete, and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. For example, a further review and analysis of this data may change the conclusions drawn from this unaudited data indicating less promising results than we currently anticipate. In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, adherence to the dosing regimen and other trial protocols, and the rate of dropout among clinical trial participants. There also may be significant variability in the safety results obtained through the long-term follow-up of patients from ongoing studies. We do not know whether any clinical trial we may conduct or follow-up data we collect will demonstrate consistent or adequate efficacy and/or safety sufficient to obtain regulatory approval to market our product candidates. In addition, the design of a clinical trial may determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. A failure of one or more clinical trials could indicate a higher likelihood that subsequent clinical trials of the same product candidate in the same or other indications or subsequent clinical trials of other related product candidates will be unsuccessful for the same reasons as the unsuccessful clinical trials. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including: ● regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; 37 Table of Contents ● we may have delays in reaching or fail to reach agreement on clinical trial contracts or clinical trial protocols with prospective trial sites; ● clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; ● the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or our participants may drop out of these clinical trials at a higher rate than we anticipate; ● our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● regulators or institutional review boards may require that we or our investigators suspend or terminate clinical trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; or ● our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials. If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may: ● be delayed in obtaining or not obtain marketing approval for our product candidates; ● obtain approval for indications or patient populations that are not as broad as intended or desired; ● obtain approval with labeling that includes significant use or distribution restrictions including imposition of a Risk Evaluation and Mitigation Strategy (REMS), or safety warnings, including boxed warnings; ● be subject to additional post marketing testing requirements; or ● have the product removed from the market after obtaining marketing approval. The FDA and foreign regulatory authorities may determine that the results from our ongoing and future trials do not support regulatory approval and may require us to conduct an additional clinical trial or trials. If these agencies take such a position, the costs of development of our product candidates could increase materially and their potential market introduction could be delayed. The regulatory agencies could also require that we conduct additional clinical, nonclinical or manufacturing validation studies and submit that data before it will consider an NDA. Our product development costs will also increase if we experience delays in clinical testing or marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. In addition, there are a number of ongoing clinical trials being conducted by other companies for product candidates treating cancer. Patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors' product candidates, particularly if they view such treatments to be more conventional and established. 38 Table of Contents Patient enrollment is affected by other factors including: ● the size and nature of the patient population; ● severity of the disease under investigation; ● eligibility criteria for the study in question; ● perceived risks and benefits of the product candidate under study in relation to other available treatments including any new treatments that may be approved for the indications we are investigating; ● efforts to facilitate timely enrollment in clinical trials; ● patient referral practices of physicians; ● the ability to monitor patients adequately during and after treatment; ● proximity and availability of clinical trial sites for prospective patients; and ● constraints on the healthcare system such as a pandemic. Furthermore, enrolled patients may drop out of a clinical trial, which could impair the validity or statistical significance of the clinical trial. A number of factors can influence the patient discontinuation rate, including, but not limited to: ● the inclusion of a placebo arm in a trial; ● possible inactivity or low activity of the product candidate being tested at one or more of the dose levels being tested; ● the occurrence of adverse side effects, whether or not related to the product candidate; and ● the availability of numerous alternative treatment options, including clinical trials evaluating competing product candidates, that may induce patients to discontinue their participation in the trial. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing. Preclinical studies and preliminary and interim data from clinical trials of our product candidates are not necessarily predictive of the results or success of ongoing or later clinical trials of our product candidates. If we cannot replicate the results from our preclinical studies and clinical trials of our product candidates, we may be unable to successfully develop, obtain regulatory approval for, and commercialize our product candidates. Preclinical studies and any positive preliminary and interim data from our clinical trials of our product candidates may not necessarily be predictive of the results of ongoing or later clinical trials. Even if we are able to complete our planned clinical trials of our product candidates according to our current development timeline, the positive results from clinical trials of our product candidates may not be replicated in subsequent clinical trial results. Also, our later stage clinical trials could differ in significant ways from earlier stage clinical trials, which could cause the outcome of the later stage trials to differ from our earlier stage clinical trials. For example, these differences may include changes to inclusion and exclusion criteria, efficacy endpoints and statistical design. Many companies in the pharmaceutical and biotechnology industries, including us, have suffered significant setbacks in late stage clinical trials after achieving positive results in an earlier stage of development. If we fail to produce positive results in our planned clinical trials of any of our product candidates, the development timeline and regulatory approval and commercialization prospects for our product candidates, and, correspondingly, our business and financial prospects, would be materially adversely affected. Our approach to the treatment of cancer through cell death, inhibition of tumor growth, and disruption of the tumor microenvironment is relatively unproven, and we do not know whether we will be able to develop any products of significant commercial value. We are developing product candidates to treat cancer by using targeted agents to cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment, and thereby thwart the growth and proliferation of cancer cells. 39 Table of Contents Research on the use of small molecules to cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment is an emerging field and, consequently, there is still uncertainty about whether defactinib and avutometinib are effective in improving outcomes for patients with cancer. Any products that we develop may not effectively cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment. While we are currently conducting clinical trials for product candidates that we believe will cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment, we may not ultimately be successful in demonstrating their efficacy, alone or in combination with other treatments. The approval of our product candidates as single agents or part of a combination therapy for the treatment of certain cancers may be more costly than our prior clinical trials, may take longer to achieve regulatory approval, may be associated with new, more severe or serious and unanticipated adverse events, and may have a smaller market opportunity. Part of our current business model involves conducting clinical trials to study the effects of combining our product candidates with other approved and investigational targeted therapies, chemotherapies, and immunotherapies to treat patients with cancer. Regulatory approval for a combination treatment generally requires clinical trials to evaluate the activity of each component of the combination treatment. As a result, it may be more difficult and costly to obtain regulatory approval of our product candidates for use as part of a combination treatment than obtaining regulatory approval of our product candidates alone. In addition, we also risk losing the supply of any approved or investigational product being combined with our product candidate in these clinical trials. Furthermore, the potential market opportunity for our product candidates is difficult to estimate precisely. For instance, if one of our product candidates receives regulatory approval from a combination study, it may be approved solely for use in combination with the approved or investigational product in a particular indication and the market opportunity our product candidate would be dependent upon the continued use and availability of the approved or investigational product. In addition, because physicians, patients, and third-party payors may be sensitive to the addition of the cost of our product candidates to the cost of treatment with the other products, we may experience downward pressure on the price that we can charge for our product candidates if they receive regulatory approval. Further, we cannot be sure that physicians will view our product candidates, if approved as part of a combination treatment, as sufficiently superior to a treatment regimen consisting of only the approved or investigational product. Additionally, the adverse side effects of our product candidates may be enhanced when combined with other products. If such adverse side effects are experienced, we could be required to conduct additional pre-clinical and clinical studies, and if such adverse side effects are severe, we may not be able to continue the clinical trials of the combination therapy because the risks may outweigh the therapeutic benefit of the combination. We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do. The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing our product candidates, including Novartis AG, Pfizer, Genentech, Inc., AstraZeneca PLC, Mirati, Amgen, Revolution Medicines, Inc., SpringWorks Therapeutics, Inc., BeiGene Ltd., Immuneering Corporation, Mapkure, LLC, Erasca, Inc., Relay Therapeutics, Inc. and Kinnate Biopharma, Inc. and others. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization. We are developing our product candidates for the treatment of cancer. There are a variety of available therapies marketed for cancer. In many cases, these drugs are administered in combination to enhance efficacy. Some of these drugs are branded and subject to patent protection, and others are available on a generic basis. Many 40 Table of Contents of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. We expect that our product candidates, if approved, will be priced at a significant premium over competitive generic products. Many of our competitors have significantly greater financial resources and expertise than we do in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Additionally, new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur in the pharmaceutical and medical technology industries at a rapid pace. These developments may render our product candidates obsolete or noncompetitive. In addition, to the extent that products or product candidates of our competitors demonstrate serious adverse side effects or are determined to be ineffective in clinical trials, the commercialization and the development of our product candidates could be negatively impacted. If we fail to obtain regulatory approval in jurisdictions outside the United States, we will not be able to market our products in those jurisdictions. We intend to seek regulatory approval for our product candidates in countries outside of the United States and expect that these countries will be important markets for our products, if approved. Marketing our products in these countries will require separate regulatory approvals in each market and compliance with numerous and varying regulatory requirements. The regulations that apply to the conduct of clinical trials and approval procedures vary from country to country and may require additional testing. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. In addition, in many countries outside the United States, a drug must be approved for reimbursement before it can be approved for sale in that country. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. Failure to obtain regulatory approval in one country may have a negative effect on the regulatory approval process in others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any foreign market. Preclinical testing and clinical trials of our product candidates may not be successful. If we are unable to obtain marketing approval for or successfully commercialize any of our product candidates, or if we experience significant delays in doing so, our business will be materially harmed. We have invested a significant portion of our efforts and financial resources in the research and development of our product candidates. Our ability to generate product revenues will depend heavily on the successful commercialization and development of our product candidates. The success of our product candidates will depend on several factors, including the following: ● initiation and successful enrollment and completion of our clinical trials; ● receipt of marketing approvals from the FDA and other regulatory authorities for our future product candidates, including pricing approvals where required; ● establishing and maintaining commercial manufacturing capabilities or making arrangements with third- party manufacturers; ● obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; 41 Table of Contents ● establishing and maintaining commercial capabilities, including hiring and training a sales force, and launching commercial sales of the products, if and when approved, whether alone or in collaboration with others; ● acceptance of the products, if and when approved, by patients, the medical community, and third-party payors; ● securing and maintaining coverage and adequate reimbursement for our products from third party payors; ● effectively competing with other therapies; and ● a continued acceptable safety and efficacy profile of the products following approval. Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of any collaborator. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business. If serious adverse or unexpected side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates. Our product candidates are in various stages of clinical development, and their risk of failure is high. It is impossible to predict when or if our other product candidates will prove effective or safe in humans or will receive marketing approval. If our product candidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk benefit perspective. Patients in our clinical trials have experienced serious adverse events, deemed by us and the clinical investigator to be related to our product candidates. Serious adverse events generally refer to adverse events, that result in death, are life threatening, require hospitalization or prolonging of hospitalization, or cause a significant and permanent disruption of normal life functions, congenital anomalies or birth defects, or require intervention to prevent such outcomes. Avutometinib and defactinib are being administered and studied in our Phase 1, Phase 2, and Phase 3 clinical trials, and the development program continues to progress. For both avutometinib and defactinib, the toxicities reported to date have been predictable and manageable. As a result of adverse events observed to date, or further safety or toxicity issues that we may experience in our clinical trials in the future, we may not receive approval to market any product candidates, which could prevent us from ever generating revenue from the sale of products or achieving profitability. Results of our trials could reveal an unacceptably high severity and prevalence of side effects. In such an event, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our products candidates for any or all targeted indications. Many compounds that initially showed promise in early stage testing for treating cancer have later been found to cause side effects that prevented further development of the compound. In addition, while we and our clinical trial investigators currently determine if serious adverse or unacceptable side effects are drug related, the FDA or other non-U.S. regulatory authorities may disagree with our or our clinical trial investigators’ interpretation of data from clinical trials and the conclusion that a serious adverse effect or unacceptable side effect was not drug related. We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market 42 Table of Contents opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. Any future product candidates that we commercialize may become subject to unfavorable pricing regulations or third- party coverage and reimbursement policies, which would harm our business. In both domestic and foreign markets, any product candidates that may receive marketing approval in the future will depend, in part, on favorable pricing as well as the availability of coverage and amount of reimbursement by third party payors, including governments and private health plans. Substantial uncertainty exists regarding coverage and reimbursement by third party payors of newly approved health care products. Outside the United States, some countries require approval of the sale price of a drug before the product can be marketed. In many such countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in product candidates, even if those product candidates obtain marketing approval. Cost containment is a key trend in the United States and elsewhere. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, the level of reimbursement. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize the product candidates for which we may obtain marketing approval. Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop. We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any other products we may develop. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: ● decreased demand for any product candidates or products that we may develop; ● injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; ● significant costs to defend the related litigation; ● substantial monetary awards to trial participants or patients; ● loss of revenue; and ● the inability to commercialize any products that we may develop. We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $10.0 million, which may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we commercialize any future product candidates or if we initiate additional clinical trials in the United States and around the world. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. 43 Table of Contents A pandemic, epidemic, or outbreak of an infectious disease, such as COVID-19, has and may in the future adversely affect our business. Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities, our financial condition and our results of operations. For example, United States residents and businesses in major urban centers have been hit especially hard by the global spread of COVID-19, which has resulted in certain disruptions to our business and may in the future result in additional disruptions to our business. Examples of both include: ● Shortages of personnel at clinical trial sites and delay in startup activities. Clinics and hospitals in Europe and United States continue to cause delays in startup and on-going activities due to the ongoing staff shortages since the onset of the COVID-19 pandemic. ● Work-from-home limitations. Since 2020, a material portion of our workforce works remotely and we expect this to continue, which could impact our ability to effectively plan, execute, communicate, and maintain our corporate culture. ● Capital markets volatility. Equity and debt markets have experienced significant volatility in recent years, which makes it more difficult to raise capital at a reasonable valuation or at all. ● Business interruptions or disruptions. There may be interruptions or disruptions that directly or indirectly adversely affect our or our current or potential collaboration partners’ organizations, which may delay or disrupt our business plans or impact a collaboration partner’s ability to fully perform under our agreements with them. Each of these factors could have a material adverse effect on our business and results of operations. Risks Related to Our Commercial Agreements We depend on Secura for the achievement and payment of the contingent consideration under the asset purchase agreement between us and Secura pursuant to which we sold the COPIKTRA assets to Secura. If Secura is unsuccessful in developing and commercializing COPIKTRA, we may not receive such payments or otherwise capitalize on the market potential of COPIKTRA. On September 30, 2020, we completed the disposition of our rights, title, and interest in and to COPIKTRA to Secura. Under the terms of the asset purchase agreement with Secura, we are entitled to contingent consideration, including milestone payments and royalties, dependent upon the further development and commercial success of COPIKTRA. Accordingly, our ability to receive the contingent consideration will depend on Secura’s ability to successfully develop and commercialize COPIKTRA. Secura’s ability to develop and commercialize COPIKTRA is subject to a number of risks and uncertainties, including the following: ● Secura has significant discretion in determining how to develop further and commercialize COPIKTRA, including through potential collaborators and partners; ● Secura may not commit sufficient resources to development, marketing or distribution of COPIKTRA; ● even if diligently pursued, Secura’s efforts to develop and commercialize COPIKTRA may not be successful; ● Secura may not properly maintain or defend its intellectual property rights or may use its proprietary information in such a way as to invite litigation that could jeopardize or invalidate the intellectual property of COPIKTRA; ● Secura may fail to maintain compliance with ongoing FDA labeling, packaging, storage, advertising, promotion, recordkeeping, safety and other post-market requirements; ● Secura may not be able to obtain regulatory approval in United States for certain oncology indications or obtain approval in jurisdictions outside of the United States and as a result, will not be able to market COPIKTRA for those indications or in those jurisdictions; and 44 Table of Contents ● disputes may arise between Secura and us that result in the delay of payments or in costly litigation that diverts management attention and resources. Our ability to receive future contingent consideration, including milestone payments and royalties, from the sale of our rights, title, and interest in COPIKTRA to Secura may be adversely affected by lower than expected COPIKTRA sales and Secura’s ability to achieve other developmental and regulatory milestones. On June 30, 2022, the FDA issued a drug safety communication warning that resulted from a clinical trial showing a possible increased risk of death with COPIKTRA compared to another medicine to treat chronic blood cancer called leukemia and lymphoma. The aforementioned clinical trial also found that COPIKTRA was associated with a higher risk of serious side effects, including infections, diarrhea, inflammation of the intestines and lungs, skin reactions, and high liver enzyme levels in the blood. In September 2022, the FDA’s ODAC voted eight to four against COPIKTRA’s use in patients with relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma after at least two prior therapies citing an unfavorable risk/benefit profile. The FDA drug safety communication warning, the FDA’s ODAC vote, future actions by the FDA, and any safety concerns associated with COPIKTRA, perceived or real, may materially and adversely affect Secura’s development and commercialization success of COPIKTRA and, consequently, our ability to receive future contingent consideration from our sale of our right, title, and interest in COPIKTRA to Secura. If we do not realize the anticipated benefits of our license agreements with Pfizer for the FAK program and Chugai for the dual RAF/MEK candidate program, or from the GenFleet Agreement, our business could be adversely affected. Our license agreements with Pfizer for defactinib, Chugai for avutometinib, and the GenFleet Agreement for up to three oncology programs, may fail to further our business strategy as anticipated or to achieve anticipated benefits and success. We may make or have made assumptions relating to the impact of the acquisition of defactinib and avutometinib or entering into the GenFleet Agreement on our financial results relating to numerous matters, including: ● the cost of development and commercialization of defactinib and avutometinib; ● the cost of development and commercialization of any of the three oncology programs if we elect to exercise any of our GenFleet Options; and ● other financial and strategic risks related to the agreements with Pfizer, Chugai and GenFleet. Further, we may incur higher than expected operating and transaction costs, and we may encounter general economic and business conditions that adversely affect us relating to our agreements with Pfizer, Chugai or GenFleet. If one or more of these assumptions are incorrect, it could have an adverse effect on our business and operating results, and the benefits from our license agreements with Pfizer for defactinib and Chugai for avutometinib and the GenFleet Agreement may not be realized or be of the magnitude expected. We depend on GenFleet to fully perform under the GenFleet Agreement On August 24, 2023, we entered into the GenFleet Agreement pursuant to which we obtained three GenFleet Options that may be exercised on a program-by-program basis. Pursuant to the GenFleet Agreement, we are reliant on GenFleet to fulfil their responsibilities including the execution of the Phase 1 clinical trials for all three oncology programs. Accordingly, our ability to realize the anticipated benefits and success of the GenFleet Agreement is dependent upon GenFleet fulfilling their obligations. If GenFleet does not successfully carry out their responsibilities, the benefits of the GenFleet Agreement may not be realized. 45 Table of Contents Risks Related to Our Financial Position and Need for Additional Capital We have incurred significant losses since our inception. We may incur losses for the foreseeable future and may never achieve or maintain profitability. Since inception, we have incurred significant operating losses. As of December 31, 2023, we had an accumulated deficit of $824.9 million. To date, we have generated minimal product revenues and have financed our operations primarily through public and private offerings of our common stock, preferred stock, and pre-funded warrants, offerings of convertible notes, sales of our common stock pursuant to our at-the-market equity offering programs, our loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”), our loan and security agreement, as amended, with Hercules Capital Inc. (“Hercules”), upfront payments under our license and collaboration agreements with Yakult, CSPC, and Sanofi, and the upfront payment under the Secura APA. We have devoted substantially all of our efforts to research and development. We expect to continue to incur significant expenses and may incur operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we: ● continue our ongoing clinical trials with our product candidates, including with defactinib and avutometinib; ● initiate additional clinical trials for our product candidates; ● maintain, expand, and protect our intellectual property portfolio; ● acquire or in-license other products and technologies; ● hire additional clinical, development, and scientific personnel; and ● establish and maintain a sales, marketing and distribution infrastructure to commercialize any products for which we obtain marketing approval. To become and remain profitable, we must develop and eventually commercialize a product or products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining marketing approval for these product candidates, and manufacturing, marketing, and selling those products for which we may obtain marketing approval. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment. We will need additional funding. If we are unable to raise capital if needed, we would be forced to delay, reduce, or eliminate our product development programs or commercialization efforts, including for avutometinib. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the clinical development of our product candidates. We expect our cash, cash equivalents and investments at December 31, 2023 will not be sufficient to fund our current operating plan and capital expenditure requirements for the next 12 months from the issuance of these financial statements. We may need to obtain additional funding in connection with our continuing operations, including for our clinical development programs. Our future capital requirements will depend on many factors, including: ● the scope, progress, and results of our ongoing and potential future clinical trials; ● the extent to which we acquire or in-license other product candidates and technologies; ● the costs, timing, and outcome of regulatory review of our product candidates (including our efforts to seek approval and fund the preparation and filing of regulatory submissions); ● revenue received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; ● the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending intellectual property related claims; and 46 Table of Contents ● our ability to establish collaborations or partnerships on favorable terms, if at all. Conducting clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval of any of our product candidates. Our commercial revenues will be derived from sales of products. Even if our product candidates gain approval, it may take several years to achieve a significant level of sales, and as a result we may need to continue to rely on additional financing to further our clinical development objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. We will require additional financing to execute our operating plan and continue to operate as a going concern. As required under Accounting Standards Update 2014-15, Presentation of Financial Statements-Going Concern (ASC 205-40), we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability to meet our future financial obligations as they become due within one year after the date the consolidated financial statements are issued. The Company believes that it may have sufficient funds to meet its obligations within the next 12 months from the issuance of these financial statements. However, this belief relies on the achievement of certain mitigation efforts. The analysis under ASC 205-40, initially cannot take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Accordingly, these uncertainties and risk factors meet the ASC 205-40 standard for raising substantial doubt about our ability to continue as a going concern within one year of the issuance date of our consolidated financial statements. Lack of necessary funds may require us, among other things, to delay, scale back, or eliminate some or all of our planned clinical trials. Because we continue to experience net operating losses, our ability to continue as a going concern is subject to our ability to obtain necessary capital from outside sources, including obtaining additional capital from the sale of our securities or assets, achieving milestones for additional drawdowns under our Loan Agreement or obtain loans from financial institutions, or entering into additional partnership arrangements. There can be no assurances that we will be able to obtain such capital on favorable terms or at all. If we are unable to raise capital when needed, we may be forced to delay, reduce or eliminate our research and development activities for our product candidates, or ultimately not be able to continue as a going concern. Unfavorable economic conditions could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Unfavorable macroeconomic conditions and other adverse macroeconomic factors have resulted, among other matters, in tightening in the debt and equity markets, and high levels of inflation. For example, tightening of the equity markets, makes it more difficult to raise capital at a reasonable valuation or at all. In addition, the U.S. Bureau of Labor Statistics has reported for the period from December 2022 to December 2023, the Consumer Price Index for All Urban Consumers rose 3.4% which remains above the U.S. Federal Reserve’s inflation target of 2%. If inflationary pressures increase or continue for a prolonged period, it may continue to result in increased costs of labor, cost of clinical trials, and costs of manufacturing which could adversely affect our results of operations. In addition, unrest in the banking sector has in the past and may in the future have an effect on our ability to access funds when needed. Our ability to use our net operating loss carryforwards may be limited. As of December 31, 2023, we had U.S. federal and state net operating loss (“NOL”) carryforwards of approximately $473.6 million and $189.0 million, respectively. As of December 31, 2023, we also had federal and state tax credits of $9.5 million and $2.2 million, respectively, which may be used to offset future tax liabilities. The NOL and tax credit carryforwards will expire at various dates through 2043, except for $277.9 million of federal NOL carryforwards which may be carried forward indefinitely. Sections 382 and 383 of the Internal Revenue Code and similar provisions under state law limits the annual use of NOL carry-forwards and tax credit carryforwards, respectively, following an ownership change pursuant to section 382 of the Internal Revenue Code and similar state provisions. In general, an ownership change occurs for purposes of Section 382 if there are certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%. 47 Table of Contents Based on our analysis under Section 382, we believe that our federal NOL carryforwards, state NOL carryforwards, research and development credits, and orphan drug credits are limited by Section 382 and similar provisions under state law as of December 31, 2023. The portion of federal NOL carryforwards, state NOL carryforwards, research and development credits, and orphan drug credits that were determined to be limited by Section 382 and similar provisions under state law have been written off as of December 31, 2023. Future changes in our stock ownership, some of which are outside of our control, could result in ownership changes in the future. We may not be able to use some or all of our NOL and tax credit carryforwards, even if we attain profitability. Risks Related to Our Indebtedness Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operations. In March 2022, we entered into a Loan Agreement with Oxford, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”), pursuant to which the Lenders have agreed to lend us up to an aggregate principal amount of $150.0 million in a series of term loans (the “Term Loans”). As of December 31, 2023, there was $40.0 million outstanding under the Loan Agreement. In connection with the Loan Agreement, we granted Oxford a security interest in all of our personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property. This indebtedness may create additional financing risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity. This indebtedness could also have other important negative consequences, including we will need to repay our indebtedness by making payments of interest and principal, which will reduce the amount of money available to finance our operations, our research and development efforts and other general corporate activities. To the extent additional debt is added to our current debt levels, the risks described above could increase. We may not have cash available in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due. Failure to satisfy our current and future debt obligations under the Loan Agreement or breaching any covenants under the Loan Agreement, subject to specified cure periods with respect to certain breaches, could result in an event of default and, as a result, could accelerate all of the amounts due. In the event of an acceleration of amounts due under the Loan Agreement, we may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time of such acceleration. In that case, we may be required to delay, limit, reduce or terminate our product candidate development or grant to others the rights to develop and market our product candidates that we would otherwise prefer to develop and market internally. Oxford could also exercise its rights as collateral agent to take possession and dispose of the collateral securing the term loans for its benefit, which collateral includes substantially all of our property other than our intellectual property. Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events. Risks Related to Our Dependence on Third Parties We rely in part on third parties to conduct our clinical trials and preclinical testing, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for and commercialize any of our other product candidates. We rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators, to conduct, provide monitors for, and manage data from all of our clinical trials. We compete with many other companies for the resources of these third parties. 48 Table of Contents Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product development activities and ultimately the commercialization of our product candidates. Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA and other regulatory agencies require us to comply with standards, commonly referred to as Good Clinical Practices for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or any of our CROs fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or other regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. We also are required to register ongoing clinical trials and post the results of completed clinical trials on government-sponsored databases, such as ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for some of our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. We rely on third parties to conduct investigator-sponsored clinical trials of our product candidates. Any failure by a third party to meet its obligations with respect to the clinical development of our product candidates may delay or impair our ability to obtain regulatory approval for our product candidates. We rely on academic and private non-academic institutions to conduct and sponsor clinical trials relating to our product candidates. We will not control the design or conduct of the investigator sponsored trials, and it is possible that the FDA or non-U.S. regulatory authorities will not view these investigator-sponsored trials as providing adequate support for future clinical trials, whether controlled by us or third parties, for any one or more reasons, including elements of the design or execution of the trials or safety concerns or other trial results. Such arrangements will provide us certain information rights with respect to the investigator sponsored trials, including access to and the ability to use and reference the data, including for our own regulatory filings, resulting from the investigator-sponsored trials. However, we do not have control over the timing and reporting of the data from investigator- sponsored trials, nor do we own the data from the investigator-sponsored trials. If we are unable to confirm or replicate the results from the investigator sponsored trials or if negative results are obtained, we would likely be further delayed or prevented from advancing further clinical development of our product candidates. Further, if investigators or institutions breach their obligations with respect to the clinical development of our product candidates, or if the data proves to be inadequate compared to the firsthand knowledge we might have gained had the investigator-sponsored trials been sponsored and conducted by us, then our ability to design and conduct any future clinical trials ourselves may be adversely affected. Additionally, the FDA or non-U.S. regulatory authorities may disagree with the sufficiency of our right of reference to the preclinical, manufacturing, or clinical data generated by these investigator-sponsored trials, or our interpretation of preclinical, manufacturing, or clinical data from these investigator-sponsored trials. If so, the FDA or other non-U.S. regulatory authorities may require us to obtain and submit additional preclinical, manufacturing, or clinical data before we may initiate our planned trials and/or may not accept such additional data as adequate to initiate our planned trials. 49 Table of Contents We contract with third parties for the manufacture of our product candidates and for compound formulation research, and these third parties may not perform satisfactorily. We do not have any manufacturing facilities or personnel. We currently obtain all of our supply of our product candidates for clinical development from third-party manufacturers or third-party collaborators, and we expect to continue to rely on third parties for the manufacture of clinical quantities of our product candidates. In addition, we currently rely on third parties for the development of various formulations of our product candidates. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost or quality, which could delay, prevent, or impair our development or commercialization efforts. We do not currently have arrangements in place for redundant supply or a second source for bulk drug substance or drug product. Even though we have supply agreements in place with our third-party manufacturers, reliance on third- party manufacturers entails additional risks, including: ● reliance on the third party for regulatory compliance and quality assurance; ● the possible breach of the manufacturing agreement by the third party, including the misappropriation of our proprietary information, trade secrets, and know-how; ● the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; and ● disruptions to the operations of our manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier or a catastrophic event affecting our manufacturers or suppliers. Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and harm our business and results of operations. Any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any interruption of the development or operation of the manufacturing facilities due to, among other reasons, events such as order delays for equipment or materials, equipment malfunction, quality control, and quality assurance issues, regulatory delays and possible negative effects of such delays on supply chains and expected timelines for product availability, production yield issues, shortages of qualified personnel, discontinuation of a facility or business, failure, or damage to a facility by natural disasters or public health crises, such as the COVID-19 pandemic, could result in the cancellation of shipments, loss of product in the manufacturing process, or a shortfall in available product candidates or materials. If our current contract manufacturers cannot perform as agreed or these parties cease to provide quality manufacturing and related services to us, we may be required to replace that manufacturer. If we are not able to engage appropriate replacements in a timely manner, our ability to manufacture our product candidates in sufficient quality and quantity required for planned pre-clinical testing, clinical trials and potential commercial use of our product candidates would be adversely affected. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement, as well as producing the drug product and obtaining regulatory approvals for the new manufacturer. In addition, we have to enter into technical transfer agreements and share our know-how with the third-party manufacturers, which can be time consuming and may result in delays. In light of the lead time needed to manufacture our product candidates, and the availability of underlying materials, we may not be able to, in a timely manner or at all, establish or maintain sufficient commercial manufacturing arrangements on commercially reasonable terms necessary to provide adequate supply of our product candidates to meet demands that exceed our clinical assumptions. Furthermore, we may not be able to obtain the significant financial capital that may be required in connection with such arrangements. Even after successfully engaging third parties to execute the manufacturing 50 Table of Contents process for our product candidates, such parties may not comply with the terms and timelines they have agreed to for various reasons, some of which may be out of their or our control, which could impact our ability to execute our business plans on expected or required timelines in connection with the commercialization of and the continued development of our product candidates. We may also be required to enter into long-term manufacturing agreements that contain exclusivity provisions and/or substantial termination penalties, which could have a material adverse effect on our business prior to and after commercialization. Our current and anticipated future dependence upon others for the manufacture of our other product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis. If we are not able to establish collaborations, we may have to alter our development and commercialization plans. Our drug development programs and the potential commercialization of our product candidates will require additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates. We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, and the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. Collaborations are complex and time consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of certain product candidates, reduce or delay our development programs, delay potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue. We may depend on collaborations with third parties for the development and commercialization of our product candidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of our product candidates. We may seek third-party collaborators for the development and commercialization of our product candidates. Our likely collaborators for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies, and biotechnology companies. If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. 51 Table of Contents Collaborations involving our product candidates would pose the following risks to us: ● collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; ● collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborator's strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities; ● collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; ● a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products; ● collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation; ● disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources; and ● collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates. Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. Our operations in foreign jurisdictions, and those of third parties for which we rely on, may be impacted by economic, political and social conditions in such jurisdictions. Our business could be adversely affected by conditions the adverse geopolitical and macroeconomic developments, including the military conflict between Ukraine and Russia, the ongoing military conflict in the Middle East, and any related sanctions. While we do not currently have clinical trials in Ukraine, Russia, or Middle East, we have clinical trial sites in Europe. We also source clinical supply for our product candidates from third party contract manufacturing organizations in Europe. Additionally, GenFleet intends to file an IND for the lead oncology program in first half of 2024 in China and expects the Phase 1 clinical trial to be conducted in China. For such activities conducted in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies of the U.S. or Chinese governments, political unrest or unstable economic conditions including sanctions on China or any of our China-based counterparties. Furthermore, the conflicts between Ukraine and Russia, the ongoing military conflict in the Middle East, and the associated measures taken or that may be taken by the United States, North Atlantic Treaty Organization (“NATO”) and others create global security concerns, including the possibility of expanded regional or global conflict, and are likely to have short-term and likely longer-term negative impacts on regional and global economies, any or all of which could disrupt our supply chain, and adversely affect our ability to conduct ongoing and future clinical trials of our product candidates. Risks Related to Our Intellectual Property If we fail to comply with our obligations under our intellectual property licenses with third parties, we could lose license rights that are important to our business. We are a party to a number of intellectual property license agreements with third parties, including Pfizer and Chugai, and expect to enter into additional license agreements in the future. Our existing license agreements 52 Table of Contents impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty, insurance, and other obligations on us. For example, under our license agreements with Pfizer and Chugai, we are required to use diligent or commercially reasonable efforts to develop and commercialize licensed products under the agreement and to satisfy other specified obligations. If we fail to comply with our obligations under these licenses, our licensors may have the right to terminate these license agreements, in which event we might not be able to market any product that is covered by these agreements, or to convert the exclusive licenses to non-exclusive licenses, which could materially adversely affect the value of the product candidate being developed under these license agreements. Termination of these license agreements or reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms, which may not be possible. If Pfizer were to terminate its license agreement with us for any reason, we would lose our rights to defactinib. If Chugai were to terminate its license agreement with us for any reason, we could lose our rights to avutometinib. In addition, we rely on certain of our licensors to prosecute patent applications and maintain patents and otherwise protect the intellectual property we license from them and may continue to do so in the future. We have limited control over these activities or any other intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such activities by these licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. We have limited control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the intellectual property rights or defend certain of the intellectual property that is licensed to us. It is possible that any licensors’ infringement proceeding, or defense activities may be less vigorous than had we conducted them ourselves. If we are unable to obtain and maintain patent protection for our products, or if our licensors are unable to obtain and maintain patent protection for the products that we license from them, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected. Our success depends in large part on our and our licensors’ ability to obtain and maintain patent protection in the United States and other countries with respect to our products, their respective components, formulations, combination therapies, methods used to manufacture them and methods of treatment and development that are important to our business. If we or our licensors do not adequately protect our or our licensors’ intellectual property rights, competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. We and our licensors seek to protect our proprietary position by filing patent applications in the United States and abroad related to our products that are important to our business. We may in the future also license or purchase patent applications filed by others. If we or our licensors are unable to secure or maintain patent protection with respect to our products and any proprietary products and technology we develop, our business, financial condition, results of operations, and prospects could be materially harmed. We also cannot be certain that any patents will issue with claims that cover our products. If the scope of the patent protection we or our licensors obtain is not sufficiently broad, we may not be able to prevent others from developing and commercializing products and technology similar or identical to ours. The degree of patent protection we require to successfully compete in the marketplace may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep any competitive advantage. We cannot provide any assurances that any of our or our licensors’ patents have, or that any of our or our licensors’ pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products or otherwise provide any competitive advantage. In addition, to the extent that we license intellectual property, we cannot make assurances that those licenses will remain in force. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed (21 years if first filed as a provisional application). Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Even if they are unchallenged, our or our licensors’ patents and pending patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our or our licensors’ patent claims to circumvent our patents by developing similar or alternative technologies or therapeutics in a non-infringing manner. For example, a third party may develop a competitive therapy that provides benefits similar to 53 Table of Contents our products but that uses a formulation and/or a method that falls outside the scope of our patent protection. If the patent protection provided by the patents and patent applications we hold, license, or pursue with respect to our products is not sufficiently broad to impede such competition, our ability to successfully commercialize our products could be negatively affected, which would harm our business. Similar risks would apply to any patents or patent applications that we may own or license. The patent prosecution process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering products that we license from third parties and are reliant on our licensors. Therefore, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. If such licensors fail to maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability, and commercial value of our and our licensors’ patent rights are highly uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued which protect our products or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the our ability to protect our inventions, maintain and enforce our intellectual property rights, or narrow the scope of our patent protection, or affect the value of our intellectual property. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases, at all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. Assuming the other requirements for patentability are met, in the United States, for patents that have an effective filing date prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. In March 2013, the United States transitioned to a first inventor to file system in which, assuming the other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent. We may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, or become involved in opposition, derivation, reexamination, inter parties review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding, or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us, or otherwise provide us with any competitive advantage. The scope of the invention claimed in a patent application can be significantly reduced before the patent is issued, and this scope can be reinterpreted after issuance. Even where patent applications we currently own, license, or that we may license in the future issue as patents, they may not issue in a form that will provide us with adequate protection to prevent competitors or other third parties from competing with us, or otherwise provide us with a competitive advantage. Any patents that eventually issue may be challenged, narrowed or invalidated by third parties. Consequently, we do not know whether any of our products will be protectable or remain protected by valid and enforceable patent rights. Our competitors or other third parties may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. 54 Table of Contents The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. We may in the future, become subject to a third-party pre-issuance submission of prior art or opposition, derivation, revocation, re-examination, post-grant and inter partes review, or interference proceeding and other similar proceedings challenging our patent rights or the patent rights of others in the USPTO or other foreign patent office. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical products, or limit the duration of the patent protection of our products. In addition, given the amount of time required for the development, testing, and regulatory review of new products, patents protecting such products might expire before or shortly after such products are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of our owned and in-licensed patents and patent applications are, and may in the future be, co- owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we or our licensors may need the cooperation of any such co-owners of our owned and in-licensed patents in order to enforce such patents against third parties, and such cooperation may not be provided to us or our licensors. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects. If our efforts to protect the proprietary nature of the intellectual property related to our products are not adequate, we may not be able to compete effectively in our market. We rely upon a combination of patents, confidentiality agreements, trade secret protection and license agreements to protect the intellectual property related to our products. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. We, or any partners, collaborators, or licensors, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to strengthen our patent position. It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we or our partners, collaborators, or licensors fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our partners, collaborators, or licensors are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business. We anticipate additional patent applications will be filed both in the United States and in other countries, as appropriate. However, we cannot predict: ● ● ● if additional patent applications covering new technologies related to our products will be filed; if and when patents will issue; the degree and range of protection any issued patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents; 55 Table of Contents ● ● ● ● whether any of our intellectual property will provide any competitive advantage; whether any of our patents that may be issued may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage; whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or whether we will need to initiate or defend litigation or administrative proceedings which may be costly regardless of whether we win or lose. Additionally, we cannot be certain that the claims in our pending patent applications covering our products and their methods of use will be considered patentable by the USPTO, or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid or patentable by courts in the United States or foreign countries. Method of use patents protect the use of a product for the specified method. These types of patents do not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label.” Although off-label prescriptions may, but not necessarily, contribute to a finding of infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute. We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses. Presently we have rights to certain patents and applications through licenses from third parties and own patents and patent applications related to our products. Additional product candidates or therapies, including combination therapies, with avutometinib and/or defactinib, may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. We may be unable to acquire or in-license compositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary or important to our business operations. If we fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, it would harm our business. We may need to cease use of the additional product candidates or methods covered by such third-party intellectual property rights, and/or may need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if it is possible and we were able to develop such alternatives. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies that we have licensed. In that event, we may be required to expend significant time and resources to develop or license replacement technologies. Moreover, the specific product candidates or methods that may be used with our products may be covered by the intellectual property rights of others. Additionally, we may seek to acquire new compounds and product candidates from other pharmaceutical and biotechnology companies, academic scientists and other researchers, such as our exclusive in-license from Pfizer, and Chugai to research, develop, commercialize, and manufacture products in oncology indications containing defactinib and avutometinib, respectively. The success of this strategy depends partly upon our ability to identify, select, discover and acquire promising pharmaceutical product candidates and products. The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Furthermore, we have and may continue to collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In certain cases, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others, potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third- 56 Table of Contents party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our business and financial condition could suffer. The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our products. More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We also may be unable to license or acquire the relevant compound or product candidate on terms that would allow us to make an appropriate return on our investment. Any product candidate that we acquire may require additional development efforts prior to commercial sale, including manufacturing, pre-clinical testing, extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development. In addition, future product or business acquisitions may entail numerous operational and financial risks, including: ● exposure to unknown liabilities; ● disruption of our business and diversion of our management’s time and attention to develop acquired products, product candidates, or technologies; ● higher than expected acquisition and integration costs; ● increased amortization expenses; and ● incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions. Future business acquisitions may also entail certain additional risks, such as: ● difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel; ● impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and ● inability to motivate key employees of any acquired businesses. Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. Some of our pending patent applications may not be allowed in the future. We cannot be certain that an allowed patent application will become an issued patent. There may be events that cause withdrawal of the allowance of a patent application. For example, after a patent application has been allowed, but prior to being issued, material that could be relevant to patentability may be identified. In such circumstances, the applicant may pull the application from allowance in order for the USPTO to review the application in view of the new material. We cannot be certain that the USPTO will issue the application in view of the new material. Further, periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign countries may require the payment of maintenance fees or patent annuities during the lifetime of a patent application and/or any subsequent patent that issues from the application. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and following the issuance of a patent. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application. Such noncompliance can result in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result 57 Table of Contents in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. Such an event could have a material adverse effect on our business. Issued patents covering our products could be found invalid or unenforceable if challenged in court or the USPTO. If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering our products, the defendant could counterclaim that the patent covering our products, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are various grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, inter partes review, post grant review and equivalent proceedings in foreign jurisdictions (such as opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose at least part, and perhaps all, of the patent protection on our products. Such a loss of patent protection could have a material adverse impact on our business and our ability to commercialize or license our technology and products. Changes to patent law in the United States and in foreign jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products. As is the case with other drug and biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the drug and biopharmaceutical industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the United States has passed wide-ranging patent reform legislation under the AIA. Moreover, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. We cannot predict how future decisions by the courts, Congress or the USPTO may impact the value of our patents. Similarly, any adverse changes in the patent laws of other jurisdictions could have a material adverse effect on our business and financial condition. Changes in the laws and regulations governing patents in other jurisdictions could similarly have an adverse effect on our ability to obtain and effectively enforce our patent rights. We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the world. We may not be able to pursue patent coverage of our products in certain countries outside of the United States. Filing, prosecuting and defending patents on products in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. The breadth and strength of our patents issued in foreign jurisdictions or regions may not be the same as the corresponding patents issued in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to certain territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. 58 Table of Contents Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protections, particularly those relating to drug and biopharmaceutical products. This difficulty with enforcing patents could make it difficult for us to stop the infringement of our patents or marketing of competing products otherwise generally in violation of our proprietary rights. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. If we do not obtain patent term extension and data exclusivity for any of our current products, our business may be materially harmed. Depending upon the timing, duration and specifics of any FDA marketing approval of our current products, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply for a patent extension within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we believe we are entitled to, our competitors may obtain approval of competing products sooner than we would expect, and our business, financial condition, results of operations, and prospects could be materially harmed. We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming, and unsuccessful. Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. Defense against these assertions, non-infringement, invalidity or unenforceability regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. Post-grant proceedings provoked by third parties or brought by the USPTO may be brought to determine the validity or priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or post-grant proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, 59 Table of Contents misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as those within the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, our licensors may have rights to file and prosecute such claims, and we are reliant on them. Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business. Our commercial success depends upon our ability and the ability of our collaborators to commercialize, develop, manufacture, market, and sell our products without infringing the proprietary rights of third parties. We have yet to conduct comprehensive freedom to operate searches to determine whether our use of certain of the patent rights owned by or licensed to us would infringe patents issued to third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products, including interference proceedings before the U.S. Patent and Trademark Office. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing product. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our products or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business. If a third party alleges that we infringe its intellectual property rights, we may face a number of issues, including, but not limited to: ● ● ● ● ● infringement and other intellectual property misappropriation which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business; substantial damages for infringement or misappropriation, which we may have to pay if a court decides that the product or technology at issue infringes on or violates the third-party’s rights, and, if the court finds we have willfully infringed intellectual property rights, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees; an injunction prohibiting us from manufacturing, marketing or selling our products, or from using our proprietary technologies, unless the third party agrees to license its patent rights to us; even if a license is available from a third party, we may have to pay substantial royalties, upfront fees and other amounts, and/or grant cross-licenses to intellectual property rights protecting our products; and we may be forced to try to redesign our products or processes so they do not infringe third-party intellectual property rights, an undertaking which may not be possible or which may require substantial monetary expenditures and time. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations or could otherwise have a material adverse effect on our business, results of operations, financial condition and prospects. Third parties may assert that we are employing their proprietary technology without authorization. Patents issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is 60 Table of Contents “clear and convincing,” a heightened standard of proof. There may be issued third-party patents of which we are currently unaware with claims to compositions, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our products. Patent applications can take many years to issue. There may be currently pending patent applications which may later result in issued patents that may be infringed by our products. Moreover, we may fail to identify relevant patents or incorrectly conclude that a patent is invalid, not enforceable, exhausted, or not infringed by our activities. If any third-party patents, held now or obtained in the future by a third party, were found by a court of competent jurisdiction to cover the manufacturing process of our products, constructs or molecules used in or formed during the manufacturing process, or any final product or methods use of the product, the holders of any such patents may be able to block our ability to commercialize the product unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover any aspect of our formulations, any combination therapies or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the product unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our products may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize our products. Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our products. Defense of these claims, regardless of their merit, could involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need or may choose to obtain licenses from third parties to advance our research or allow commercialization of our products. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our products, which could harm our business significantly. We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property. We generally enter into confidentiality and intellectual property assignment agreements with our employees, consultants, and contractors. These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, those agreements may not be honored and may not effectively assign intellectual property rights to us. Moreover, there may be some circumstances, where we are unable to negotiate for such ownership rights. Disputes regarding ownership or inventorship of intellectual property can also arise in other contexts, such as collaborations and sponsored research. If we are subject to a dispute challenging our rights in or to patents or other intellectual property, such a dispute could be expensive and time-consuming. If we were unsuccessful, we could lose valuable rights in intellectual property that we regard as our own. We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers. Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary information or know how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual 61 Table of Contents property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management. Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. In addition to seeking patents for some of our products, we also rely on trade secrets, including unpatented know- how, technology, and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. These parties may also be subject to cyberattacks that result in such information becoming available to competitors, including in jurisdictions where we or such parties may not be able to enforce our rights. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time consuming, and the outcome is unpredictable. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition. If we choose to go to court to stop a third party from using any of our trade secrets, we may incur substantial costs. These lawsuits may consume our time and other resources even if we are successful. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks of interest and our business may be adversely affected. Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During the trademark registration process, we may receive Office Actions from the USPTO objecting to the registration of our trademark. Although we would be given an opportunity to respond to those objections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our 62 Table of Contents trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected. European patents and patent applications could be challenged in the recently created Unified Patent Court for the European Union. Our owned or our licensors’ European patents and patent applications could be challenged in the recently created Unified Patent Court (“UPC”) for the European Union. We may decide to opt out our European patents and patent applications from the UPC. However, if certain formalities and requirements are not met, our European patents and patent applications could be challenged for non-compliance and brought under the jurisdiction of the UPC. We cannot be certain that our or our licensors’ European patents and patent applications will avoid falling under the jurisdiction of the UPC, if we decide to opt out of the UPC. Under the UPC, a granted European patent would be valid and enforceable in numerous European countries. A successful invalidity challenge to a European patent under the UPC would result in loss of patent protection in those European countries. Accordingly, a single proceeding under the UPC could result in the partial or complete loss of patent protection in numerous European countries, rather than in each validated European country separately as such patents always have been adjudicated. Such a loss of patent protection could have a material adverse impact on our business and our ability to commercialize our technology and products and, resultantly, on our business, financial condition, prospects and results of operations. Risks Related to Achieving Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize such candidates, and our ability to generate revenue will be materially impaired. Obtaining approval of an NDA can be a lengthy, expensive, and uncertain process. The activities associated with a product candidate’s development and commercialization, including its design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, and distribution are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for product candidates will prevent us from commercializing such product candidates. We have not received approval to market any of our current product candidates from regulatory authorities in any jurisdiction in the United States. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process. Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information to the FDA for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing FDA approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA. A product candidate may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical, or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we ultimately obtain may be subject to more limited indications than those we propose or subject to restrictions or post approval commitments that render the approved product not commercially viable. 63 Table of Contents If we experience delays in obtaining approval or if we fail to obtain approval of a product candidate, its commercial prospects may be harmed and our ability to generate revenues will be materially impaired. We have received orphan drug designation for certain of our product candidates, but there can be no assurance that we will be able to prevent third parties from developing and commercializing products that are competitive to these product candidates. We received orphan drug designation in the United States, the European Union, and Australia for the use of defactinib in ovarian cancer, and in the United States, the European Union, and Australia for the use of defactinib in mesothelioma. Orphan drug exclusivity grants seven years of marketing exclusivity under the FDCA, up to ten years of marketing exclusivity in Europe, and five years of marketing exclusivity in Australia. Other companies have received orphan drug designations for compounds other than defactinib for the same indications for which we may have received orphan drug designation in corresponding territories. While orphan drug exclusivity for defactinib provides market exclusivity against the same active ingredient for the same indication, we would not be able to exclude other companies from manufacturing and/or selling drugs using the same active ingredient for the same indication beyond that timeframe on the basis of orphan drug exclusivity. Furthermore, the marketing exclusivity in Europe can be reduced from ten years to six years if the orphan designation criteria are no longer met or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstances under which the FDA may approve a competing product for the same indication during the seven-year period of marketing exclusivity, such as if the later product is the same compound as our product but is shown to be clinically superior to our product, or if the later product is a different drug than our product candidate. Further, the seven- year marketing exclusivity would not prevent competitors from obtaining approval of the same compound for other indications or of another compound for the same use as the orphan drug. A decision in 2021 by the U.S. Court of Appeals for the Eleventh Circuit in Catalyst Pharmaceuticals, Inc. vs. Becerra regarding interpretation of the Orphan Drug Act’s exclusivity provisions as applied to drugs and biologics approved for orphan indications narrower than the product’s orphan designation has the potential to significantly broaden the scope of orphan exclusivity for such products. FDA announced on January 24, 2023 that despite the Catalyst decision, it will continue to apply its longstanding regulations, which tie the scope of orphan exclusivity to the uses or indications for which the drug is approved, rather than to the designation. FDA’s application of its orphan drug regulations post-Catalyst could be the subject of future legislation or to further challenges in court, which could impact our ability to obtain or seek to work around orphan exclusivity, and might affect our ability to retain orphan exclusivity that the FDA previously has recognized for our products. We have sought and obtained fast track designation from the FDA for one of our product candidates, and may seek such fast track designation for one more additional product candidates, but we might not receive such additional designation, and such designation may not actually lead to a faster development or regulatory review or approval process nor does it ensure that we will receive marketing approval. Any sponsor may seek fast track designation for a drug if it is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical need for this condition, a drug sponsor may apply for FDA fast track designation. In January 2024, the FDA granted fast track designation for combination of avutometinib and LUMAKRAS for the treatment of patients with KRAS G12C-mutant metastatic NSCLC who have received at least one prior systematic therapy and have not been previously treated with a KRAS G12C inhibitor. We may also seek fast track designation for additional product candidates, which we may not receive from the FDA. However, fast track designation does not ensure that we will receive marketing approval or that approval will be granted within any particular timeframe. We may not experience a faster development or regulatory review or approval process with fast track designation compared to conventional FDA procedures. In addition, the FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast track designation alone does not guarantee qualification for the FDA’s priority review procedures. 64 Table of Contents Any product candidate for which we obtain marketing approval could be subject to restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved. Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post approval clinical data, labeling, advertising, and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance, and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly post marketing testing and surveillance to monitor the safety or efficacy of the product, including the imposition of a REMS. The FDA closely regulates the post approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off label use, and if we do not market our products for their approved indications, we may be subject to enforcement action for off label marketing. In addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including: ● restrictions on such products, manufacturers, or manufacturing processes; ● restrictions on the labeling or marketing of a product; ● restrictions on product distribution or use; ● requirements to conduct post marketing clinical trials; ● warning or untitled letters; ● withdrawal of the products from the market; ● refusal to approve pending applications or supplements to approved applications that we submit; ● recall of products; ● fines, restitution, or disgorgement of profits or revenue; ● suspension or withdrawal of marketing approvals; ● refusal to permit the import or export of our products; ● product seizure; or ● injunctions or the imposition of civil or criminal penalties. The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may fail to obtain any marketing approvals, lose any marketing approval that we may have obtained and we may not achieve or sustain profitability. Our business operations, including our relationships with healthcare providers, third-party payors, and patients, will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings. Healthcare providers, including physicians, and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our arrangements with healthcare providers, third-party payors, patients and other parties within the healthcare industry may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare and regulatory 65 Table of Contents laws and regulations within the United States include the following, some of which will apply only if and when we have a marketed product: ● the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the anti-kickback statute or specific intent to violate it in order to have committed a violation; ● the federal False Claims Act (“FCA”), which imposes criminal and civil penalties on individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government and actions under the FCA may be brought by private whistleblowers as well as the government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the FCA; ● the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program; ● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also establishes requirements related to the privacy, security, and transmission of individually identifiable health information which apply to many healthcare providers, physicians, and third-party payors with whom we interact; ● the federal false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; ● the federal anti-kickback prohibition known as Eliminating Kickbacks in Recovery Act, or EKRA, which prohibits certain payments related to referrals of patients to certain providers (recovery homes, clinical treatment facilities, and laboratories) and applies to services reimbursed by private health plans as well as government health care programs; ● the FDCA, which, among other things, strictly regulates drug product and medical device marketing, prohibits manufacturers from marketing such products for off-label use and regulates the distribution of samples; ● federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under governmental healthcare programs; ● federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; ● state medical privacy and comprehensive privacy statutes, which regulate the privacy and security of personal information; ● the so-called federal “sunshine law” or Open Payments which requires manufacturers of drugs, devices, biologics, and medical supplies to report to the Centers for Medicare & Medicaid Services information related to payments and other transfers of value to teaching hospitals, physicians, and other healthcare practitioners, as well as ownership and investment interests held by physicians and their immediate family members; and ● analogous state laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non- governmental third-party payors, including private insurers, and state laws which regulate interactions between pharmaceutical companies and healthcare providers, require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, require pharmaceutical companies to report information on transfers of value to other healthcare providers, marketing 66 Table of Contents expenditures or pricing information and/or require licensing of sales representatives. State laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Similar healthcare and data privacy laws and regulations exist in the European Union and other foreign jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information. For example, the General Data Protection Regulation (“GDPR”), impose obligations with respect to operations in the European Economic Area (“EEA”), and increasing the scrutiny applied to transfers of personal data from the EEA (including health data from our clinical sites in the EEA) to countries that are considered by the European Commission to lack an adequate level of data protection, such as the United States. The compliance obligations imposed by the GDPR have required us to revise our operations and increased our cost of doing business. In addition, the GDPR provides for substantial fines for breaches of data protection requirements, and it confers a private right of action on data subjects for breaches of data protection requirements. In connection with the separation from the European Union, the United Kingdom adopted similar legislation, and many other countries and more than twelve U.S. states have adopted comprehensive data privacy laws that may increase the costs of compliance, inhibit the sharing of personal data across national boundaries, and impact operations. The number and complexity of both federal and state laws continues to increase; the laws contain ambiguous requirements or require administrative guidance for implementation; government interpretations of the laws continue to evolve; and additional governmental resources are being used to enforce these laws and to prosecute companies and individuals who are believed to be violating them. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Governmental authorities may potentially conclude that our business practices, including arrangements we may have with physicians and other healthcare providers, or patient assistance programs, may not comply with applicable laws. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government funded healthcare programs. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Our employees, independent contractors, principal investigators, CROs, consultants, and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation. We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants and vendors may engage in fraud or other misconduct, including intentional failures to: comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards, or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions. 67 Table of Contents Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain. In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post approval activities, and affect our ability to profitably sell any of our product candidates for which we obtain marketing approval. The U.S. healthcare industry generally and U.S. government healthcare programs in particular are highly regulated and subject to frequent and substantial changes. The U.S. government and individual states have been aggressively pursuing healthcare reform. For example, the ACA, enacted in March 2010, was intended to broaden access to health insurance through a Medicaid expansion and the implementation of the individual mandate for health insurance coverage, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms. The law, for example, increased drug rebates under state Medicaid programs for brand name prescription drugs and extended those rebates to Medicaid managed care and assessed a fee on manufacturers and importers of brand name prescription drugs reimbursed under certain government programs, including Medicare and Medicaid. Beyond the ACA, there are ongoing and widespread health care reform efforts, a number of which have focused on regulation of prices or payment for drug products. Drug pricing and payment reform has been a focus of the Biden Administration. For example, federal legislation enacted in 2021 eliminates a statutory cap on Medicaid drug rebate program rebates effective January 1, 2024. For example, federal legislation enacted in 2021 eliminates a statutory cap on Medicaid drug rebate program rebates effective January 1, 2024. As another example, the Inflation Reduction Act (“IRA”) of 2022 includes a number of changes intended to address rising prescription drug prices in Medicare Parts B and D, with varying implementation dates. These changes include caps on Medicare Part D out-of-pocket costs, Medicare Part B and Part D drug price inflation rebates, a new Medicare Part D manufacturer discount drug program (replacing the ACA Medicare Part D coverage gap discount program) and a drug price negotiation program for certain high spend Medicare Part B and D drugs (with the first list of drugs announced in 2023). Subsequent to the enactment of the IRA, in 2022, the Biden administration released an executive order directing the Department of Health and Human Services (“HHS”) to report on how the CMMI could be leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. The report was issued in 2023 and proposed various models that CMMI is currently developing which seek to lower the cost of drugs, promote accessibility, and improve quality of care, models are currently still in development. Healthcare reform efforts have been and may continue to be subject to scrutiny and legal challenge. For example, with respect to the ACA, tax reform legislation was enacted that eliminated the tax penalty established for individuals who do not maintain mandated health insurance coverage beginning in 2019 and, in 2021, the U.S. Supreme Court dismissed the latest judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. As another example, revisions to regulations under the federal anti-kickback statute would remove protection for traditional Medicare Part D discounts offered by pharmaceutical manufacturers to pharmacy benefit managers and health plans. Pursuant to court order, the removal was delayed and recent legislation imposed a moratorium on implementation of the rule until January 2032. As another example, the IRA drug price negotiation program has been challenged in litigation filed by various pharmaceutical manufacturers and industry groups. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price constraints, restrictions on copayment assistance by pharmaceutical manufacturers, marketing cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing. In addition, other broader legislative changes have been adopted that could have an adverse effect upon, and could prevent, our products’ commercial success. For example, the Budget Control Act of 2011, as amended, resulted in the imposition of reductions in Medicare (but not Medicaid) payments to providers in 2013 and remains 68 Table of Contents in effect through 2032 unless additional Congressional action is taken. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations. We cannot be sure whether additional legislative changes will be enacted, or whether the regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post marketing testing and other requirements. We continue to evaluate federal and state health care reform efforts and the effect that such efforts may have on our business. Healthcare reform measures that may be adopted in the future could have a material adverse effect on our industry generally and on our ability to successfully commercialize any product candidates if and when approved. Disruptions at the FDA and other government agencies caused by funding shortages could prevent our product candidates from being developed, approved, or commercialized in a timely manner, or at all, which could negatively impact our business. The ability of the FDA and foreign regulatory authorities to review or approve new product candidates can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s or foreign regulatory authorities’ ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s or foreign regulatory authorities’ ability to perform routine functions. Average review times at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. For example, over the last several years, the U.S. federal government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, preventing the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Separately, in response to the COVID-19 pandemic, the FDA announced its intention to postpone most inspections of foreign and domestic manufacturing facilities and products at various points. Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and any resurgence of the virus, including as a result of the emergence of new variants may lead to further inspectional delays. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting business as usual or conducting inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material effect on our business. Risks Related to Employee Matters and Managing Growth Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified personnel. We are highly dependent on the efforts and abilities of the principal members of our senior management and other key personnel, including Daniel Paterson, our President and Chief Executive Officer and Daniel Calkins, our Chief Financial Officer. Although we have formal employment agreements with Daniel Paterson and Daniel Calkins, these agreements do not prevent them from terminating their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives. 69 Table of Contents Recruiting and retaining qualified scientific, clinical, manufacturing, and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies, universities, and research institutions for similar personnel. Although we have implemented a retention plan for certain key employees, our retention plan may not be successful in incentivizing these employees to continue their employment with us. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors, including our scientific co-founders, may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. We may expand our development, regulatory and future sales and marketing capabilities over time, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations. We may experience significant growth over time in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs, and sales and marketing. To manage our anticipated future growth, we may continue to implement and improve our managerial, operational, and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel when we expand. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations. Our business and operations may be materially adversely affected in the event of computer system breaches or failures. There are growing risks related to the security, confidentiality, and integrity of personal and corporate information stored and transmitted electronically due to increasingly diverse and sophisticated threats to networks, systems, and data security. Despite our efforts to implement security measures, our information technology systems, and those of our contract research organizations and other third parties who process information on our behalf or have access to our systems, are vulnerable to damage from computer viruses, ransomware, unauthorized access, natural disasters, fire, terrorism, war, and telecommunication and electrical failures. Similarly, our information system providers and their software and hardware supply chains are vulnerable to attacks. These attacks may not be identified or addressed quickly enough to avoid harm, particularly when threat actors use stealthy and persistent tactics. Cybersecurity breaches may be the result of negligent or unauthorized activity by our employees and contractors, as well as by third parties who use cyberattack techniques involving malware, ransomware, hacking and phishing, among others. Cyberattacks have increased in frequency and potential harm over time, and the methods used to gain unauthorized access constantly evolve, making it increasingly difficult to anticipate, prevent, and/or detect incidents successfully in every instance. We are required to expend significant resources in an effort to protect against security incidents and may be required or choose to spend additional resources or modify our business activities, particularly where required by applicable data privacy and security laws or regulations or industry standards. The SEC and other regulatory bodies are increasingly focusing on cybersecurity enforcement, and the costs of complying with these regulatory initiatives may be significant. If a security incident or data breach were to occur and cause interruptions in our operations, it could result in a material disruption of our key business processes and clinical development programs. For example, the loss of clinical trial data from ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could be exposed to substantial remediation costs, claims or litigation, regulatory enforcement, liability including under laws that protect the privacy of personal information, and additional reporting requirements, any of which could have a material adverse effect on our operating results and financial condition, affect our reputation, undermine market and commercial confidence, erode goodwill, and possibly delay the further development and commercialization of our product candidates. 70 Table of Contents Risks Related to Our Capital Stock Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management. Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition, or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions: ● establish a classified board of directors such that not all members of the board are elected at one time; ● allow the authorized number of our directors to be changed only by resolution of our board of directors; ● limit the manner in which stockholders can remove directors from the board; ● establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; ● require that stockholder actions must be affected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; ● limit who may call stockholder meetings; ● authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and ● require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws. Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. The market price of our common stock has been, and may continue to be, highly volatile. Our stock price has been volatile. Since January 27, 2012, when we became a public company, the price for one share of our common stock has reached a high of $194.53 and a low of $3.54 through December 31, 2023, on a post reverse stock split basis. We cannot predict whether the price of our common stock will rise or fall. The market price for our common stock may be influenced by many factors, including: ● the success of competitive products or technologies; ● results of clinical trials of our product candidates or those of our competitors; ● regulatory or legal developments in the United States and other countries; ● developments or disputes concerning patent applications, issued patents or other proprietary rights; ● the recruitment or departure of key personnel; ● the level of expenses related to any of our product candidates or clinical development programs; ● the results of our efforts to discover, develop, acquire, or in-license additional product candidates or products; 71 Table of Contents ● actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts; ● variations in our financial results or those of companies that are perceived to be similar to us; ● changes in the structure of healthcare payment systems; ● market conditions in the pharmaceutical and biotechnology sectors; ● general economic, industry and market conditions; and ● the other factors described in this "Risk Factors" section. In addition, the stock market in general and the market for small pharmaceutical companies and biotechnology companies in particular have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the market, securities class action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management's attention and resources, which could materially and adversely affect our business and financial condition. Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the source of gain for our stockholders. We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings to finance the growth and development of our business. In addition, the terms of any current or future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future. We can issue and have issued shares of preferred stock, which may adversely affect the rights of holders of our common stock. We have in the past issued, and we may at any time in the future issue, shares of preferred stock, and as of December 31, 2023 we have 1,000,000 shares of our Series A convertible preferred stock, par value $0.0001 per share (the “Series A Convertible Preferred Stock”) and 1,200,000 shares of our Series B convertible preferred stock, par value $0.0001 per share (the “Series B Convertible Preferred Stock” and together with the Series A Convertible Preferred Stock, the “Preferred Stock”) outstanding. Our amended and restated certificate of incorporation authorizes us to issue up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of holders of our common stock. For example, our Series B Convertible Preferred Stock ranks senior to our common stock, and the holders of our Series B Convertible Preferred Stock are entitled to a liquidation preference of $1.00 per share of Series B Convertible Preferred Stock in the event of our liquidation, dissolution or winding up, which could limit or eliminate any payments that the holders of our common stock could expect to receive upon our liquidation. Additionally, holders of our Preferred Stock are entitled to receive, on an as converted basis, dividends and consideration in the event of certain transactions equivalent to the dividends and consideration received by the holders of our common stock, which would make paying dividends and engaging in certain transactions more expensive. We also may not make any changes to our amended and restated certificate of incorporation that would limit the rights of the holders of our either series of our preferred stock without the affirmative vote of a majority of such series of preferred stock, which may make it more difficult to take certain corporate actions in the future. Our stockholders will experience substantial dilution if shares of our Series B Convertible Preferred Stock are converted into common stock or our pre-funded warrants are exercised for common stock. As of December 31, 2023, there were 1,200,000 shares of our Series B Convertible Preferred Stock outstanding, which are convertible without payment of additional consideration into 4,236,570 shares of our common stock, subject to certain ownership limitations and pre-funded warrants to purchase 1,538,591 shares of our common stock for an exercise price equal to $0.001 per share of common stock. The conversion of the outstanding shares of our Series B Convertible Preferred Stock into common stock or exercise of our pre-funded warrants would 72 Table of Contents be substantially dilutive to existing stockholders. Any dilution or potential dilution may cause our stockholders to sell their shares, which may contribute to a downward movement in the stock price of our common stock. Raising additional capital or entering into certain licensing arrangements may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, grants and government funding, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or securities convertible into our common stock, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. To the extent that we enter into certain licensing arrangements, the ownership interest of our existing stockholders may be diluted if we elect to make certain payments in shares of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish future revenue streams or valuable rights to product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. 73 Table of Contents Item 1B. Unresolved Staff Comments None. Item 1C. Cybersecurity Risk management and strategy. In the ordinary course of our business, we and our third-party service providers, such as contract research organizations, contract manufacturing organizations, and managed service providers collect, maintain and transmit sensitive data on our networks and systems, including our intellectual property and proprietary or confidential business information (such as research and development data and personal information). The secure maintenance of this confidentiality, availability and integrity of this information is critical to our business and reputation. In addition, we are heavily dependent on the functioning of our information technology applications and services to carry out our business processes. While we have adopted administrative, technical and physical safeguards to protect such systems and data, our systems and those of third-party service providers may be vulnerable to a cyber-attack. We have adopted processes designed to identify, assess and manage material risks from cybersecurity threats. Those processes include assessment of, and response to internal and external threats to the security, confidentiality, integrity and availability of our data and information systems, along with other material risks to our operations, at least annually or whenever there are material changes to our systems or operations. Our risk management team collaborates with our Chief Information Officer (“CIO”), our internal information technology (“IT”) department, our Compliance team and our third-party IT managed service providers to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs. We have processes to detect potential vulnerabilities and anomalies through technical safeguards and have adopted policies and procedures around internal and external notification of cybersecurity incidents. Our CIO and IT Department implement processes around security monitoring and vulnerability testing. We also have in place an incident response process for responding to and escalating cybersecurity events and incidents. As part of our risk management process, we engage outside providers to conduct periodic internal and external penetration testing of our systems, networks and web properties. We also employ internal security testing solutions and security awareness training for all employees. We engage a security operations platform provider to assist us in monitoring, assessing and managing potential cyber events. We also perform periodic cyber maturity assessments to measure our cybersecurity profile against industry peers and standards. We rely on third parties, including software-as-a-service and platform-as-a-services cloud vendors, for various business functions. Our third-party services providers have access to our information systems and data, and we rely on such third parties for the continuous operation of our business. We oversee these third-party service providers by conducting vendor diligence during contracting and onboarding and through ongoing monitoring. Vendors are assessed for risk based on the nature of their service, access to data and systems, and the level to which those systems and data impact our business. Based on that assessment, we conduct diligence that may include completing security questionnaires, onsite audits, and other technical and data security evaluations. Governance. Our Board of Directors provides oversight of the Company’s cybersecurity risk management program and integrates this oversight into its overall evaluation of enterprise risk. Our Audit Committee has primary responsibility for oversight of cybersecurity and is briefed on cybersecurity risks at least once each year and following any material cybersecurity incidents. 74 Table of Contents At the management level, our cybersecurity program is managed by our CIO, reporting into the executive leadership team. Our CIO has over 30 years of experience managing IT operations and cybersecurity within the pharmaceutical, biotechnology and high-tech industries. Our CIO reports at least annually to the Audit Committee and such reporting will include an overall assessment of our compliance with our cybersecurity policies and procedures as well as topics that may include risk assessments, risk management and control decisions, service provider arrangements, test results, security incidents and responses and recommendations for changes and updates to policies and procedures. In the event of a cybersecurity incident, the CIO reports the incident to the executive leadership team. If the cybersecurity incident is determined to be material the executive leadership team will report the incident to the Audit Committee or Board of Directors as appropriate. As of the date of this report, we have not experienced a cybersecurity incident that resulted in a material effect on our business strategy, results of operations, or financial condition. Despite our continuing efforts, we cannot guarantee that our cybersecurity safeguards will prevent breaches or breakdowns of our or our third-party service providers’ information technology systems, particularly in the face of continually evolving cybersecurity threats and increasingly sophisticated threat actors. A cybersecurity incident may materially affect our business, results of operations or financial condition, including where such an incident results in reputational, competitive or business harm or damage to our brand, lost sales, reduced demand, loss of intellectual property rights, significant costs or government investigations, litigation, fines or damages. For more information, see “Our business and operations may be materially adversely affected in the event of computer system breaches or failures” in Item 1A. Risk Factors in this Annual Report on Form 10-K. Item 2. Properties We occupy approximately 27,810 square feet of office space in Needham, Massachusetts under a lease that expires in June 2025. We believe that our facility is sufficient to meet our current needs and that suitable additional space will be available as and when needed. Item 3. Legal Proceedings From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business activities. We do not believe we are currently party to any pending legal action, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business or operating results. Item 4. Mine Safety Disclosures Not applicable. 75 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities MARKET INFORMATION Our common stock is publicly traded on The Nasdaq Global Market under the symbol “VSTM.” HOLDERS As of February 29, 2024, there were 5 holders of record of our common stock and the closing price of our common stock on The Nasdaq Capital Market as of that date was $12.46. The number of holders of record does not include beneficial owners whose shares are held by nominees in street name. DIVIDENDS We have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash dividends on our common stock in the foreseeable future. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The information required by this Item 5 of Form 10-K regarding equity compensation plans will be included in our 2024 Proxy Statement and is incorporated herein by reference. PERFORMANCE GRAPH The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference into such filing. The following graph compares the performance of our common stock to the Nasdaq Composite Index and to the Nasdaq Biotechnology Index from December 31, 2018 through December 31, 2023. The comparison assumes $100 was invested after the market closed on December 31, 2018 in our common stock and in each of the foregoing indices, and it assumes reinvestment of dividends, if any. 76 Table of Contents Cumulative Total Return Comparison Verastem, Inc. NASDAQ Composite NASDAQ Biotechnology PURCHASE OF EQUITY SECURITIES 2018 100.00 100.00 100.00 2019 39.88 136.69 125.11 December 31, 2020 63.39 198.10 158.16 2021 61.01 242.03 158.20 2022 11.98 163.28 142.19 2023 20.19 236.17 148.71 We did not purchase any of our equity securities during the period covered by this Annual Report on Form 10-K. Item 6. Reserved 77 Table of Contents Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and as set forth under “Risk Factors.” Please also refer to the section under the heading “Forward-Looking Statements.” OVERVIEW We are a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to advancing new medicines for patients battling cancer. Our pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/MEK inhibition and FAK inhibition. Our most advanced product candidates, avutometinib and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, but not limited to LGSOC, NSCLC, pancreatic cancer, CRC, and melanoma. We believe that avutometinib may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors, or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies. On August 10, 2020, we and Secura signed the Secura APA and on September 30, 2020, the transaction closed. Pursuant to the Secura APA, we sold to Secura our exclusive worldwide license for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib. Refer to Note 13. License, collaboration and commercial agreements in our consolidated financial statements located in this Annual Report on Form 10-K for a detailed description of the terms and conditions of the Secura APA. With the transition of the duvelisib program to Secura, we are focusing our efforts on our lead product candidates, avutometinib and defactinib. Our operations to date have been organizing and staffing our company, business planning, raising capital, identifying and acquiring potential product candidates, undertaking preclinical studies and clinical trials for our product candidates and initiating U.S. commercial operations following the approval of COPIKTRA through our ownership period ending in September 2020. We have financed our operations to date primarily through public offerings of our common stock and pre-funded warrants, offerings of convertible notes, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments and milestone payments under our license and collaboration agreements with Sanofi, CSPC, and Yakult, the upfront payment and milestone payments received under the Secura APA, the proceeds in connection with the private investment in public equity (the “PIPE”), and our loan and security agreement executed with Oxford in March 2022, sales of Series B Convertible Preferred Stock. Additionally, from our U.S. commercial launch of COPIKTRA on September 24, 2018, through our ownership period ending in September 2020, we financed a portion of our operations through product revenue. As of December 31, 2023, we had an accumulated deficit of $824.9 million. Our net loss was $87.4 million, $73.8 million, and $71.2 million, for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, we had cash, cash equivalents, and investments of $137.1 million. In accordance with applicable accounting standards, we evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within 12 months after the date of the issuance of the consolidated financial statements. We anticipate operating losses may continue for the foreseeable future since we do not yet have regulatory approval to sell any of our product candidates, and we continue to incur operating costs to execute our strategic plan, including costs related to research and development of our product candidates and commercial readiness activities. These conditions raise substantial doubt about our ability to continue as a going concern for 12 months after the date the consolidated financial statements are issued. 78 Table of Contents We expect to finance our operations with our existing cash, cash equivalents and investments, through potential future milestones and royalties received pursuant to the Secura APA, through the loan and security agreement with Oxford, or through other strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of our equity, or the incurrence of debt. However, given the risk associated with these potential strategic or financing opportunities, they are not deemed probable for purposes of the going concern assessment. If we fail to obtain additional future capital, we may be unable to complete our planned preclinical studies and clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities. Therefore, there is substantial doubt about our ability to continue as a going concern. 79 Table of Contents FINANCIAL OPERATIONS OVERVIEW Revenue Sale of licenses and related assets revenue to date have been generated through our sale of our duvelisib license and related assets to Secura. The sale included intellectual property related to duvelisib in oncology indications, certain existing duvelisib inventory, certain manufacturing equipment and, claims and rights under certain contracts pertaining to duvelisib including net contract prepaid balances. Research and development expenses Research and development expenses consist of costs associated with our research activities, including the development of our product candidates. Research and development expenses include product/ product candidate and/or project-specific costs, as well as unallocated costs. We allocate the expenses related to external research and development services, such as contract research organizations (“CROs”), clinical sites, manufacturing organizations and consultants, by project and/or product candidate. We use our employee and infrastructure resources in a cross-functional manner across multiple research and development projects. Our project costing methodology does not allocate personnel, infrastructure and other indirect costs to specific clinical programs or projects. Product/ product candidate/ project specific costs include: ● direct third-party costs, which include expenses incurred under agreements with CROs, the cost of consultants who assist with the development of our product candidates on a program-specific basis, clinical site costs, and any other third-party expenses directly attributable to the development of the product candidates; ● costs related to contract manufacturing operations including manufacturing costs in connection with producing product candidates for use in conducting preclinical and clinical studies. Costs associated with manufacturing avutometinib are included in “Avutometinib manufacturing and non-clinical trial specific” category below as these costs relate to both the “Avutometinib + defactinib” and “Avutometinib + other combinations” categories and are not specifically allocated to any particular project. Costs to produce defactinib are included in “Avutometinib + defactinib” below; and ● license fees. Unallocated costs include: ● research and development employee-related expenses, including salaries, benefits, travel, and stock-based compensation expense; ● cost of consultants, including our scientific advisory board, who assist with our research and development but are not allocated to a specific program; and ● facilities, depreciation, and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, and laboratory supplies. 80 Table of Contents The table below summarizes our direct research and development expenses for our product/ product candidates/ projects and our unallocated research and development costs for the years ended December 31, 2023, 2022, and 2021: 2023 (in thousands) Year ended December 31, 2022 (in thousands) 2021 (in thousands) Product/ product candidate / project specific costs Avutometinib + defactinib Avutometinib + other combinations Avutometinib manufacturing and non-clinical trial specific GenFleet COPIKTRA Unallocated costs Personnel costs, excluding stock-based compensation Stock-based compensation expense Other unallocated expenses Total research and development expense $ $ 28,683 $ 5,323 5,528 2,177 93 12,299 1,987 5,266 61,356 $ 22,374 $ 2,373 8,204 — 183 10,848 1,766 4,810 50,558 $ 17,025 416 5,441 — 1,194 9,953 2,099 3,219 39,347 Costs for certain development activities, such as clinical trial expenses, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, and information provided us by our vendors on their actual costs incurred or level of effort expended. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as prepaid expenses and other current assets or accrued expenses. Our research and development expenses may increase significantly in future periods as we undertake costlier development activities for our existing and future product candidates, including larger and later-stage clinical trials. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete development of our product candidates or the period, if any, in which material net cash inflows from our product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of: ● clinical trial results; ● the scope, rate of progress, and expense of our research and development activities, including preclinical research and clinical trials; ● the potential benefits of our product candidates over other therapies; ● our ability to market, commercialize, and achieve market acceptance for any of our product candidates that we receive regulatory approval for; ● the terms and timing of regulatory approvals; and ● the expense of filing, prosecuting, defending, and enforcing patent claims and other intellectual property rights. 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 other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. 81 Table of Contents Selling, general, and administrative expenses Selling, general, and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation expense, in our executive, finance, legal, information technology, commercial, communication, human resources, and business development functions. Other selling, general, and administrative expenses include allocated facility costs, commercial costs, professional fees for legal, patent, investor and public relations, consulting, insurance premiums, audit, tax, and other public company costs. Other income, other expense, interest income and interest expense Other expense for the year ended December 31, 2023 was comprised of transaction losses due to changes in foreign currency exchange rates. Other income for the year ended December 31, 2022 was comprised of a gain on the sale of fixed assets and transaction gains due to changes in foreign currency exchange rates. There was no other income or other expense for the year ended December 31, 2021. Interest income reflects interest earned on our cash, cash equivalents and available-for-sale securities. Interest expense reflects interest expense due on our Loan Agreement with Oxford and our convertible notes, as well as non-cash interest related to the amortization of debt discount and issuance costs. Change in fair value of preferred stock tranche liability The change in fair value of preferred stock tranche liability for the year ended December 31, 2023, was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Securities Purchase Agreement (the “Series B Preferred Stock Securities Purchase Agreement”), dated January 24, 2023 with certain purchasers pursuant to which the Company agreed to sell and issue to the purchasers in a private placement up to 2,144,160 shares of its Series B Convertible Preferred Stock in two tranches. There was no preferred stock tranche liability outstanding during the years ended December 31, 2022 and December 31, 2021. CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued and prepaid research and development expenses, stock-based compensation, revenue recognition, and collaborative agreements, described in greater detail below. We base our estimates on our limited historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. However, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations. Revenue recognition We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services in accordance with Accounting Standards Codification (“ASC”) Topic 606 Revenue from Contracts with Customers. 82 Table of Contents Sales of intellectual property For sales of license and intellectual property, that include sale-based royalties, including milestone payments based on a level of sales, we evaluate whether the royalties and sales-based milestones are considered probable of being achieved and estimate the amount of royalties to include over the contractual term using the expected value method and estimate the sales-based milestones using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated royalty and milestone value is included in the transaction price. Royalties and sales-based milestones for territories for which there is not regulatory approval are not considered probable until such regulatory approval is achieved. We evaluate factors such as whether consideration is outside of our control, timeline for when the uncertainty will be resolved and historical sales of COPIKTRA if applicable. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and amount of royalty revenue to be received and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. At December 31, 2023, we determined less than $0.1 million of future potential royalties, we expect to receive pursuant to the Secura APA, were not constrained and have been recorded in the transaction price. As the consideration for future royalties is conditional, we recorded a corresponding contract asset for the expected future royalties. Portions of the contract asset are reclassified to accounts receivable when the right to consideration becomes unconditional. Refer to Note 2. Significant Accounting Policies and Note 13. License, collaboration and commercial agreements to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of revenue. Collaborative Arrangements Collaborative Arrangements: Contracts are considered to be collaborative arrangements pursuant to GAAP when they satisfy the following criteria defined in ASC Topic 808, Collaborative Arrangements: (i) the parties to the contract must actively participate in the joint operating activity and (ii) the joint operating activity must expose the parties to the possibility of significant risk and rewards, based on whether or not the activity is successful. Payments received from or made to a partner that are the result of a collaborative relationship with a partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction or increase to research and development expense, respectively. Accrued and prepaid research and development expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses. This process involves reviewing contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include fees paid to CROs in connection with research and development activities for which we have not yet been invoiced. We base our expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular 83 Table of Contents period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred. Refer to Note 2. Significant Accounting Policies, and Note 4. Accrued expenses to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of accrued research and development expenses. Stock-based compensation For service-based awards, we recognize stock-based compensation expense for stock options, and restricted stock units (“RSUs”) issued to employees, directors and consultants based on the grant date fair value of the awards on a straight-line basis over the requisite service period. In addition, we issue shares under our employee stock purchase plan (“ESPP”) to employees. The fair value of our stock options and ESPP grants is estimated at the date of grant using the Black-Scholes option pricing model. We have also granted performance-based RSUs and stock options with terms that allow the recipients to vest in a specific number of shares based upon the achievement of performance-based milestones as specified in the grants. Stock- based compensation expense associated with these performance-based RSUs and stock options is recognized if the performance condition is considered probable of achievement using management’s best estimates of the time to vesting for the achievement of the performance-based milestones. If the actual achievement of the performance-based milestones varies from our estimates, stock-based compensation expense could be materially different than what is recorded in the period. The cumulative effect on current and prior periods of a change in the estimated time to vesting for performance- based RSUs and stock options will be recognized as compensation cost in the period of the revision, and recorded as a change in estimate. While the assumptions used to calculate and account for stock-based compensation awards represent management’s best estimates, these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if revisions are made to our underlying assumptions and estimates, our stock-based compensation expense could vary significantly from period to period. During the year ended December 31, 2023, we recorded $5.9 million of stock-based compensation expense. As of December 31, 2023, there was approximately $9.2 million of unrecognized stock-based compensation related to stock options, which are expected to be recognized over a weighted-average period of 2.6 years. As of December 31, 2023, there was approximately $3.1 million of unrecognized stock-based compensation related to RSUs, which are expected to be recognized over a weighted-average period of 2.1 years. See Note 2. Significant accounting policies and Note 8. Stock- based compensation to our consolidated financial statements located in this Annual Report on Form 10-K for further discussion of stock-based compensation. 84 Table of Contents RESULTS OF OPERATIONS All financial information presented has been consolidated and includes the accounts of our wholly-owned subsidiaries, Verastem Securities Company and Verastem Europe GmbH. All intercompany balances and transactions have been eliminated in consolidation. Revenue: Sale of COPIKTRA license and related assets Transition services revenue Total revenue Operating expenses: Research and development Selling, general and administrative Total operating expenses Loss from operations Other income (expense) Interest income Interest expense Change in fair value of preferred stock tranche liability Net loss Year Ended December 31, 2023 2022 2021 — — — 2,596 — 2,596 1,447 606 2,053 61,356 30,728 92,084 (92,084) (109) 6,214 (4,139) 2,751 (87,367) 50,558 24,975 75,533 (72,937) 47 1,215 (2,137) — (73,812) 39,347 24,115 63,462 (61,409) — 181 (9,972) — (71,200) Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022 Sale of COPIKTRA license and related assets revenue. Sale of COPIKTRA license and related assets revenue for the year ended December 31, 2023 (the “2023 Period”) was $0.0 million compared to $2.6 million for the year ended December 31, 2022 (the “2022 Period”). Sale of COPIKTRA license and related assets revenue for the 2022 Period was comprised of one regulatory milestone for $2.5 million achieved by Secura’s sublicensee, CSPC, and $0.1 million related to royalties on COPIKTRA sales in the 2022 Period and future royalties expected to be received pursuant to the Secura APA that are not constrained. Research and development expense. Research and development expense for the 2023 Period was $61.4 million compared to $50.6 million for the 2022 Period. The $10.8 million increase from the 2022 Period to the 2023 Period was primarily related to an increase of $6.1 million in CRO costs, a $2.0 million upfront payment made in September 2023 pursuant to the GenFleet Agreement, an increase of $1.8 million in personnel related costs, including non-cash stock-based compensation, an increase of $1.5 million in IST costs, an increase of $0.9 million in consulting costs, and an increase of $0.7 million in investigator fees. The increase is partially offset by a decrease of $2.2 million in drug substance and drug manufacturing costs. Selling, general and administrative expense. Selling, general and administrative expense for the 2023 Period was $30.7 million compared to $25.0 million for the 2022 Period. The increase of $5.7 million from the 2022 Period to the 2023 Period primarily resulted from an increase of $1.7 million in personnel related costs, including non-cash stock-based compensation, an increase of $1.4 million of costs in anticipation of the potential launch of avutometinib and defactinib in LGSOC, an increase of $1.2 million in consulting and professional fees, an increase of $0.6 million in costs associated with financing activities, and an increase of $0.8 million in travel and other costs. Other Income (expense). Other expense of $0.1 million for the 2023 Period was comprised of transaction losses due to changes in foreign currency exchange rates compared to other income of less than $0.1 million for the 2022 Period comprised of a gain on the sale of fixed assets and transaction gains due to changes in foreign currency exchange rates. Interest income. Interest income for the 2023 Period was $6.2 million compared to $1.2 million for the 2022 Period. The increase of $5.0 million in interest income was primarily driven by an increase in interest rates and investment balances on short-term investments and cash equivalents. 85 Table of Contents Interest expense. Interest expense for the 2023 Period was $4.1 million compared to $2.1 million for the 2022 Period. The increase of $2.0 million from the 2022 Period to the 2023 Period was primarily driven by increased expense on the Loan Agreement as a result of the additional $15.0 million debt drawdown on March 22, 2023. Change in fair value of preferred stock tranche liability. The change in fair value of the preferred stock tranche liability of $2.8 million for the 2023 Period was comprised of the mark-to-market adjustment related to the second tranche right issued as part of the Series B Convertible Preferred Stock Securities Purchase Agreement. There was no preferred stock tranche liability outstanding during the 2022 Period. LIQUIDITY AND CAPITAL RESOURCES Sources of liquidity We have financed our operations to date primarily through public and private offerings of our common stock and pre-funded warrants, offerings of convertible notes, sales of common stock under our at-the-market equity offering programs, our loan and security agreement executed with Hercules in March 2017, as amended, the upfront payments under our license and collaboration agreements with Sanofi, Yakult, and CSPC, the upfront payment under the Secura APA, the proceeds in connection with the PIPE, the Loan Agreement with Oxford, and the issuance of Series B Convertible Preferred Stock. With the commercial launch of COPIKTRA in the United States in September 2018 through our ownership period ending in September 2020, we financed a portion of our operations through product revenue. As of September 30, 2020, we have sold our COPIKTRA license and no longer sell COPIKTRA in the United States. We expect to finance a portion of our business through future potential milestones and royalties received pursuant to the Secura APA. As of December 31, 2023, we had $137.1 million in cash, cash equivalents, and investments. We primarily invest our cash, cash equivalents and investments in U.S. Government money market funds, government bonds, corporate bonds and commercial paper of publicly traded companies. Risks and uncertainties include those identified under Item 1A. Risk Factors, in this Annual Report on Form 10- K. Cash flows The following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands): Net cash (used in) provided by: Operating activities Investing activities Financing activities Increase (decrease) in cash, cash equivalents and restricted cash Year ended December 31, 2023 2022 2021 $ (86,460) (44,447) 134,194 3,287 $ $ (63,673) $ (53,502) 87 6,885 (46,530) 66,185 51,784 $ 54,296 Operating activities. The use of cash in operating activities in the 2023 Period and 2022 Period resulted primarily from our net losses adjusted for non-cash adjustments and changes in the components of working capital. Our cash outflow from net losses adjusted for non-cash adjustments was $85.5 million and $67.6 million for the 2023 Period and 2022 Period, respectively. Non-cash adjustments were primarily related to stock-based compensation expense, non-cash interest, net, and change in fair value on preferred stock tranche liability in the 2023 Period and stock-based compensation expense in the 2022 Period. Our cash outflow for the 2023 Period from operating activities due to changes in operating assets and liabilities was $1.0 million for the 2023 Period primarily driven by an increase of $5.8 million in prepaid expenses, other current assets and other assets, and a decrease of $0.4 million in deferred liabilities, partially offset by an increase of $2.9 million in accrued expenses and other liabilities, and an increase of $2.3 million in accounts payable. Our cash inflow for the 2022 Period from operating activities due to changes in operating assets and liabilities was $3.9 million primarily driven by an increase of $2.6 86 Table of Contents million in accounts payable, an increase of $0.7 million in deferred liabilities, a decrease of $0.7 million of prepaid expenses, other current assets and other assets, and a decrease of $0.5 million in accounts receivable, partially offset by a $0.6 million decrease in accrued expenses and other liabilities. The changes in prepaid expenses, other current assets, and other assets in both periods are exclusive of cash received from PanCAN and used in the RAMP 205 study. Cash used in operating activities was $86.5 million and $63.7 million for the 2023 Period and the 2022 Period, respectively. Investing activities. The cash used in investing activities for the 2023 Period primarily relates to the net purchases of investments of $44.4 million. The cash provided by investing activities for the 2022 Period primarily relates to the net maturities of investments of $66.2 million. Financing activities. The cash provided by financing activities for the 2023 Period primarily represents $91.4 million of proceeds from our previously disclosed public offering in June 2023 of common stock and pre-funded warrants to purchase shares of our common stock, net of issuance costs, $28.1 million of proceeds received from issuance of Series B Convertible Preferred Stock, net of issuance costs, $14.9 million of proceeds received pursuant to the loan and security agreement with Oxford, $1.4 million of proceeds received from insurance premium financing and $0.1 million of proceeds received related to our employee stock purchase plan, partially offset by $1.4 million of payments on insurance premium financing, and $0.3 million of repayment of our 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”). The cash provided by financing activities for the 2022 Period primarily represents $27.4 million of net proceeds received under our at-the market equity offering program, $24.1 million of net proceeds received from the loan and security agreement with Oxford, and $0.3 million of proceeds received related to exercise of stock options and our employee stock purchase plan. Refer to Note 11. Capital Stock to our consolidated financial statements located in this Annual Report on Form 10-K for additional details on the January 2023 offering of our Series B Convertible Preferred Stock, the June 2023 offering of our common stock and pre-funded warrants to purchase shares of our common stock, and our at-the-market equity offering program; Note 5. Debt to our consolidated financial statements located in this Annual Report on Form 10-K for additional details on the Loan Agreement; Note 16. Notes Payable to our consolidated financial statements located in this Annual Report on Form 10-K for additional details on the finance agreement with AFCO Premium Credit LLC related to insurance premium financing and the monthly payments of principal and interest related thereto; and Note 10. Convertible Senior Notes to our consolidated financial statements located in this Annual Report on Form 10-K for details on the 2018 Notes. Funding requirements We expect to continue to incur significant expenses and may continue to incur operating losses. Refer to risk factor titled We have incurred significant losses since our inception. We may incur losses for the foreseeable future and may never achieve or maintain profitability within section Item 1A. Risk Factors for detailed activities which may drive our continued operating losses and expenses in future periods. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, and the extent to which we may enter into collaborations with third parties for development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our current product candidates. Our future capital requirements will depend on many factors, including: ● the costs and timing of commercialization activities for our product candidates for which we expect to receive marketing approval; ● the scope, progress, and results of our ongoing and potential future clinical trials; ● the extent to which we acquire or in-license other product candidates and technologies; ● the costs, timing, and outcome of regulatory review of our product candidates (including our efforts to seek approval and fund the preparation and filing of regulatory submissions); ● revenue received from commercial sales our product candidates, should any of our other product candidates receive marketing approval; 87 Table of Contents ● the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending intellectual property related claims; ● our ability to establish collaborations or partnerships on favorable terms, if at all; and ● receipt of milestone payments and royalties pursuant to the Secura APA including timing of such receipt. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and through future potential milestones and royalties received pursuant to the Secura APA. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Without additional funding we do not believe that we have sufficient funds to meet our obligations within the next 12 months from the date of issuance of these consolidated financial statements. While we believe that we may have sufficient funds to meet our obligations within the next 12 months from the date of the issuance of the consolidated financial statements for the year ended December 31, 2023, in performing this analysis under the applicable accounting standards management excluded certain elements of our operating plan that cannot be considered probable of occurring. Accordingly, management has concluded that substantial doubt exists about our ability to continue as a going concern for 12 months from the date the consolidated financial statements are issued. CONTRACTUAL OBLIGATIONS AND COMMITMENTS On April 15, 2014, we entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts. The lease term commenced on April 15, 2014, and it was scheduled to expire on September 30, 2019. Effective February 15, 2018, we amended the lease agreement to relocate within the facility to another location consisting of 27,810 square feet of office space (the “Amended Lease Agreement”). The Amended Lease Agreement extends the expiration date of the lease from September 2019 through June 2025. Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $0.7 million, which increases during the lease term to $1.1 million for the last 12-month period. As of December 31, 2023, the total future minimum lease payments under the agreement are $1.6 million through June 2025. As discussed in Note 13. License, collaboration and commercial agreements to the consolidated financial statements located in this Annual Report on Form 10-K, we are party to several agreements to license intellectual property. The license agreements may require us to pay upfront license fees, ongoing annual license maintenance fees, milestone payments, minimum royalty payments, as well as reimbursement of certain patent costs incurred by the licensors, as applicable. As of December 31, 2023, we do not have any minimum contractual obligations in relation to these agreements because: there were no upfront license fees payable in future periods; no annual license maintenance fees; we cannot estimate if milestone and/or royalty payments will occur in future periods; and patent cost reimbursement costs are perpetual and the agreements are cancelable by us at any time upon prior written notice to the licensor. TAX LOSS CARRYFORWARDS As of December 31, 2023, we had federal and state net operating loss (“NOL”) carryforwards of $473.6 million and $189.0 million, respectively, which are available to reduce future taxable income. We also had federal and state tax credits of $9.5 million and $2.2 million, respectively, which may be used to offset future tax liabilities. 88 Table of Contents The net operating loss and tax credit carryforwards will expire at various dates through 2043, except for $277.9 million of federal net operating loss carryforwards which may be carried forward indefinitely. Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of our company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. At December 31, 2023, we recorded a 100% valuation allowance against our NOL and tax credit carryforwards, as we believe it is more likely than not that the tax benefits will not be fully realized. In the future, if we determine that a portion or all of the tax benefits associated with our tax carryforwards will be realized, net income would increase in the period of determination. Based on our analysis under Section 382 of the Internal Revenue Code and similar provisions under state law, we believe that our federal net operating loss carryforwards, our state net operating loss carryforwards, our research and development (“R&D”) credits and our Orphan Drug (“OD”) credits will be limited as of December 31, 2023. The portion of federal NOL, state NOL, R&D credits and OD credits that were determined to be limited by Section 382 have been written off as of December 31, 2023. The remaining unused carryforwards remain available for future periods. Due to our full valuation allowance the write off of NOLs, R&D credits, and OD credits did not have any impact to the statements of operation and comprehensive loss for the 2023 Period and 2022 Period. RECENTLY ADOPTED ACCOUNTING STANDARDS Refer to Note 2. Significant Accounting Policies to our consolidated financial statements located in this Annual Report on Form 10-K for recently adopted accounting standards. Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk related to changes in interest rates. We had cash, cash equivalents, and investments of $137.1 million and $87.9 million as of December 31, 2023 and 2022, respectively, consisting of cash, U.S. Government money market funds, government bonds, corporate bonds and commercial paper of publicly traded companies. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because most of our investments are interest bearing. Our available for sale securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term duration of most of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our portfolio. We contract with CROs and contract manufacturers globally, which may be denominated in foreign currencies. We may be subject to fluctuations in foreign currency rates in connection with these agreements. Transactions denominated in currencies other than the functional currency are recorded based on exchange rates at the time such transactions arise. As of December 31, 2023, an immaterial amount of our total liabilities was denominated in currencies other than the functional currency. As of December 31, 2023, we have borrowed $40.0 million under the Loan Agreement. The Loan Agreement bears interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap. Changes in interest rates can cause interest charges to fluctuate under the Loan Agreement. A 10% increase in current interest rates would have resulted in an immaterial increase in the amount of cash interest expense for the year ended December 31, 2023 due to the overall interest rate floor and cap. Item 8. Consolidated Financial Statements and Supplementary Data Our consolidated financial statements, together with the report of our independent registered public accounting firm (e.g., Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)), appear on pages F-1 through F-38 of this Annual Report on Form 10-K. 89 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Limitations on Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as the process designed by, or under the supervision of, our Chief Executive Officer and our Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with the authorizations of management and directors; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm, as allowed by the SEC. Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting during the fiscal quarter ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 90 Table of Contents Item 9B. Other Information Trading Plans of Our Directors and Officers During our fiscal quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) entered into, modified (as to amount, price or timing of trades) or terminated (i) contracts, instructions or written plans for the purchase or sale of our securities that are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading in securities on the basis of material nonpublic information or (ii) non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S- K). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE Information regarding our directors, including the audit committee and audit committee financial experts, and executive officers and compliance with Section 16(a) of the Exchange Act will be included in our 2024 Proxy Statement and is incorporated herein by reference. We have adopted a Code of Business Conduct and Ethics for all of our directors, officers, and employees as required by Nasdaq governance rules and as defined by applicable SEC rules. Stockholders may locate a copy of our Code of Business Conduct and Ethics on our website at www.verastem.com or request a copy without charge from: Verastem, Inc. Attention: Investor Relations 117 Kendrick St., Suite 500 Needham, MA 02494 We will post to our website any amendments to the Code of Business Conduct and Ethics and any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 of Form 10-K regarding executive compensation will be included in our 2024 Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item 12 of Form 10-K regarding security ownership of certain beneficial owners and management will be included in our 2024 Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item 13 of Form 10-K regarding certain relationships and related transactions and director independence will be included in our 2024 Proxy Statement and is incorporated herein by reference. 91 Table of Contents ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item 14 of Form 10-K regarding principal accountant fees and services will be included in our 2024 Proxy Statement and is incorporated herein by reference. 92 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents are filed as part of this Annual Report on Form 10-K: (1) Consolidated Financial Statements See Part II, Item 8 for the Financial Statements required to be included in this Annual Report on Form 10-K. (2) Consolidated Financial Statement Schedules All financial statement schedules are omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. (3) Exhibits Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the exhibits hereto and such listing is incorporated herein by reference. Item 16. Form 10-K Summary None. 93 Table of Contents Exhibit number EXHIBIT INDEX Description of exhibit 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed by the Registrant on March 12, 2019) 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed by the Registrant on March 12, 2019) 3.3 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.4 to Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-177677) filed by the Registrant on January 13, 2012) 3.4 Certificate of Amendment to the Restated Certificate of Incorporation of Verastem, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on May 21, 2020) 3.5 Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on November 7, 2022) 3.6 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on January 25, 2023) 3.7 Certificate of Amendment to the Restated Certificate of Incorporation of Verastem, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on May 31, 2023) 4.1 Specimen certificate evidencing shares of common stock (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-177677) filed by the Registrant on January 13, 2012) 4.2 Description of Securities (incorporated by reference to Exhibit 4.5 to the Form 10-K filed by the Registrant with the Securities and Exchange Commission on March 14, 2023) 4.3 Form of Pre-Funded Warrant. (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on June 21, 2023). 10.1# Form of Incentive Stock Option Agreement under 2012 Incentive Plan (incorporated by reference to Exhibit 10.3 to Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-177677) filed by the Registrant on January 13, 2012) 10.2# Form of Incentive Stock Option Agreement under Amended and Restated 2012 Incentive Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s Annual Report on Form 10-K filed by the Registrant on March 13, 2018) 10.3# Form of Nonstatutory Stock Option Agreement under 2012 Incentive Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-177677) filed by the Registrant on January 13, 2012) 10.4# Form of Nonstatutory Stock Option Agreement under Amended and Restated 2012 Incentive Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Annual Report on Form 10-K filed by the Registrant on March 13, 2018) 94 Table of Contents 10.5# Form of Restricted Stock Unit Agreement under 2012 Incentive Plan (incorporated by reference to Exhibit 10.16 to Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-177677) filed by the Registrant on January 13, 2012) 10.6# Amendment to Form of Restricted Stock Unit Agreement under 2012 Incentive Plan (incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K filed by the Registrant on March 26, 2013) 10.9# Form of Restricted Stock Unit Agreement under Amended and Restated 2012 Incentive Plan (incorporated by reference to Exhibit 10.9 of the Registrant’s Annual Report on Form 10-K filed by the Registrant on March 13, 2018) 10.7# Form of Inducement Award Nonstatutory Stock Option Agreement (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8 filed by the Registrant with the Securities and Exchange Commission on December 19, 2014) 10.8# Form of Inducement Award Nonstatutory Stock Option Agreement (incorporated by reference to Exhibit 10.11 of the Registrant’s Annual Report on Form 10-K filed by the Registrant on March 13, 2018) 10.9# Form of Inducement Award Restricted Stock Unit Agreement (incorporated by reference to Exhibit 4.3 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed by the Registrant with the Securities and Exchange Commission on November 7, 2018) 10.10# Form of Indemnification Agreement between the Registrant and each director and executive officer (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on August 8, 2017) 10.11 Lease Agreement, dated April 15, 2014, between the Registrant and Intercontinental Fund III 117 Kendrick Street LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on April 18, 2014) 10.12 First Amendment of Lease Agreement, dated February 15, 2018, between the Registrant and 117 Kendrick DE, LLC, as successor-in-interest to Intercontinental Fund III 117 Kendrick Street, LLC (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on May 3, 2018) 10.13# Employment Agreement, dated August 2, 2023, by and between Verastem, Inc. and Daniel W. Paterson (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on August 4, 2023). 10.14† License Agreement, dated July 11, 2012, by and between the Registrant and Pfizer Inc. (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Registrant on August 13, 2012) 10.15† Letter Agreement, dated December 7, 2012, by and between the Registrant and Pfizer Inc. (incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K filed by the Registrant on March 6, 2014) 10.16† License Agreement for CKI27, dated January 7, 2020, between Verastem, Inc. and Chugai Pharmaceutical Co., Ltd. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on May 7, 2020) 10.17# Form of Restricted Stock Unit Agreement under the 2012 Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Registrant on May 7, 2020) 10.18# Form of Inducement Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed by the Registrant on May 7, 2020) 95 Table of Contents 10.19# Form of Incentive Stock Option Agreement under the 2012 Incentive Plan (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed by the Registrant on May 7, 2020) 10.20# Form of Nonstatutory Stock Option Agreement under the 2012 Incentive Plan (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed by the Registrant on May 7, 2020) 10.21# Form of Inducement Nonstatutory Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by the Registrant on May 7, 2020) 10.22# Form of Incentive Stock Option Agreement under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Registrant on August 2, 2021) 10.23# Form of Nonstatutory Stock Option Agreement (Employees) under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed by the Registrant on August 2, 2021) 10.24# Form of Nonstatutory Stock Option Agreement (Non-Employees) under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q filed by the Registrant on August 2, 2021) 10.25# Form of Restricted Stock Unit Agreement under the 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q filed by the Registrant on August 2, 2021) 10.26# Form of Inducement Nonstatutory Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q filed by the Registrant on August 2, 2021) 10.27# Form of Inducement Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q filed by the Registrant on August 2, 2021) 10.28† Asset Purchase Agreement by and between Secura Bio, Inc. and Verastem, Inc. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by the Registrant on November 9, 2020) 10.29 Exchange Agreement by and between Verastem, Inc. and Highbridge Tactical Credit Master Fund, L.P., dated November 6, 2020 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Registrant on November 9, 2020) 10.30 Loan and Security Agreement, dated as of March 25, 2022, among Verastem, Inc., as borrower, Oxford Finance LLC, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed by the Registrant with the Securities and Exchange Commission on March 27, 2022) 10.31 Securities Purchase Agreement, dated January 24, 2023, by and among Verastem, Inc. and each purchaser party thereto (incorporated by reference to Exhibit 10.1 to the form 8-K filed by the Registrant with the Securities and Exchange Commission on January 25, 2023) 10.32# Employment Agreement, dated October 24, 2023 by and between Verastem, Inc. and Daniel Calkins (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on October 27, 2023). 10.33 First Amendment to Loan and Security Agreement, dated as of January 4, 2024, among Verastem, Inc., as borrower, Oxford Finance LLC, as collateral agent and a lender, and the other lenders party thereto. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Registrant with the Securities and Exchange Commission on January 8, 2024) 10.34# Amended and Restated 2018 Employee Stock Purchase Plan. (incorporated by reference to Exhibit 10.1 to Form 10-Q by the Registrant with the Securities and Exchange Commission on August 8, 2023) 96 Table of Contents 10.35# Amended and Restated 2012 Incentive Plan. (incorporated by reference to Exhibit 10.2 to Form 10-Q by the Registrant with the Securities and Exchange Commission on August 8, 2023) 10.36# Amended and Restated 2021 Equity Incentive Plan. (incorporated by reference to Exhibit 10.3 to Form 10-Q by the Registrant with the Securities and Exchange Commission on August 8, 2023) 10.37 Exchange Agreement, dated November 4, 2022, by and among Verastem, Inc. and Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS LP and MSI BVF SPV, LLC (incorporated by reference to Exhibit 10.1 to for the form 8-K filed by the Registrant with the Securities and Exchange Commission on November 7, 2022) 21.1* Subsidiaries of the Registrant 23.1* Consent of Ernst & Young LLP 31.1* Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) 31.2* Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) 32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97.1* Policy for Recoupment of Incentive Compensation 99.1* Press Release issued by Verastem, Inc. on March 14, 2024 (furnished herewith). 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Filed herewith. † Certain confidential information contained in this exhibit has been omitted because it (i) is not material and (ii) would be competitively harmful if publicly disclosed. Confidential materials omitted will be filed separately with the SEC upon request. # Management contract or compensatory plan, contract or agreement. 97 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of March 2024. VERASTEM, INC. By: /s/ DANIEL W. PATERSON Daniel W. Paterson President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date /s/ DANIEL W. PATERSON Daniel W. Paterson /s/ DANIEL CALKINS Daniel Calkins /s/ PAUL BUNN, M.D. Paul Bunn, M.D. /s/ ROBERT GAGNON Robert Gagnon /s/ ANIL KAPUR Anil Kapur /s/ MICHAEL KAUFFMAN, M.D.,PH.D. Michael Kauffman, M.D., PH.D. /s/ JOHN JOHNSON John Johnson /s/ MICHELLE ROBERTSON Michelle Robertson /s/ ERIC ROWINSKY, M.D. Eric Rowinsky, M.D. /s/ BRIAN STUGLIK Brian Stuglik /s/ KARIN TOLLEFSON Karin Tollefson President, Chief Executive Officer and Director (Principal Executive Officer) March 14, 2024 Chief Financial Officer (Principal Financial and Accounting officer) Director Director Director Director Director Director Director Director Director 98 March 14, 2024 March 14, 2024 March 14, 2024 March 14, 2024 March 14, 2024 March 14, 2024 March 14, 2024 March 14, 2024 March 14, 2024 March 14, 2024 Table of Contents Verastem, Inc. CONSOLIDATED FINANCIAL STATEMENTS CONTENTS Report of Independent Registered Public Accounting Firm Consolidated Financial Statements Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements F-1 F-2 F-4 F-5 F-6 F-7 F-8 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Verastem, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Verastem, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. The Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accrued and Prepaid Clinical Trial Expense Description of the Matter As summarized in Note 4 to the consolidated financial statements, the Company’s accrued clinical expenses were $6.5 million at December 31, 2023, which included the estimated F-2 Table of Contents How We Addressed the Matter in Our Audit obligation for clinical trial expenses incurred as of December 31, 2023 but not paid as of that date. In addition, the Company’s total prepaid expenses and other current assets were $6.5 million, which included amounts that were paid in advance of services incurred pursuant to clinical trials. As discussed in Note 2 to the consolidated financial statements, the Company records clinical trial expenses as incurred. The Company’s determination of costs incurred for certain development activities, such as clinical trial expenses, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, and information provided to the Company by its vendor on their actual costs incurred or level of effort expended. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as prepaid expenses and other current assets or accrued expenses. Auditing the Company’s accrued and prepaid clinical trial expenses was especially challenging due to the volume of information received from vendors that perform services on the Company’s behalf. While the Company’s estimates of accrued and prepaid clinical trial expenses are primarily based on information received from its vendors for each study, the Company is required to make an estimate for additional costs incurred. Additionally, due to the long duration of clinical trials and the timing of vendor invoices, the actual amounts incurred are not typically known at the time the financial statements are issued. To evaluate the accrued and prepaid clinical trial expenses, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the estimates and evaluating the significant assumptions used by management to estimate the recorded accruals and prepayments. We obtained third party confirmation from the Company’s primary contract research organization to validate the underlying data used in management’s estimate. We corroborated the progress of research and development activities associated with clinical trials through discussion with the Company’s research and development personnel that oversee the clinical activities. In addition, we performed analytics over fluctuations in accruals and prepaids by vendor throughout the period subject to audit and compared subsequent invoices received from third parties to amounts accrued. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2011. Boston, Massachusetts March 14, 2024 F-3 Table of Contents Verastem, Inc. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) Assets Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Prepaid expenses and other current assets Total current assets Property and equipment, net Right-of-use asset, net Restricted cash Other assets Total assets Liabilities, convertible preferred stock and stockholders’ equity Current liabilities: Accounts payable Accrued expenses Deferred liabilities Lease liability, short-term Convertible senior notes Total current liabilities Non-current liabilities: Long-term debt Lease liability, long-term Preferred stock tranche liability Total liabilities Convertible preferred stock: Series B Convertible Preferred Stock, $0.0001 par value; 2,144 and 0 shares designated at December 31, 2023 and December 31, 2022, respectively; 1,200 and 0 shares issued and outstanding at December 31, 2023 and 2022, respectively Stockholders’ equity: Preferred Stock, $0.0001 par value; 5,000 shares authorized: Series A Convertible Preferred Stock, $0.0001 par value; 1,000 shares designated, 1,000 shares issued and outstanding at December 31, 2023 and December 31, 2022 Common stock, $0.0001 par value; 300,000 shares authorized, 25,281 and 16,712 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively Additional paid-in capital Accumulated other comprehensive income Accumulated deficit Total stockholders’ equity Total liabilities, convertible preferred stock and stockholders’ equity See accompanying notes to the consolidated financial statements. F-4 December 31, 2023 2022 $ $ $ $ 77,909 59,220 — 6,553 143,682 37 1,171 241 4,587 149,718 7,184 17,928 327 941 — 26,380 40,086 530 4,189 71,185 21,159 — 3 882,248 13 (824,890) 57,374 149,718 $ $ $ $ 74,933 12,961 31 4,945 92,870 92 1,789 241 58 95,050 4,901 14,983 710 794 275 21,663 24,526 1,470 — 47,659 — — 2 784,912 — (737,523) 47,391 95,050 Table of Contents Verastem, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share amounts) Revenue: Sale of COPIKTRA license and related assets Transition services revenue Total revenue Operating expenses: Research and development Selling, general and administrative Total operating expenses Loss from operations Other income (expense) Interest income Interest expense Change in fair value of preferred stock tranche liability Net loss Net loss per share—basic and diluted Weighted average common shares outstanding used in computing net loss per share—basic and diluted Net loss Unrealized gain (loss) on available-for-sale securities Comprehensive loss Year Ended December 31, 2022 2021 2023 $ — $ — — $ 2,596 — 2,596 1,447 606 2,053 61,356 30,728 92,084 (92,084) (109) 6,214 (4,139) 2,751 (87,367) (3.96) 50,558 24,975 75,533 (72,937) 47 1,215 (2,137) — (73,812) (4.57) 39,347 24,115 63,462 (61,409) — 181 (9,972) — (71,200) (4.90) 22,054 16,138 14,535 $ (87,367) $ 13 $ (87,354) $ (73,812) $ (71,200) (19) (73,846) $ (71,219) (34) See accompanying notes to the consolidated financial statements. F-5 Table of Contents Verastem, Inc. CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (in thousands, except share data) Series B Convertible Preferred Stock Series A Convertible Preferred Stock Shares Amount Shares Amount Accumulated other Additional comprehensive paid-in Amount capital (loss) income Accumulated deficit Common stock Shares — 14,205,004 $ — — — 1 $ 707,731 $ — Balance at December 31, 2020 Net loss Unrealized loss on available-for-sale marketable securities Conversion of Notes into common stock Issuance of common stock under Employee Stock Purchase Plan Issuance of common stock resulting from vesting of restricted stock units Issuance of common stock resulting from exercise of stock options Issuance of common stock resulting from at-the-market transactions, net Stock-based compensation expense Balance at December 31, 2021 Net loss Unrealized loss on available-for-sale marketable securities Issuance of Series A Convertible Preferred Stock in exchange for common stock Issuance of common stock under Employee Stock Purchase Plan Issuance of common stock resulting from vesting of restricted stock units Issuance of common stock resulting from exercise of stock options Issuance of common stock resulting from at-the-market transactions, net Stock-based compensation expense Balance at December 31, 2022 Net loss Unrealized gain on available-for-sale marketable securities Issuance of Series B Convertible Preferred Stock, net of issuance costs of $1,901 and preferred stock tranche liability of $6,940 Issuance of common stock, and pre- funded warrants, net of issuance cost of $6,351 Issuance of common stock under Employee Stock Purchase Plan Issuance of common stock resulting from vesting of restricted stock units Stock-based compensation expense — $ — — — — — — — — — $ — — — — — — — — — $ — — — — — — — — — — — — — — — — — — — — — — — 1,200,000 21,159 — — — — — — — — Balance at December 31, 2023 1,200,000 $ 21,159 $ $ $ — — — — — — — — — — — — 1,000,000 — — — — — 1,000,000 — — — — — Total stockholders' equity 53 $ — (592,511) $ (71,200) 115,274 (71,200) (19) — — — — — — — — — (19) 28,000 182 (90) 905 — — 34 $ — — — (663,711) $ (73,812) 6,796 7,711 87,559 (73,812) (34) — (34) — — — — — — (737,523) $ (87,367) — — — 164 — 118 27,349 6,047 47,391 (87,367) 13 — — 91,420 — — — — — — — $ — 13 — — — — — — 13 $ — — (824,890) $ 57 — 5,860 57,374 — — — — — — 717,949 9,172 215,409 49,087 244,209 — — — — 15,440,830 $ — — — — — — — — — (833,333) 10,194 121,441 8,181 1,964,448 — — — — 16,711,761 $ — — — — — — — — 8,489,409 14,270 — 1 — — — — — — 27,999 182 (90) 905 6,796 7,711 2 $ 751,234 $ — — — 164 — 118 27,349 6,047 — — — — — — — 2 $ 784,912 $ — — — 1 — — — — — 91,419 57 — 5,860 3 $ 882,248 $ — — 1,000,000 $ 65,710 — — — 25,281,150 $ See accompanying notes to the consolidated financial statements. F-6 Table of Contents Verastem, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Operating activities Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation Amortization of right-of-use asset and lease liability Stock-based compensation expense Amortization of deferred financing costs, debt discounts and premiums and discounts on available-for-sale marketable securities Change in fair value of preferred stock tranche liability Changes in operating assets and liabilities: Accounts receivable, net Prepaid expenses, other current assets and other assets Accounts payable Accrued expenses and other liabilities Deferred liabilities Net cash used in operating activities Investing activities Purchases of property and equipment Purchases of investments Maturities of investments Net cash provided by (used in) investing activities Financing activities Proceeds from issuance of Series B Convertible Preferred Stock, net Proceeds from long-term debt, net Repayment of 2018 Notes Proceeds from insurance premium financing Payments on insurance premium financing Proceeds from the exercise of stock options and employee stock purchase program Settlement of restricted stock for tax withholdings Proceeds from the issuance of common stock and pre-funded warrants, net Net cash provided by financing activities Increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at beginning of period Cash, cash equivalents and restricted cash at end of period Supplemental disclosure Cash paid for interest Supplemental disclosure of non-cash investing and financing activities Issuance of preferred stock tranche liability Conversion of 2020 Notes into common stock Purchases of property and equipment included in accounts payable and accrued expenses Year Ended December 31, 2022 2021 2023 $ (87,367) $ (73,812) $ (71,200) 118 (154) 6,047 228 — 485 744 2,599 (638) 710 (63,673) — (17,815) 84,000 66,185 — 24,148 — — — 282 — 27,354 51,784 54,296 21,493 75,789 1,536 $ $ 206 (134) 7,711 9,331 — (277) (1,558) 623 1,796 — (53,502) (196) (86,442) 86,725 87 — — — — — 1,087 (925) 6,723 6,885 (46,530) 68,023 21,493 1,007 $ $ 62 (175) 5,860 (1,132) (2,751) 31 (5,826) 2,283 2,938 (383) (86,460) — (96,447) 52,000 (44,447) 28,099 14,918 (300) 1,430 (1,430) 57 — 91,420 134,194 3,287 75,789 $ 79,076 3,361 $ $ $ $ 6,940 $ — $ $ 7 — $ — $ — $ — 28,000 — See accompanying notes to the consolidated financial statements. F-7 Table of Contents 1. Nature of business Verastem, Inc. (the “Company”) is a late-stage development biopharmaceutical company, with an ongoing registration directed trial, committed to advancing new medicines for patients battling cancer. The Company’s pipeline is focused on novel anticancer agents that inhibit critical signaling pathways in cancer that promote cancer cell survival and tumor growth, particularly RAF/MEK inhibition and FAK inhibition. The Company’s most advanced product candidates, avutometinib and defactinib, are being investigated in both preclinical and clinical studies for the treatment of various solid tumors, including, but not limited to low-grade serous ovarian cancer (“LGSOC”), non-small cell lung cancer (“NSCLC”), pancreatic cancer, colorectal cancer (“CRC”), and melanoma. The Company believes that avutometinib may be beneficial as a therapeutic as a single agent or when used together in combination with defactinib, other agents, other pathway inhibitors or other current and emerging standard of care treatments in cancers that do not adequately respond to currently available therapies. On September 24, 2018, the Company’s first commercial product, COPIKTRA® (duvelisib), was approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of adult patients with certain hematologic cancers including relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma after at least two prior therapies and relapsed or refractory follicular lymphoma after at least two prior systemic therapies. On August 10, 2020, the Company and Secura Bio, Inc. (“Secura”) entered into an asset purchase agreement (“Secura APA”). Pursuant to the Secura APA, the Company sold to Secura its exclusive worldwide license, including certain related assets for the research, development, commercialization, and manufacture in oncology indications of products containing COPIKTRA (duvelisib). The transaction closed on September 30, 2020. Refer to Note 13. License, collaboration and commercial agreements for a detailed discussion of the Secura APA. The consolidated financial statements include the accounts of Verastem Securities Company and Verastem Europe GmbH, wholly-owned subsidiaries of the Company. All financial information presented has been consolidated and includes the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company is subject to the risks associated with other life science companies, including, but not limited to, possible failure of preclinical testing or clinical trials, competitors developing new technological innovations, inability to obtain marketing approval of the Company’s product candidates, avutometinib and defactinib, market acceptance and commercial success of the Company’s product candidates, avutometinib and defactinib, following receipt of regulatory approval, and, protection of proprietary technology and the continued ability to obtain adequate financing to fund the Company’s future operations. If the Company does not obtain marketing approval and successfully commercialize its product candidates, avutometinib and defactinib, following regulatory approval, it will be unable to generate product revenue or achieve profitability and may need to raise additional capital. As of December 31, 2023, the Company had cash, cash equivalents, and investments of $137.1 million. In accordance with applicable accounting standards, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within 12 months after the date of the issuance of these consolidated financial statements. The Company anticipates operating losses may continue for the foreseeable future since the Company does not yet have regulatory approval to sell any of its product candidates, and the Company continues to incur operating costs to execute its strategic plan, including costs related to research and development of its product candidates and commercial readiness activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for 12 months after the date the consolidated financial statements are issued. The Company expects to finance its operations with its existing cash, cash equivalents and investments, through potential future milestones and royalties received pursuant to the Secura APA, through the loan and security agreement with Oxford Finance LLC (“Oxford”), or through other strategic financing opportunities that could include, but are not limited to collaboration agreements, future offerings of its equity, or the incurrence of debt. However, given the risk associated with these potential strategic or financing opportunities, they are not deemed probable for purposes of the going concern assessment. If the Company fails to obtain additional future capital, it may be unable to complete its planned preclinical studies and clinical trials and obtain approval of certain F-8 Table of Contents investigational product candidates from the FDA or foreign regulatory authorities. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern. Reverse Stock Split On May 30, 2023, the Company filed a Certificate of Amendment to the Company’s Restated Certificate of Incorporation, as amended to date, with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s issued and outstanding common stock, par value $0.0001 at a ratio of 1-for-12 (the “Reverse Stock Split”), as authorized at the Company’s 2023 annual meeting of stockholders held on May 15, 2023. The Company effected the Reverse Stock Split on May 31, 2023. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise were entitled to a fractional share of common stock were entitled to receive a price equal to the closing price of the common stock on the Nasdaq Capital Market on the date immediately preceding the Reverse Stock Split, as adjusted by the ratio of one share of common stock for every 12 shares of common stock, multiplied by the applicable fraction of a share. The number of shares of common stock that the Company is authorized to issue remains at 300,000,000 shares and the par value of its common stock remains unchanged at $0.0001 per share. The Company has retroactively restated the share and per share amounts in the consolidated financial statements as of December 31, 2022 and the 12 months ended December 31, 2023, 2022 and 2021, to give retroactive effect to the Reverse Stock Split. Proportionate adjustments were made to the per share exercise price and number of shares of common stock issuable under all outstanding stock options, convertible notes and preferred stock. In addition, proportionate adjustments have been made to the number of shares of common stock issuable upon vesting of the restricted stock units and the number of shares of common stock reserved for the Company’s equity incentive compensation plans. The consolidated statements of convertible preferred stock and stockholders’ equity and balance sheets reflect the impact of the Reverse Stock Split by reclassifying from “common stock” to “additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the Reverse Stock Split. 2. Significant accounting policies Basis of presentation The accompanying financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) under the assumption that the Company will continue as a going concern for the next 12 months. Accordingly, they do not include any adjustments that might result from the uncertainty related to the Company’s ability to continue as a going concern. Use of estimates The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including but not limited to estimates related to revenue recognition, accrued and prepaid clinical trial expense and other general accruals, stock-based compensation expense and its preferred stock tranche liability. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable. Actual results could differ from such estimates. Segment and geographic information Operating segments are defined as components of an enterprise about which separate discrete information is available and regularly reviewed by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment, which is the business of developing and commercializing drugs for the treatment of cancer. All material long-lived assets of the Company reside in the United States. F-9 Table of Contents Proceeds from grants In May 2022 the Company was awarded the “Therapeutic Accelerator Award” grant from Pancreatic Cancer Network (“PanCAN”) for up to $3.8 million (the “PanCAN Grant”). In August 2022, PanCAN agreed to provide the Company with an additional $0.5 million for the collection and analysis of patient samples. The grant is supporting a Phase 1b/2 clinical trial of GEMZAR (gemcitabine) and ABRAXANE (Nab-paclitaxel) in combination with avutometinib and defactinib entitled RAMP 205. The RAMP 205 study is evaluating whether combining avutometinib (to target mutant KRAS which is found in more than 90% of pancreatic adenocarcinomas) and defactinib (to reduce stromal density and adaptive resistance to avutometinib) to the standard GEMZAR/ABRAXANE regimen improves outcomes for patients with such pancreatic cancers. Through December 31, 2023, the Company has received $2.7 million of cash proceeds which was initially recorded as deferred liabilities on the balance sheet. The Company recognizes grants as contra research and development expense in the consolidated statement of operations and comprehensive loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. The Company recorded $2.0 million and $0.3 million of the proceeds as a reduction of research and development expense during the years ended December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023 and December 31, 2022, the Company recorded $0.3 million and $0.7 million, respectively, as deferred liabilities in the consolidated balance sheet related to the PanCAN Grant. Cash, cash equivalents and restricted cash The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist of a U.S. Government money market funds and corporate bonds and commercial paper of publicly traded companies. Cash equivalents are reported at fair value. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands): Cash and cash equivalents Restricted cash Total cash, cash equivalents and restricted cash $ December 31, 2023 77,909 1,167 79,076 $ $ December 31, 2022 74,933 856 75,789 $ Amounts included in restricted cash as of December 31, 2023 and December 31, 2022 represent (i) cash received pursuant to the PanCAN Grant restricted for future expenditures for specific research and development activities in the amounts of $0.9 million and $0.6 million, respectively, and (ii) cash held to collateralize outstanding letters of credit provided as a security deposit for the Company’s office space located in Needham, Massachusetts in the amount of $0.2 million. Cash held pursuant to the PanCAN Grant is included in prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2023, and December 31, 2022. The letters of credit are included in non- current restricted cash on the consolidated balance sheets as of December 31, 2023 and December 31, 2022. F-10 Table of Contents Fair value of financial instruments The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs: Level 1 inputs Level 2 inputs Level 3 inputs Quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Items Measured at Fair Value on a Recurring Basis The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis (in thousands) Description Financial assets Cash equivalents Short-term investments Total financial assets Preferred stock tranche liability Description Financial assets Cash equivalents Short-term investments Total financial assets Total 46,093 59,220 105,313 4,189 Total 73,613 12,961 86,574 $ $ $ $ $ $ $ $ $ $ December 31, 2023 Level 1 Level 2 Level 3 46,093 5,992 52,085 $ — $ $ — $ 53,228 53,228 $ — $ — — — 4,189 December 31, 2022 Level 1 Level 2 Level 3 72,617 — 72,617 $ $ 996 12,961 13,957 $ $ — — — The investments and cash equivalents have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing its validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of December 31, 2023 and 2022. A preferred stock tranche liability was recorded as a result of the entry into the Series B Convertible Preferred Stock Securities Purchase Agreement (defined herein) (see Note 7. Capital Stock). The fair value measurement of the preferred stock tranche liability is classified as Level 3 under the fair value hierarchy. The fair value of the preferred stock tranche liability was determined using a Monte-Carlo simulation. The inputs to the Monte-Carlo include the risk-free rate, stock price volatility, expected dividends and remaining term. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement. F-11 Table of Contents Below are the inputs used to value the preferred stock tranche liability at December 31, 2023 and January 24, 2023: Risk-free interest rate Volatility Dividend yield Remaining term (years) December 31, 2023 January 24, 2023 5.13-5.52 % 75 % — 0.6 4.41-4.84 % 90 % — 1.5 The following table represents a rollforward for the year ended December 31, 2023 of the preferred stock right liability recorded in connection with the entry into the Series B Convertible Preferred Stock Securities Purchase Agreement (in thousands): January 1, 2023 Fair value recognized upon entering into Securities Purchase Agreement Fair value adjustment December 31, 2023 Fair Value of Financial Instruments $ $ — 6,940 (2,751) 4,189 The fair value of the Company’s 2018 issued 5.00% Convertible Senior Notes due 2048 (the “2018 Notes”) was approximately $0.3 million as of December 31, 2022, which equals the carrying value of the 2018 Notes as of December 31, 2022. During the year ended December 31, 2023, the Company repaid the 2018 Notes and no 2018 Notes remain outstanding. See Note 9. Convertible Senior Notes for additional discussion on the 2018 Notes. The fair value of the 2018 Notes is influenced by the Company’s stock price, stock price volatility, and current market yields and was determined using Level 3 inputs. The fair value of the Company’s long-term debt is determined using a discounted cash flow analysis with current applicable rates for similar instruments as of the consolidated balance sheet date. The carrying value of the Company’s long-term debt as of December 31, 2023 and December 31, 2022, was approximately $40.1 million and $24.5 million, respectively. The Company estimates that the fair value of its long-term debt as of December 31, 2023 and December 31, 2022, was approximately $39.6 million and $24.9 million, respectively. The fair value of the Company’s long-term debt was determined using Level 3 inputs. Investments Investments and cash equivalents consist of investments in a U.S. Government money market funds, overnight repurchase agreements collateralized by government agency securities or U.S. Treasury securities, corporate bonds and commercial paper of publicly traded companies that are classified as available-for-sale pursuant to ASC Topic 320, Investments—Debt and Equity Securities. The Company classifies investments available to fund current operations as current assets on its consolidated balance sheets. Debt securities are carried at fair value with unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity, until such gains and losses are realized. The fair value of these securities is based on quoted prices for identical or similar assets. The Company reviews investments for impairment whenever the fair value of a investment is less than the amortized cost and evidence indicates that a investment’s carrying amount is not recoverable. Unrealized losses are evaluated for impairment under ASC 326, Financial Instruments - Credit Losses (“ASC 326”), to determine if the impairment is credit-related or noncredit-related. Credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings, and noncredit-related impairment is recognized in other comprehensive income (loss). Evidence considered in this assessment includes reasons for the impairment, compliance with our investment policy, the severity of the impairment, collectability of the security, and any adverse conditions specifically related to the security, an industry, or geographic area. Realized gains and losses are F-12 Table of Contents determined using the specific identification method and are included in interest income in the consolidated statements of operations and comprehensive loss. There were no realized gains or losses on investments for the years ended December 31, 2023, 2022 or 2021. Accrued interest receivable is excluded from the amortized cost and estimated fair value of the Company’s investments. Accrued interest receivable of $0.1 million is presented within prepaid expenses and other current assets on the consolidated balance sheets as of December 31, 2023 and December 31, 2022. There were two debt securities in an unrealized loss position at each of December 31, 2023, and December 31, 2022. None of these investments had been in an unrealized loss position for more than 12 months as of December 31, 2023 and December 31, 2022. The Company considered the decline in the market value for these securities to be primarily attributable to current economic conditions and not credit related. At both December 31, 2023 and December 31, 2022, the Company had the intent and ability to hold such securities until recovery. As a result, the Company did not record any charges for credit-related impairments for its investments as of December 31, 2023 and December 31, 2022. The following is a summary of available-for-sale securities with unrealized losses for less than 12 months as of December 31, 2023 and 2022 (in thousands): December 31, 2023 Fair Value Losses Unrealized December 31, 2022 Fair Value Losses Unrealized Corporate bonds, agency bonds and commercial paper (due within 1 year) Total available-for-sale securities in an unrealized loss position $ $ 8,896 8,896 $ $ (1) (1) $ $ 5,964 5,964 $ $ (2) (2) Cash, cash equivalents, restricted cash and investments consist of the following (in thousands): Cash, cash equivalents & restricted cash: Cash and money market accounts Total cash, cash equivalents & restricted cash: Investments: Corporate bonds, agency bonds and commercial paper (due within 1 year) Total investments Total cash, cash equivalents, restricted cash and investments December 31, 2023 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value $ $ 79,076 79,076 59,208 59,208 $ $ 138,284 $ $ $ $ — $ — $ — $ — $ 79,076 79,076 13 13 13 $ $ (1) (1) (1) 59,220 59,220 $ $ 138,296 December 31, 2022 Gross Gross Amortized Unrealized Unrealized Cost Losses Gains Fair Value Cash, cash equivalents & restricted cash: Cash and money market accounts Corporate bonds, agency bonds and commercial paper (due within 90 days) Total cash, cash equivalents & restricted cash: Investments: Corporate bonds, agency bonds and commercial paper (due within 1 year) Total investments Total cash, cash equivalents, restricted cash and investments $ 74,794 995 75,789 12,961 12,961 88,750 $ $ $ $ $ $ $ $ $ — $ — $ 74,794 — $ — $ 995 — — $ 75,789 2 2 2 $ $ $ (2) (2) (2) $ 12,961 $ 12,961 $ 88,750 F-13 Table of Contents Concentrations of credit risk and off-balance sheet risk Cash and cash equivalents, investments, and trade accounts receivable are financial instruments that potentially subject the Company to concentrations of credit risk. The Company mitigates this risk by maintaining its cash and cash equivalents and investments with high quality, accredited financial institutions. The management of the Company’s investments is not discretionary on the part of these financial institutions. As of December 31, 2023, the Company’s cash, cash equivalents and investments were deposited at four financial institutions and it has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. There was no accounts receivable balance as of December 31, 2023. As of December 31, 2022, there was one customer, Secura, that made up more than 60% of the Company’s trade accounts receivable balance. The Company assesses the creditworthiness of all its customers and sets and reassesses customer credit limits to ensure collectability of any trade accounts receivable balances are assured. For the year ended December 31, 2023, the Company did not record any revenue. For the year ended December 31, 2022 one customer, Secura, individually accounted for all of the Company’s total revenue. Refer to Note 13. License, collaboration, and commercial agreements for a detailed discussion of the Secura APA. Property and equipment Property and equipment consist of laboratory equipment, office furniture, computer equipment and leasehold improvements. Expenditures for repairs and maintenance are recorded to expense as incurred, whereas major betterments are capitalized as additions to property and equipment. Depreciation and amortization are calculated using the straight-line method over the following estimated useful lives of the assets: Laboratory equipment Furniture Computer equipment Leasehold improvements 5 years 5 years 3 years Lesser of useful life or life of lease Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized. The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying value of assets may not be recoverable. Recoverability is measured by comparison of the asset’s book value to future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash flows arising from the assets. No impairment losses have been recorded through December 31, 2023. Research and development costs The Company expenses research and development costs to operations as incurred. Research and development expenses consist of: ● employee-related expenses, including salaries, benefits, travel and stock-based compensation expense; ● external research and development expenses incurred under arrangements with third parties, such as clinical research organizations (“CROs”), clinical trial sites, manufacturing organizations and consultants, including the scientific advisory board; ● license fees; ● facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, and laboratory supplies; and F-14 Table of Contents Costs for certain development activities, such as clinical trial expenses, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, and information provided to the Company by its vendor on their actual costs incurred or level of effort expended. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as prepaid expenses and other current assets or accrued expenses. Stock-based compensation For service-based equity awards, the Company recognizes stock-based compensation expense for stock options, and restricted stock units (“RSUs”) issued to employees, directors, and consultants based on the grant date fair value of the awards on a straight-line basis over the requisite service period, which typically is the vest period. The Company recognized stock-based compensation for shares issued to employees under the Company’s employee stock purchase plan (“ESPP”) plan. The Company has granted performance-based RSUs and stock options with terms that allow the recipients to vest in a specific number of shares based upon the achievement of performance-based milestones as specified in the grants. Stock-based compensation expense associated with these performance-based RSUs and stock options is recognized if the performance condition is considered probable of achievement using the Company’s best estimates of the time to vesting for the achievement of the performance-based milestones. Awards subject to performance-based vesting requirements are expensed utilizing an accelerated attribution model if achievement of the performance criteria is determined to be probable. The grant date fair value of stock options is estimated using the Black-Scholes option pricing model that takes into account the fair value of its common stock, the exercise price, the expected life of the option, the expected volatility of its common stock, expected dividends on its common stock, and the risk-free interest rate over the expected life of the option. The Company applies the simplified method described in the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) Topic 14.D.2 to calculate the expected term as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for options granted to employees. The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its population. The Company has not paid and do not anticipate paying cash dividends on the Company’s shares of common stock; therefore, the expected dividend yield is assumed to be zero. The computation of expected volatility is based on the historical volatility of the Company’s common stock. The risk- free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company accounts for forfeitures as they occur. The Company issues shares under the Company’s ESPP to employees. Stock-based compensation expense for discounted purchases under the ESPP is measured using the Black-Scholes model to compute the fair value of the lookback provision plus the purchase discount and is recognized as compensation expense over the offering period. Leases Leases are accounted for in accordance with ASC Topic 842, Leases (“ASC 842”). This standard requires lessees to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term for both finance and operating leases. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances within the arrangement. A lease is identified where an arrangement conveys the right to control the use of identified property, plant, and equipment for a period of time in exchange for consideration. Leases which are identified within the scope of ASC 842 and which have a term greater than one year are recognized on the Company’s consolidated balance sheets as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize leases with terms of one year or less on its consolidated balance sheets. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain F-15 Table of Contents adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates to calculate the present value of lease payments. Incremental borrowing rates are the rates the Company incurs to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In accordance with ASC 842, components of a lease are split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non- components (e.g., property taxes, insurance, etc.). The fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, certain practical expedients are available. Entities may elect the practical expedient to not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company has elected to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the contract consideration to the lease component only. The lease component results in an operating right-of-use asset being recorded on the consolidated balance sheets and amortized on a straight-line basis as lease expense. Revenue recognition The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services in accordance with ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”). To determine revenue recognition for contracts with its customers, the Company performs the following five step assessment: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines which goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Sales of intellectual property For sales of license and intellectual property, that include sale-based royalties, including milestone payments based on a level of sales, the Company evaluates whether the royalties and sales-based milestones are considered probable of being achieved and estimates the amount of royalties to include over the contractual term using the expected value method and estimates the sales-based milestones using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated royalty and milestone value is included in the transaction price. Royalties and sales-based milestones for territories for which there is not regulatory approval are not considered probable until such regulatory approval is achieved. The Company evaluates factors such as whether consideration is outside of the Company’s control, timeline for when the uncertainty will be resolved and historical sales of COPIKTRA if applicable. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and amount of royalty revenue to be received and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Collaborative arrangements Collaborative Arrangements: Contracts are considered to be collaborative arrangements when they satisfy the following criteria defined in ASC Topic 808, Collaborative Arrangements: (i) the parties to the contract must actively participate in the joint operating activity and (ii) the joint operating activity must expose the parties to the F-16 Table of Contents possibility of significant risk and rewards, based on whether or not the activity is successful. Payments received from or made to a partner that are the result of a collaborative relationship with a partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction or increase to research and development expense, respectively. Accounts receivable, net Accounts receivable, net consists of amounts due from customers, net of applicable revenue reserves. Accounts receivable have standard payments that generally require payment within 30 to 90 days. The Company analyzes accounts that are past due for collectability and provides an allowance for receivables when collection becomes doubtful. Income taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Tax benefits are recognized when it is more likely than not that a tax position will be sustained during an audit. Deferred tax assets are reduced by a valuation allowance if current evidence indicates that it is considered more likely than not that these benefits will not be realized. The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not that it will be sustained based solely on its technical merits as of the reporting date and only in an amount more likely than not that it will be sustained upon review by the tax authorities. The Company evaluates uncertain tax positions on a quarterly basis and adjust the liability for changes in facts and circumstances, such as new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, significant amendment to an existing tax law, or resolution of an examination. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the income tax provision in the period in which such determination is made. The resolution of its uncertain income tax positions is dependent on uncontrollable factors such as law changes, new case law, and the willingness of the income tax authorities to settle, including the timing thereof and other factors. Although the Company does not anticipate significant changes to its uncertain income tax positions in the next 12 months, items outside of its control could cause its uncertain income tax positions to change in the future, which would be recorded in its statements of operations. Interest and/or penalties related to income tax matters are recognized as a component of income tax expense. Net operating loss (“NOL”) and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company experienced a greater than 50% change in ownership as defined under Section 382 and 383 of the Internal Revenue Code as well as similar state provisions during the year ended December 31, 2020. For more details please refer to Note 11. Income Taxes. F-17 Table of Contents Net loss per share Basic net loss per common share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Weighted-average number of common shares outstanding includes the weighted average effect of the pre-funded warrants issued in June 2023, as the exercise of which requires little or no consideration for the delivery of shares of common stock. Diluted net loss per common share is calculated by increasing the denominator by the weighted-average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options, restricted stock units, and ESPP (using the “treasury stock” method), the Notes (defined herein), Series A Convertible Preferred Stock, and Series B Convertible Preferred Stock (using the “if-converted” method), unless their effect on net loss per share is antidilutive. Under the “if- converted” method, convertible instruments that are-in-the-money, are assumed to have been converted as of the beginning of the period or when issued, if later. Additionally, the effects of any interest expense and changes in fair value of any bifurcated derivatives shall be added back to the numerator of the diluted net loss per share calculation. Refer to Note 10. Net Loss per share for further details related to the calculation of net loss per share. F-18 Table of Contents Recently Adopted Accounting Standards Updates In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Effective January 1, 2023, the Company adopted the provisions of ASU 2016-13. The adoption did not have a material impact on the Company's consolidated financial statements or related financial statement disclosures. In August 2020, the FASB issued No. ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) (“ASU 2020-06”). ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. The ASU also simplifies the diluted earnings per share calculation in certain areas. The Company elected to adopt this standard on January 1, 2023 under the modified retrospective transition method. The adoption did not have a material impact on the Company's consolidated financial statements or related financial statement disclosures. In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”). ASU 2022-04 requires the buyer in a supplier finance program to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. This guidance is effective for fiscal years beginning after December 15, 2022. We adopted this guidance as of January 1, 2023, on a prospective basis. The adoption of the standard only resulted in new disclosures and did not affect the Company’s recognition, measurement, or financial statement presentation of supplier finance program obligations on the consolidated financial statements. For additional information on the new disclosures, see Note 14. Notes Payable. Recently issued accounting standards updates In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and by extending the disclosure requirements to entities with a single reportable segment. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is to be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance in ASU 2023-09 improves the transparency of income tax disclosures by greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for public companies for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2023-09 may have on its consolidated financial statements. Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or have a material effect on the consolidated financial statements upon future adoption. F-19 Table of Contents 3. Property and equipment, net Property and equipment and related accumulated depreciation are as follows (in thousands): Leasehold improvements Furniture and fixtures Computer equipment Assets not yet placed in service Less: accumulated depreciation Total property and equipment, net December 31, December 31, 2023 2022 $ $ 146 811 665 7 1,629 (1,592) 37 $ $ 146 811 665 — 1,622 (1,530) 92 The Company recorded approximately $0.1 million, $0.1 million, and $0.2 million in depreciation expense for the years ended December 31, 2023, 2022, and 2021, respectively. 4. Accrued expenses Accrued expenses consist of the following (in thousands): Accrued clinical trial expenses Accrued contract manufacturing expenses Accrued other research and development expenses Accrued compensation and related benefits Accrued professional fees Accrued consulting fees Accrued interest Accrued commercialization costs Accrued other Total accrued expenses 5. Long-term debt Oxford December 31, 2023 December 31, 2022 $ $ 6,518 2,010 1,043 4,796 637 1,078 316 453 1,077 17,928 $ $ 4,281 3,258 996 3,844 469 902 192 148 893 14,983 On March 25, 2022 (the “Closing Date”), the Company entered into a loan and security agreement (the “Loan Agreement”) with Oxford, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”), pursuant to which the Lenders have agreed to lend the Company up to an aggregate principal amount of $150.0 million in a series of term loans (the “Term Loans”). On January 4, 2024, the Company amended the Loan Agreement to extend the date by which it may draw down the Term C Loan from March 31, 2024 to March 31, 2025. Pursuant to the Loan Agreement, as amended, the Company received an initial Term Loan of $25.0 million on the Closing Date, and drew down the second term loan of $15.0 million (the “Term B Loan”) on March 22, 2023 and may borrow an additional $110.0 million of Term Loans at its option upon the satisfaction of certain conditions as follows: i. $25.0 million (the “Term C Loan”), when the Company has received accelerated or full approval from the FDA of avutometinib for the treatment of LGSOC (the “Term C Milestone”). The Company may F-20 Table of Contents draw the Term C Loan within 60 days after the occurrence the Term C Milestone, but no later than March 31, 2025. $35.0 million (the “Term D Loan”), when the Company has achieved at least $50.0 million in gross product revenue calculated on a trailing six-month basis (the “Term D Milestone”). The Company may draw the Term D Loan within 30 days after the occurrence of the Term D Milestone, but no later than March 31, 2025. $50.0 million (the “Term E Loan”), at the sole discretion of the Lenders. ii. iii. The Term Loans bear interest at a floating rate equal to (a) the greater of (i) the one-month CME Secured Overnight Financing Rate and (ii) 0.13% plus (b) 7.37%, which is subject to an overall floor and cap. Interest is payable monthly in arrears on the first calendar day of each calendar month. As a result of the Term B Loan drawdown, beginning (i) April 1, 2025, or (ii) April 1, 2026, if either (A) avutometinib has received FDA approval for the treatment of LGSOC or (B) COPIKTRA has received FDA approval for the treatment of PTCL, the Company shall repay the Term Loans in consecutive equal monthly payments of principal, together with applicable interest, in arrears. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on March 1, 2027. The Company is required to make a final payment of 5.0% of the original principal amount of the Term Loans that are drawn, payable at maturity or upon any earlier acceleration or prepayment of the Term Loans (the “Final Payment Fee”). The Company may prepay all, but not less than all, of the Term Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount of the applicable Term Loan if prepaid on or before the first anniversary date of the funding date of such Term Loan, (ii) 2.0% of the principal amount of the applicable Term Loan if prepaid after the first anniversary and on or before the second anniversary of the funding date of such Term Loan, and (iii) 1.0% of the principal amount of the applicable Term Loan if prepaid after the second anniversary of the applicable funding date of such Term Loan. All Term Loans are subject to a facility fee of 0.5% of the principal amount. The Loan Agreement contains no financial covenants. The Loan Agreement includes customary events of default, including, among others, payment defaults, breach of representations and warrants, covenant defaults, judgment defaults, insolvency and bankruptcy defaults, and a material adverse change. The occurrence of an event of default could result in the acceleration of the obligations under the Loan Agreement, termination of the Term Loan commitments and the right to foreclose on the collateral securing the obligations. During the existence of an event of default, the Term Loans will accrue interest at a rate per annum equal to 5.0% above the otherwise applicable interest rate. In connection with the Loan Agreement, the Company granted Oxford a security interest in all of the Company’s personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property. The Company assessed all terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the Loan Agreement, including put and call features. The Company determined that all features of the Loan Agreement were clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s assessment through December 31, 2023. The debt issuance costs and the Final Payment Fee have been recorded as a debt discount which are being accreted to interest expense through the maturity date of the Term Loan using the effective interest method. The components of the carrying value of the debt as of December 31, 2023, and 2022 (in thousands): Principal loan balance Final Payment Fee Debt issuance costs, net of accretion Long-term debt, net of discount $ $ December 31, 2023 December 31, 2022 40,000 661 (575) 40,086 $ $ 25,000 225 (699) 24,526 F-21 Table of Contents The following table sets forth total interest expense for the years ended December 31, 2023, 2022, and 2021 (in thousands): 2023 Year ended December 31, 2022 2021 Contractual Interest Amortization of debt discount and issuance costs Amortization of Final Payment Fee Total $ $ 3,472 230 437 4,139 $ $ 1,733 179 225 2,137 $ $ As of December 31, 2023, future principal payments due are as follows (in thousands): 2024 2025 2026 2027 Total principal payments 6. Leases 773 9,199 — 9,972 — 15,000 20,000 5,000 40,000 $ On April 15, 2014, the Company entered into a lease agreement for approximately 15,197 square feet of office and laboratory space in Needham, Massachusetts. The lease term commenced on April 15, 2014 and it was scheduled to expire on September 30, 2019. Effective February 15, 2018, the Company amended its lease agreement to relocate within the facility to another location consisting of 27,810 square feet of office space (the Amended Lease Agreement). The Amended Lease Agreement extends the expiration date of the lease from September 2019 through June 2025. Pursuant to the Amended Lease Agreement, the initial annual base rent amount is approximately $0.7 million, which increases during the lease term to $1.1 million for the last 12-month period. The Company has accounted for its Needham, Massachusetts office space as an operating lease. The Company’s lease contains an option to renew and extend the lease terms and an option to terminate the lease prior to the expiration date. The Company has not included the lease extension or the termination options within the right-of-use asset and lease liability on the consolidated balance sheets as neither option is reasonably certain to be exercised. The Company’s lease includes variable non-lease components (e.g., common area maintenance, maintenance, consumables, etc.) that are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred. The Company does not have any other operating or finance leases. In calculating the present value of future lease payments, the Company has elected to utilize its incremental borrowing rate based on the remaining lease term at the date of adoption of ASC 842. The Company has elected to account for lease components and associated non-lease components as a single lease component and has allocated all of the contract consideration to the lease components only. This will potentially result in the initial and subsequent measurement of the balances of the right-of-use asset and lease liability for leases being greater than if the policy election was not applied. F-22 Table of Contents As of December 31, 2023, a right-of-use asset of $1.2 million and lease liability of $1.5 million are reflected on the consolidated balance sheets. The elements of lease expense were as follows (dollar amounts in thousands): Lease Expense Operating lease expense Total Lease Expense Other Information - Operating Leases Operating cash flows paid for amounts included in measurement of lease liabilities $ $ $ Other Balance Sheet Information - Operating Leases Weighted average remaining lease term (in years) Weighted average discount rate Maturity Analysis 2024 2025 Total Less: Present value discount Lease Liability 7. Capital Stock Year ended December 31, 2023 2022 2021 885 885 $ $ 885 885 $ $ 885 885 1,060 $ 1,039 $ 1,019 December 31, 2023 1.5 14.6% 1,081 546 1,627 (156) 1,471 $ $ Under the amended and restated certificate of incorporation, the Company’s board of directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding. As of December 31, 2023 and 2022, the Company had reserved the following shares of common stock for the issuance of common stock for vested restricted stock units, the exercise of stock options, employee stock purchase plan, 2018 Notes, Series A Convertible Preferred Stock conversions to shares of common stock, the issuance and conversion of Series B Convertible Preferred Stock, and exercise of Pre-Funded Warrants (in thousands): Shares reserved under equity compensation plans Shares reserved for inducement grants Shares reserved for 2018 Notes Shares reserved for ESPP Shares reserved for Series A Convertible Preferred Stock Shares reserved for Series B Convertible Preferred Stock Shares reserved for Pre-Funded Warrants Total shares reserved December 31, 2023 2022 2,845 810 — 75 833 7,570 1,539 13,672 2,895 327 3 89 833 — — 4,147 Each share of common stock is entitled to one vote. The holders of the common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors. F-23 Table of Contents June 2023 Public Offering On June 15, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with RBC Capital Markets, LLC and Cantor Fitzgerald & Co. (“Cantor”), as representatives of several underwriters (the “Underwriters”) to offer 7,181,409 shares of the Company’s common stock, at a price to the public of $9.75 per share, less the underwriting discounts and commissions, and, in lieu of shares of common stock to certain investors, pre-funded warrants to purchase up to an aggregate of 1,538,591 shares of common stock at a price to the public of $9.749 (the “Pre- Funded Warrants”) per Pre-Funded Warrant, which represents the per share public offering price for the shares of common stock less the $0.001 per share exercise price for each such Pre-Funded Warrant (the “June 2023 Offering”). In addition, the Company granted the Underwriters an option to purchase, at the public offering price less any underwriting discounts and commissions, an additional 1,308,000 shares of common stock, exercisable for 30 days from the date of the Underwriting Agreement, which the Underwriters exercised in full on June 16, 2023. The June 2023 Offering closed on June 21, 2023. The Company may not effect the exercise of any Pre-Funded Warrant, and a holder will not be entitled to exercise any portion of any Pre-Funded Warrant if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election upon 61 days’ notice to the Company subject to the terms of such Pre-Funded Warrants, provided that such percentage may in no event exceed 19.99%. Each Pre-Funded Warrant has an exercise price equal to $0.001 per share of common stock. The exercise price and the number of shares of common stock issuable upon exercise of each Pre-Funded Warrant is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common stock as well as upon any distribution of assets, including cash, stock or other property, to the Company’s stockholders. The Pre-Funded Warrants are exercisable as of June 21, 2023, do not expire and are exercisable in cash or by means of a cashless exercise. In addition, upon the consummation of an acquisition (as described in the Pre-Funded Warrant agreements), each Pre-Funded Warrant will automatically be converted into the right of the holder of such Pre-Funded Warrant to receive the kind and amount of securities, cash or other property that such holders would have received had they exercised such Pre-Funded Warrant immediately prior to such acquisition, without regard to any limitations on exercise contained in the Pre-Funded Warrants The Pre-Funded Warrants cannot require cash settlement, are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, and do not embody an obligation for the Company to repurchase its common stock shares and permit the holders to receive a fixed number of shares of common stock upon exercise. Additionally, the Pre-Funded Warrants do not provide any guarantee of value or return. Accordingly, the Pre-Funded Warrants are classified as a component of permanent equity. After deducting for commissions and other offering expenses, the Company received net proceeds of approximately $91.4 million from the sale of 8,489,409 shares of common stock and 1,538,591 Pre-Funded Warrants. Series B Convertible Preferred Stock On January 24, 2023, the Company entered into a Securities Purchase Agreement (the “Series B Convertible Preferred Stock Securities Purchase Agreement”) with certain purchasers pursuant to which the Company agreed to sell and issue to the purchasers in a private placement (the “Private Placement”) up to 2,144,160 shares of its Series B convertible preferred stock, par value $0.0001 per share (the “Series B Convertible Preferred Stock”), in two tranches. On January 24, 2023, the Company filed the Certificate of Designation of the Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (the “Series B Convertible Preferred Stock Certificate of Designation”) setting forth the preferences, rights and limitations of the Series B Convertible Preferred Stock with the Secretary of State of the State of Delaware. The Series B Convertible Preferred Stock Certificate of Designation became effective upon filing. F-24 Table of Contents Each share of the Series B Convertible Preferred Shares is convertible into 3.5305 shares of the Company’s common stock, such conversion rate reflects an adjustment to account for the Reverse Stock Split, at the option of the holders at any time, subject to certain limitations, including that the holder will be prohibited from converting Series B Convertible Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99% (the “Conversion Blocker”) of the total common stock then issued and outstanding immediately following the conversion of such shares of Series B Convertible Preferred Stock. Holders of the Series B Convertible Preferred Stock are permitted to increase the Conversion Blocker to an amount not to exceed 19.99% upon 60 days’ notice. The Company agreed to sell and issue in the first tranche of the Private Placement 1,200,000 shares of Series B Convertible Preferred Stock at a purchase price of $25.00 per share of Series B Convertible Preferred Stock (equivalent to $7.0812 per share of common stock on a post-Reverse Stock Split basis). The first tranche of the Private Placement closed on January 27, 2023. The Company received gross proceeds from the first tranche of the Private Placement of approximately $30.0 million, before deducting fees to the placement agent and other offering expenses payable by the Company (“Series B Convertible Preferred Stock Proceeds”). In addition, the Company agreed to sell and issue in the second tranche of the Private Placement 944,160 shares of Series B Convertible Preferred Stock at a purchase price of $31.77 per share of Series B Convertible Preferred Stock (equivalent to $9.00 per share of common stock on a post-Reverse Stock Split basis) if at any time within 18 months following the closing of the first tranche the 10-day volume weighted average price of the Company’s common stock (as quoted on Nasdaq and as calculated by Bloomberg) should reach at least $13.50 per share, such threshold reflects an adjustment to account for the Reverse Stock Split (which may be further adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as needed) with aggregate trading volume during the same 10-day period of at least $25 million (the “Second Tranche Right”). The second tranche of the Private Placement is expected to close within seven trading days of meeting the second tranche conditions and will be subject to additional, customary closing conditions. If the Second Tranche Right conditions are satisfied, the Company anticipates receiving gross proceeds from the second tranche of the Private Placement of approximately $30.0 million, before deducting fees to the placement agent and other offering expenses payable by the Company. The Series B Convertible Preferred Stock ranks (i) senior to the common stock; (ii) senior to all other classes and series of equity securities of the Company that by their terms do not rank senior to the Series B Convertible Preferred Stock; (iii) senior to all shares of the Company’s Series A Convertible Preferred Stock the equity securities described in (i)- (iii), the “Junior Stock”); (iv) on parity with any class or series of capital stock of the Company hereafter created specifically ranking by its terms on parity with the Series B Convertible Preferred Stock (the “Parity Stock”); (v) junior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to any Series B Convertible Preferred Stock (“Senior Stock”); and (vi) junior to all of the Company’s existing and future debt obligations, including convertible or exchangeable debt securities, in each case, as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily and as to the right to receive dividends. In the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Company, and subject to the prior and superior rights of any Senior Stock, each holder of shares of Series B Convertible Preferred Stock will be entitled to receive, in preference to any distributions of any of the assets or surplus funds of the Company to the holders of the common stock and any of the Company’s securities that are Junior Stock and pari passu with any distribution to the holders of any Parity Stock, an amount equal to $1.00 per share of Series B Convertible Preferred Stock, plus an additional amount equal to any dividends declared but unpaid on such shares, before any payments shall be made or any assets distributed to holders of the common stock or any of our securities that Junior Stock. So long as any shares of the Series B Convertible Preferred Stock remain outstanding, the Company cannot without the affirmative vote or consent of the holders of majority of the shares of the Series B Convertible Preferred Stock then-outstanding, in which the holders of the Series B Convertible Preferred Stock vote separately as a class: (a) amend, alter, modify or repeal (whether by merger, consolidation or otherwise) the Series B Convertible Preferred Stock Certificate of Designation, the Company’s certificate of incorporation, or the Company’s bylaws in F-25 Table of Contents any manner that adversely affects the rights, preferences, privileges or the restrictions provided for the benefit of, the Series B Convertible Preferred Stock; (b) issue further shares of Series B Convertible Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series B Convertible Preferred Stock; (c) authorize or issue any Senior Stock; or (d) enter into any agreement to do any of the foregoing that is not expressly made conditional on obtaining the affirmative vote or written consent of the majority of then-outstanding Series B Convertible Preferred Stock. Holders of Series B Convertible Preferred Stock are entitled to receive when, as and if dividends are declared and paid on the common stock, an equivalent dividend, calculated on an as-converted basis. Shares of Series B Convertible Preferred Stock are otherwise not entitled to dividends. The Company classified the first tranche of the Series B Convertible Preferred Stock as temporary equity in the consolidated balance sheets as the Company could be required to redeem the Series B Convertible Preferred Stock if the Company cannot convert the Series B Convertible Preferred Stock into shares of common stock for any reason including due to any applicable laws or by the rules or regulations of any stock exchange, interdealer quotation system, or other self- regulatory organization with jurisdiction over the Company which is not solely in the control of the Company. If the Company were required to redeem the Series B Convertible Preferred Stock, it would be based upon the volume-weighted- average price of common stock on an as converted basis on the date the holders provided a conversion notice to the Company. As of December 31, 2023, the Company did not adjust the carrying value of the Series B Convertible Preferred Stock since it was not probable the holders would be unable to convert the Series B Convertible Preferred Stock into shares of common stock due to any reason including due to any applicable laws or by the rules or regulations of any stock exchange, interdealer quotation system, or other self-regulatory organization with jurisdiction over the Company. The Company evaluated the Second Tranche Right under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and determined that it met the requirements for separate accounting from the initial issuance of Series B Convertible Preferred Stock as a freestanding financial instrument. The Company then determined the Second Tranche Right should be liability classified pursuant to ASC 480. As a result, the Company classified the Second Tranche Right as a non-current liability within the consolidated balance sheets and the Second Tranche Right was initially recorded at fair value and is subsequently re-measured at fair value at the end of each reporting period. The fair value of the Second Tranche Right on the date of issuance was determined to be $6.9 million based on a Monte-Carlo valuation and the Company allocated $6.9 million of the Series B Convertible Preferred Stock Proceeds to this liability and recorded this amount as preferred stock tranche liability. On December 31, 2023, the fair value of the Second Tranche Right was determined to be $4.2 million, and the Company recorded this amount as preferred stock tranche liability on the consolidated balance sheets. The Company recorded the mark-to-market adjustment of $2.8 million for the year ended December 31, 2023, under change in fair value of preferred stock tranche liability within the consolidated statements of operations and loss. The Company determined that all other features of the securities offered pursuant to the Series B Convertible Preferred Stock Securities Purchase Agreement were clearly and closely associated with the equity host and did not require bifurcation or the fair value of the feature was immaterial to the Company's consolidated financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting. There have been no changes to the Company’s original assessment through December 31, 2023. Series A Convertible Preferred Stock On November 4, 2022, the Company entered into an exchange agreement (the “Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS LP and MSI BVF SPV, LLC (collectively referred to as “BVF”), pursuant to which BVF exchanged 833,333 shares of the Company’s common stock (as adjusted to account for the Reverse Stock Split) for 1,000,000 shares of newly designated Series A convertible preferred stock, par value $0.0001 per share (the “Series A Convertible Preferred Stock”) (the “Exchange”). Each share of the Series A Convertible Preferred Stock is convertible into 0.833 shares of the Company’s common stock (as adjusted to account for the Reverse Stock Split) at the option of the holder at any time, subject to certain limitations, including that the holder will be prohibited from converting Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of F-26 Table of Contents common stock above the Conversion Blocker, initially set at 9.99%, of the total common stock then issued and outstanding immediately following the conversion of such shares of Preferred Stock. Holders of the Series A Convertible Preferred Stock are permitted to increase the Conversion Blocker to an amount not to exceed 19.99% upon 60 days’ notice. Shares of Series A Convertible Preferred Stock generally have no voting rights, except as required by law and except that the consent of a majority of the holders of the outstanding Series A Convertible Preferred Stock will be required to amend the terms of the Series A Convertible Preferred Stock. In the event of the Company’s liquidation, dissolution or winding up, holders of Series A Convertible Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock. Holders of Series A Convertible Preferred Stock are entitled to receive when, as and if dividends are declared and paid on the common stock, an equivalent dividend, calculated on an as-converted basis. Shares of Series A Convertible Preferred Stock are otherwise not entitled to dividends. The Series A Convertible Preferred Stock (i) senior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms junior to the Series A Convertible Preferred Stock; (ii) on parity with the common stock and any class or series of capital stock of the Company created specifically ranking by its terms on parity with the Series A Convertible Preferred Stock; and (iii) junior to the Series B Convertible Preferred Stock and to any class or series of capital stock of the Company created specifically ranking by its terms senior to any Series A Convertible Preferred Stock, in each case, as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily. The Company evaluated the Series A Preferred Stock for liability or equity classification under ASC 480, Distinguishing Liabilities from Equity, and determined that equity treatment was appropriate because the Series A Preferred Stock did not meet the definition of the liability under ASC 480. Additionally, the Series A Preferred Stock is not redeemable for cash or other assets (i) on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within control of the Company. As such, the Company recorded the Series A Preferred Stock as permanent equity. At-the-market equity offering programs In August 2021, the Company entered into a sales agreement with Cantor pursuant to which the Company can offer and sell up to $100.0 million of its common stock at the current market prices from time to time through Cantor as sales agent (the “August 2021 ATM”). During the years ended December 31, 2023, 2022, and 2021, the Company sold 0 shares, 1,964,448 shares and 244,209 shares, respectively, under the August 2021 ATM for net proceeds of approximately $0.0 million, $27.4 million and $6.8 million, respectively, (after deducting commissions and other offering expenses). 8. Stock-based compensation Stock-based compensation expense as reflected in the Company’s consolidated statements of operations and comprehensive loss was as follows (in thousands): Research and development Selling, general and administrative Total stock-based compensation expense Year ended December 31, 2022 $ 1,766 4,281 6,047 $ 2023 $ 1,987 3,873 5,860 $ $ $ 2021 2,099 5,612 7,711 All of the $5.9 million, $6.0 million, and $7.7 million of stock-based compensation expense recorded during the years ended December 31, 2023, 2022, and 2021, respectively, was recorded to additional paid-in capital. The Company has awards outstanding under two equity compensation plans, the 2021 Equity Incentive Plan (the “2021 Plan”), and the Amended and Restated 2012 Incentive Plan (the “2012 Plan”), as well as the inducement award program. Terms of stock award agreements, including vesting requirements, are determined by the board of directors, subject to the provisions of the individual plans. F-27 Table of Contents 2021 Plan During 2021, the Company’s stockholders approved the 2021 Plan. Upon effectiveness of the 2021 Plan, the Company ceased making awards under the 2012 Plan. The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSUs and other stock-based awards. The number of shares of common stock initially reserved for issuance under the 2021 Plan was (i) 1,991,666 which is the sum of 1,104,177 shares plus the number of shares available for issuance under the 2012 Plan as of the date the Company’s Board of Directors approved the 2021 Plan (887,489 shares) plus (ii) the number of shares of the Company’s common stock underlying awards under the 2012 Plan and the 2010 Equity Incentive Plan (the “2010 Plan”) that expire, terminate or are surrendered without delivery of shares, are forfeited to or repurchased by the Company, or otherwise become available again for grant under the terms of the 2012 Plan or the 2010 Plan, as applicable. As of December 31, 2023, under the 2021 Plan, the Company has granted stock options for 1,398,762 shares of common stock, of which 52,013 have been forfeited and 0 have been exercised, and granted RSUs for 269,349 shares of common stock, of which 18,594 have been forfeited and 80,367 have vested. As of December 31, 2023, 693,645 shares remain available for future issuance. The exercise price of each option has been equal to the closing price of a share of the Company’s common stock on the grant date. 2012 Plan The 2012 Plan became effective immediately upon the closing of the Company’s initial public offering in February 2012. Upon effectiveness of the 2012 Plan, the Company ceased making awards under the 2010 Plan. The 2012 Plan initially allowed the Company to grant awards for up to 285,714 shares of common stock, plus the number of shares of common stock available for grant under the 2010 Plan as of the effectiveness of the 2012 Plan (which was an additional 2,508 shares), plus that number of shares of common stock related to awards outstanding under the 2010 Plan which terminate by expiration, forfeiture, cancellation or otherwise. The 2012 Plan included an “evergreen provision” that allowed for an annual increase in the number of shares of common stock available for issuance under the 2012 Plan. The annual increase was added on the first day of each year from 2013 through 2018 and was equal to the lesser of 107,412 shares of common stock and 4.0% of the number of shares of common stock outstanding, or a lesser amount as determined by the board of directors. On each of January 1, 2018, January 1, 2017 and January 1, 2016, the number of shares available for issuance under the 2012 Plan increased by 107,412 under this provision. On December 18, 2018, the shareholders of the Company approved the Amended and Restated 2012 Incentive Plan which increased the maximum number of shares available for issuance under the 2012 Plan to 1,385,702 and eliminated the evergreen provision. On May 19, 2020, the shareholders of the Company approved the Amended and Restated 2012 Incentive Plan which increased the maximum number of shares available for issuance by 1,083,333 shares. Awards under the 2012 Plan may include the following award types: incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSUs, other stock-based or cash-based awards and any combination of the foregoing. As of December 31, 2023, under the 2012 Plan, the Company has granted stock options for 1,841,188 shares of common stock, of which 814,357 have been forfeited, 213,901 have expired, and 191,342 have been exercised, and granted RSUs for 556,432 shares of common stock, of which 87,458 have been forfeited and 455,878 have vested. The exercise price of each stock option has been equal to the closing price of a share of the Company’s common stock on the grant date. Upon adoption of the 2021 Plan, the Company ceased issuing awards from the 2012 Plan. Inducement Award Program In December 2014, the Company established an inducement award program (in accordance with Nasdaq Listing Rule 5635(c)(4)) under which it may grant non-statutory stock options to purchase, and RSUs in respect of up to an aggregate of 62,500 shares of common stock to new or prospective employees as inducement to enter into employment with the Company. In December 2016, the Board of Directors authorized and reserved 48,333 additional shares of common stock under this program. In December 2017, the Board of Directors authorized and reserved 208,333 additional shares of common stock under this program. In June and December 2018, the Board of Directors authorized and reserved 141,666 and 104,166 additional shares of common stock under this program, F-28 Table of Contents respectively. In February 2020, the Board of Directors authorized the reduction of 169,447 shares available for issuance under this program. In September 2023, the Board of Directors authorized and reserved 500,000 additional shares of common stock under this program. The program is governed by the terms of the 2021 Plan, but shares issued pursuant to the program are not issued under the 2021 Plan. As of December 31, 2023, the Company had granted options for 825,562 shares of common stock under the program, of which 472,880 have been forfeited, 1,997 have expired and 48,663 have been exercised, and granted RSUs for 80,804 shares, of which 24,871 have been forfeited and 30,128 have vested. As of December 31, 2023, 482,667 shares remain available for future issuance. Stock Options Most options granted by the Company vest twenty-five percent (25%) one year from vesting start date and six and a quarter percent (6.25%) for each successive three-month period, thereafter (subject to acceleration of vesting in the event of certain change of control transactions) subject to the employee’s continued employment with, or service to, the Company on such vesting date and are exercisable for a period of ten years from the date of grant. A summary of the Company’s stock option activity and related information for the year ended December 31, 2023, is as follows: Outstanding at December 31, 2022 Granted Forfeited/cancelled Expired Outstanding at December 31, 2023 Vested at December 31, 2023 Shares 1,168,105 1,177,750 (62,831) (12,665) 2,270,359 876,016 Weighted-average exercise price per share $ $ $ 33.63 7.98 35.38 117.12 19.81 33.39 Weighted- average remaining contractual term (years) 7.1 Aggregate intrinsic value (in thousands) $ 18 7.8 5.8 $ $ 559 138 The fair value of each stock option was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions: Risk-free interest rate Volatility Dividend yield Expected term (years) Year ended December 31, 2022 3.13 % 88 % — 5.8 2023 3.77 % 92 % — 6.1 2021 1.15 % 89 % — 6.0 The Company recorded stock-based compensation expense associated with employee and non-employee stock options of $4.2 million, $4.2 million, and $4.1 million, for the years ended December 31, 2023, 2022, and 2021, respectively. The weighted-average grant date fair value of stock options granted in the years ended December 31, 2023, 2022, and 2021 was $6.16, $8.28, and $21.84 per stock option, respectively. The fair value of stock options that vested during the years ended December 31, 2023, 2022, and 2021 was $3.1 million, $4.4 million, and $3.8 million, respectively. The aggregate intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by employees to exercise the option) during the years ended December 31, 2023, 2022, and 2021 was $0.0 million, less than $0.1 million, and $0.8 million, respectively. At December 31, 2023 there was $9.2 million of total unrecognized compensation cost related to unvested stock options and the Company expects to recognize this cost over a remaining weighted-average period of 2.6 years. F-29 Table of Contents Restricted Stock Units (“RSUs”) Each RSU entitles the holder to receive one share of the Company’s common stock when the RSU vests. The RSUs generally vest (i) twenty-five percent (25%) one year from vesting start date and six and a quarter percent (6.25%) for each successive three-month period, thereafter, (ii) two tranches for 50% of the award with the second and final vesting date on the one year anniversary of the vesting commencement date and (iii) 100 percent within two years of the vesting commencement date. The RSUs are subject to acceleration of vesting in the event of certain change of control transactions and subject to the employee’s continued employment with, or service to, the Company on such vesting date. Compensation expense is recognized on a straight-line basis. A summary of RSU activity during the year ended December 31, 2023, is as follows: Outstanding at December 31, 2022 Granted Vested Forfeited/cancelled Outstanding at December 31, 2023 Weighted- average grant date fair value per share $ $ $ $ $ 25.82 10.15 25.45 17.96 18.05 Shares 172,909 108,058 (66,201) (5,477) 209,289 The Company recorded stock-based compensation expense associated with employee and non-employee RSUs of $1.6 million, $1.8 million, and $3.5 million, for the years ended December 31, 2023, 2022, and 2021, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2023, 2022, and 2021 was approximately $1.7 million, $2.3 million, and $3.7 million, respectively. At December 31, 2023, there was $3.1 million of total unrecognized compensation cost related to unvested RSUs and the Company expects to recognize this cost over a remaining weighted-average period of 2.1 years. Employee stock purchase plan At the Special Meeting of Stockholders, held on December 18, 2018, the stockholders approved the 2018 Employee Stock Purchase Plan (“2018 ESPP”). On June 21, 2019, the board of directors of the Company amended and restated the 2018 ESPP, to account for certain non-material changes to the plan’s administration (the “Amended and Restated 2018 ESPP”). The Amended and Restated 2018 ESPP provides eligible employees with the opportunity, through regular payroll deductions, to purchase shares of the Company’s common stock at 85% of the lesser of the fair market value of the common stock (a) on the date the option is granted, which is the first day of the purchase period, and (b) on the exercise date, which is the last business day of the purchase period. The Amended and Restated 2018 ESPP generally allows for two six-month purchase periods per year beginning in January and July, or such other periods as determined by the compensation committee of the Company’s board of directors. The Company has reserved 166,666 shares of common stock for the administration of the Amended and Restated 2018 ESPP. The fair value of shares expected to be purchased under the Amended and Restated 2018 ESPP was calculated using the Black-Scholes model with the following weighted- average assumptions: Risk-free interest rate Volatility Dividend yield Expected term (years) 2023 5.16 % 126 % — 0.5 Year ended December 31, 2022 1.56 % 77 % — 0.5 2021 0.07 % 68 % — 0.5 F-30 Table of Contents For the years ended December 31, 2023, 2022, and 2021, the Company has recognized less than $0.1 million, $0.1 million, and $0.1 million, respectively, of stock-based compensation expense under the Amended and Restated 2018 ESPP. During the year ended December 31, 2023, 2022, and 2021, the Company issued 14,270 shares, 10,194 shares and 9,172 shares, respectively, of common stock for proceeds of $0.1 million, $0.2 million and $0.2 million, respectively under the Amended and Restated 2018 ESPP. 9. Convertible Senior Notes 2018 Notes On October 17, 2018, the Company closed a registered direct public offering of $150.0 million aggregate principal amount of the Company’s 2018 Notes for net proceeds of approximately $145.3 million. The 2018 Notes were governed by the terms of a base indenture for senior debt securities (the “2018 Base Indenture”), as supplemented by the first supplemental indenture thereto (the “Supplemental Indenture” and together with the “2018 Base Indenture”, the “2018 Indenture”), each dated October 17, 2018, by and between the Company and Wilmington Trust, National Association, (“Wilmington”) as trustee. The 2018 Notes were senior unsecured obligations of the Company and bore interest at a rate of 5.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2019. The 2018 Notes will mature on November 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms. Prior to November 1, 2022, the Company did not have the right to redeem the 2018 Notes. On or after November 1, 2022, the Company may elect to redeem the 2018 Notes, in whole or in part, at a cash redemption price equal to the principal amount of the 2018 Notes to be redeemed, plus accrued and unpaid interest, if any. Unless the Company has previously called all outstanding 2018 Notes for redemption, the 2018 Notes will be subject to repurchase by the Company at the holders’ option on each of November 1, 2023, November 1, 2028, November 1, 2033, November 1, 2038 and November 1, 2043 (or, if any such date is not a business day, on the next business day) at a cash repurchase price equal to the principal amount of the 2018 Notes to be repurchased, plus accrued and unpaid interest, if any. The Company determined that the expected life of the 2018 Notes was equal to the period through November 1, 2023, as this represents the point at which the 2018 Notes were initially subject to repurchase by the Company at the option of the holders. In the fourth quarter of 2023, the Company repaid the remaining outstanding balance of 2018 Notes of $0.3 million in exchange for principal amount plus accrued and unpaid interest of a total of $0.3 million. As a result there are no outstanding 2018 Notes as of December 31, 2023. The components of the carrying value of the 2018 Notes as of December 31, 2022 are detailed below (in thousands): 2018 Notes principal balance Debt discount and issuance costs, net of accretion 2018 Notes, net 2019 Notes $ $ December 31, 2022 300 (25) 275 On November 14, 2019 and December 23, 2019, the Company entered into privately negotiated agreements to exchange approximately $114.3 million and $7.4 million, respectively, aggregate principal amount of the 2018 Notes for (i) approximately $62.9 million and $4.0 million, respectively, aggregate principal amount of newly issued 5.00% Convertible Senior Second Lien Notes due 2048 (the “2019 Notes”), (ii) an aggregate of $11.4 million and $0.7 million, respectively, in 2018 Notes principal repayment and (iii) accrued interest on the 2018 Notes through November 14, 2019 and December 23, 2019, respectively. As of March 31, 2020, all 2019 Notes had converted into shares of common stock and are no longer outstanding. F-31 Table of Contents 2020 Notes On November 6, 2020, the Company entered into a privately negotiated agreement with an investor who was a holder of the Company’s 2018 Notes to exchange approximately $28.0 million aggregate principal amount of 2018 Notes for approximately $28.0 million aggregate principal amount of newly issued 5.00% Convertible Senior Notes due 2048 (the “2020 Notes” and together with the 2018 Notes and 2019 Notes referred to as the “Notes”). The issuance of the 2020 Notes closed on November 13, 2020. On July 16, 2021, the aggregate principal of $28.0 million of 2020 Notes was converted into 717,949 shares of common stock. As a result, as of September 30, 2021, all 2020 Notes have converted into shares of common stock. Upon conversion of the 2020 Notes, holders received a cash payment equal to the accrued and unpaid interest on the converted 2020 Notes. Pursuant to ASC 815-15-40-1, upon conversion, the Company recorded the remaining discount on the 2020 Notes of $7.8 million as interest expense in the statements of operations and comprehensive loss during the year ended December 31, 2021. All Notes The Company determined that the expected life of the Notes was equal to the period through November 1, 2023, as this represents the point at which the Notes were initially subject to repurchase by the Company at the option of the holders. Accordingly, the total debt discount, inclusive of the fair value of the embedded conversion feature derivative at issuance and change in fair value of conversion options upon exchanges, was amortized using the effective interest method through November 1, 2023. The effective interest utilized to amortize 2018 Notes and 2020 Notes was 15.65% and 20.31%, respectively. For the year ended December 31, 2023, the Company recognized less than $0.1 million of interest expense related to the 2018 Notes. 10. Net Loss per Share ASC Topic 260, Earnings Per Share, requires the Company to calculate its net loss per share based on basic and diluted net loss per share, as defined. Basic EPS excludes dilution and is computed by dividing net loss by the weighted average number of shares outstanding for the period. For the years ended December 31, 2023, 2022, and 2021 net loss, basic and diluted EPS are the same as the assumed exercise of stock options, RSUs, ESPP, the 2018 Notes, Series A Convertible Preferred Stock, and Series B Convertible Preferred Stock are anti-dilutive. The following potentially dilutive securities were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect: Outstanding stock options Outstanding restricted stock units 2018 Notes Employee stock purchase plan Series A Convertible Preferred Stock Series B Convertible Preferred Stock Total potentially dilutive securities 11. Income Taxes Year Ended December 31, 2022 1,168,105 172,909 3,489 6,874 833,333 — 2023 2,270,359 209,289 — 7,475 833,333 4,236,570 7,557,026 2,184,710 2021 1,355,220 233,710 3,489 4,803 — — 1,597,222 As of December 31, 2023, the Company had federal and state NOL carryforwards of approximately $473.6 million and $189.0 million, respectively, which are available to reduce future taxable income. The Company also had federal and state tax credits of $9.5 million and $2.2 million, respectively, which may be used to offset future tax liabilities. The NOL and tax credit carryforwards will expire at various dates through 2043, except for $277.9 million of federal NOL carryforwards which may be carried forward indefinitely. F-32 Table of Contents A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows: Income tax benefit using U.S. federal statutory rate State tax benefit, net of federal benefit Research and development tax credits Stock-based compensation Permanent items Change in the valuation allowance Tax law change NOL and tax credit expiration under Section 382 Other December 31, 2023 21.00 % 2.82 % 4.41 % (0.98)% 0.44 % (21.17)% (4.31)% (2.07)% (0.14)% — % 2022 21.00 % 2.15 % 2.81 % (2.17)% (0.08)% (21.41)% — % (2.26)% (0.04)% — % On October 4, 2023, Massachusetts enacted tax law changes which included the adoption of a single sales apportionment factor effective on January 1, 2025. As required under ASC 740, the Company has accounted for the deferred tax impacts of this tax law change in the period the tax law was enacted, which has the impact of reducing its state deferred tax assets. The impact of the tax law change is offset by a change in valuation allowance. The principal components of the Company’s deferred tax assets and liabilities are as follows (in thousands): Deferred tax assets: Net operating loss carryforwards Capitalized research and development Research and development credits Stock-based compensation Installment sale Lease liability Other deferred tax assets Total deferred tax assets Deferred tax liabilities: Right-of-use asset Debt discount Other deferred tax liability Total deferred tax liabilities Net deferred tax asset prior to valuation allowance Valuation allowance Net deferred tax asset December 31, 2023 2022 $ 110,152 20,356 11,192 3,340 6,909 311 346 152,606 $ 103,243 11,621 7,107 3,450 7,768 538 587 134,314 (248) — — (248) 152,358 (152,358) $ — $ (425) (4) (29) (458) 133,856 (133,856) — The Tax Cuts and Jobs Act (“TCJA”) requires taxpayers to capitalize and amortize research and development (“R&D”) expenditures under section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company during 2022. The Company will amortize these costs for tax purposes over 5 years for R&D performed in the U.S. and over 15 years for R&D performed outside the U.S. The Company has recorded a valuation allowance against its deferred tax assets at December 31, 2023 and 2022 because the Company’s management believes that it is more likely than not that these assets will not be fully realized. The increase in the valuation allowance of approximately $18.5 million in the year ended December 31, 2023, primarily relates to the capitalization of research and development expenses, the generation of NOLs and R&D credits. F-33 Table of Contents Section 382 of the Internal Revenue Code and similar provisions under state law limit the utilization of U.S. NOL carryforwards, state NOL carryforwards, R&D credits, and Orphan Drug (“OD”) credits following certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%. Based on the Company’s analysis under Section 382, the Company believes that its federal NOL carryforwards, its state NOL carryforwards, R&D credits, and OD credits are limited by Section 382 and similar provisions under state law as of December 31, 2023. The portion of federal NOL carryforwards, state NOL carryforwards, R&D credits, and OD credits that were determined to be limited have been written off as of December 31, 2023. The remaining unused carryforwards and credits remain available for future periods. Due the Company’s full valuation allowance the write off of NOL carryforwards and R&D and OD credits did not have any impact to the statements of operation and comprehensive loss. The Company’s reserves related to taxes are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. From inception and through December 31, 2023, the Company had no unrecognized tax benefits or related interest and penalties accrued. The Company has not conducted a study of R&D credit carryforwards. This study may result in an adjustment to the Company’s R&D credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s R&D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheet or statement of operations if an adjustment were required. The Company would recognize both accrued interest and penalties related to unrecognized benefits in income tax expense. The Company’s uncertain tax positions are related to years that remain subject to examination by relevant tax authorities. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all tax years in which a loss carryforward is available. 12. Commitments and contingencies The Company entered into a lease agreement for approximately 27,810 square feet of office space in Needham, Massachusetts. Please refer to Note 6. Leases for further details regarding the minimum aggregate future lease commitments as of December 31, 2023. In conjunction with the execution of the Amended Lease Agreement, the Company has provided a security deposit in the form of a letter of credit in the amount of $0.2 million as of December 31, 2023, and 2022. The amount is included in non-current restricted cash on the consolidated balance sheets as of December 31, 2023, and 2022. Pursuant to the terms of various agreements, the Company may be required to pay various development, regulatory and commercial milestones. In addition, if any products related to these agreements are approved for sale, the Company may be required to pay significant royalties on future sales. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurring. F-34 Table of Contents 13. License, collaboration and commercial agreements GenFleet Therapeutics (Shanghai), Inc. On August 24, 2023, the Company entered into a collaboration and option agreement (“GenFleet Agreement”) with GenFleet Therapeutics (Shanghai), Inc. (“GenFleet”), pursuant to which GenFleet granted the Company the option to obtain exclusive development and commercialization rights worldwide outside of mainland China, Hong Kong, Macau, and Taiwan (the “Territory”) for up to three oncology programs targeting RAS pathway driven cancers (the “GenFleet Options”). The Company may exercise its GenFleet Options on a program-by-program basis. The Company made an upfront payment of $2.0 million to GenFleet in September 2023 and will provide $1.5 million of research support (“GenFleet R&D Support Fee”) over the first three years of the GenFleet Agreement. In addition, pursuant to the GenFleet Agreement, upon achievement of certain development and commercial milestones, and upon the Company exercising its GenFleet Options, GenFleet will be entitled to receive payments of up to $622.0 million. The Company has also agreed to pay GenFleet royalties on net sales of licensed products in the Territory ranging from the mid to high single digits. The Company may terminate the GenFleet Agreement in its entirety or on a program-by-program basis by providing 90 days written notice to GenFleet. Either party may terminate the GenFleet Agreement in its entirety or on a program-by-program and country-by-country basis, with 60 days’ written notice for the other party’s material breach if such party fails to cure the breach. Either party may also terminate the GenFleet Agreement in its entirety upon certain insolvency events involving the other party. During the year ended December 31, 2023, the Company expensed $2.0 million related to the upfront payment and $0.2 million related to the GenFleet R&D Support Fee within research and development expense in the consolidated statements of operations and comprehensive loss. The future milestone payments are contingent in nature and will be recognized if and when the respective contingencies are resolved. If the Company elects to exercise its GenFleet Options, the related payment will be recognized if and when each respective GenFleet Option is elected. Secura Bio, Inc. (“Secura”) On August 10, 2020, the Company and Secura signed the Secura APA and on September 30, 2020, the transaction closed. Pursuant to the Secura APA, the Company sold to Secura its exclusive worldwide license, including related assets, for the research, development, commercialization, and manufacture in oncology indications of products containing duvelisib. The sale included certain intellectual property related to duvelisib in oncology indications, certain existing duvelisib inventory, claims and rights under certain contracts pertaining to duvelisib. Pursuant to the Secura APA, Secura assumed all operational and financial responsibility for activities that were part of the Company’s duvelisib oncology program, including all commercialization efforts related to duvelisib in the United States and Europe, as well as the Company’s ongoing duvelisib clinical trials. Further, Secura assumed all obligations with existing collaboration partners developing and commercializing duvelisib, which include Yakult Honsha Co., Ltd. (“Yakult”), CSPC Pharmaceutical Group Limited (“CSPC”), and Sanofi. Additionally, Secura assumed all royalty payment obligations due under the amended and restated license agreement with Infinity Pharmaceuticals, Inc. Pursuant to the terms of the Secura APA, Secura has paid the Company an up-front payment of $70.0 million in September 2020 and has agreed to pay the Company (i) regulatory milestone payments up to $45.0 million, consisting of a payment of $35.0 million upon receipt of regulatory approval of COPIKTRA in the United States for the treatment of peripheral T-cell lymphoma and a payment of $10.0 million upon receipt of the first regulatory approval for the commercial sale of COPIKTRA in the European Union for the treatment of peripheral T-cell lymphoma, (ii) sales milestone payments of up to $50.0 million, consisting of $10.0 million when total worldwide net sales of COPIKTRA exceed $100.0 million, $15.0 million when total worldwide net sales of F-35 Table of Contents COPIKTRA exceed $200.0 million and $25.0 million when total worldwide net sales of COPIKTRA exceed $300.0 million, (iii) low double-digit royalties on the annual aggregate net sales above $100.0 million in the United States, European Union, and the United Kingdom of Great Britain and Northern Ireland and (iv) 50% of all royalty, milestone and sublicense revenue payments payable to Secura under the Company’s existing license agreements with Sanofi, Yakult, and CSPC, and 50% of all royalty and milestone payments payable to Secura under any license or sublicense agreement entered into by Secura in certain jurisdictions. In connection with the Secura APA, the Company and Secura entered into a transition services agreement (“Secura TSA”). Under the terms of the Secura TSA, the Company provided certain support functions at Secura’s direction for a term of less than one year from the date of execution (“Secura TSA Services”). Services performed were paid at a mutually agreed upon rate. The Company evaluated the Secura APA and Secura TSA in accordance with ASC 606 as the Company concluded that the counterparty, Secura, is a customer. The Company identified the following performance obligations under the Secura APA and Secura TSA: ● a bundled performance obligation consisting of delivery of the duvelisib global license and intellectual property, certain existing duvelisib inventory, certain duvelisib contracts and clinical trials, certain regulatory approvals, and certain regulatory documentation and books and records (the “Bundled Secura Performance Obligation”); and ● Secura TSA Services. The Company concluded that the duvelisib global license and intellectual property were not distinct within the context of the contract (i.e. separately identifiable) because the other assets including certain existing duvelisib inventory, certain duvelisib contracts and clinical trials, certain regulatory approval, and certain regulatory documentation and books and records do not have stand-alone value from other duvelisib global license and intellectual property and Secura could not benefit from them without the duvelisib global license and intellectual property. Consistent with the guidance under ASC 606-10-25-16A, the Company disregarded immaterial promised goods and services when determining performance obligations. The Company has determined that the upfront payment of $70.0 million, future potential milestone payments and royalties including from Secura’s sublicensees should be allocated to the delivery of the Bundled Secura Performance Obligation. The Company has the right to consideration for TSA services in an amount that corresponds directly with the value to Secura of the Company’s performance to date. Consideration allocated to the Secura TSA Services will be recognized as such services are provided over the performance period using an output method based on the amount to which the Company has a right to invoice. The Company determined less than $0.1 million of future potential royalties the Company expects to receive pursuant to the Secura APA were not constrained as of December 31, 2023. When estimating the amount of royalties to be received that were not constrained, the Company used the expected value method as there are a range of possible outcomes. When estimating royalties expected to be received, the Company used a combination of internal projections and forecasts and data from external sources. The Company determined that all other future potential royalties were constrained under the guidance as of December 31, 2023. As part of the Company’s evaluation of the constraint on future royalties, the Company considered a number of factors in determining whether there is significant uncertainty associated with the future events that would result in royalty payments. Those factors include: the likelihood and magnitude of revenue reversals related to future royalties, the amount of variable consideration is highly susceptible to factors outside of the Company’s influence, the amount of time to resolve the uncertainty, and lack of significant history of selling COPIKTRA outside of the United States. As the consideration for future royalties is conditional, the Company recorded a corresponding contract asset for the expected future royalties. Portions of the contract asset are reclassified to accounts receivable when the right to consideration becomes unconditional. As of December 31, 2023, and 2022, the contract asset has been recorded within prepaid and other current assets on the consolidated balance sheets. F-36 Table of Contents The following table presents changes in the Company’s contract asset for the year ended December 31, 2023 (in thousands): Contract Asset: Contract asset - Secura Total December 31, 2022 Additions Reclassification to receivable $ $ 96 96 $ $ — $ — $ (54) (54) December 31, 2023 42 $ 42 $ During the year ended December 31, 2023, the Company determined all future potential milestones were excluded from the transaction price, as all other milestone amounts were fully constrained under the guidance as of December 31, 2023. As part of the Company’s evaluation of the constraint, the Company considered a number of factors in determining whether there is significant uncertainty associated with the future events that would result in the milestone payments. Those factors included: the likelihood and magnitude of revenue reversals related to future milestones, the amount of variable consideration that is highly susceptible to factors outside of the Company’s influence and the uncertainty about the consideration is not expected to be resolved for an extended period of time. All future potential milestone payments were fully constrained as the risk of significant revenue reversal related to these amounts has not yet been resolved. During the year ended December 31, 2022, the Company recognized $2.6 million of sale of COPIKTRA license and related assets revenue within the statements of operations and comprehensive loss. The sale of COPIKTRA license and related assets revenue for the year ended December 31, 2022 related to one regulatory milestone for $2.5 million achieved by Secura’s sublicensee, CSPC, and $0.1 million related to royalties on COPIKTRA sales in the year ended December 31, 2022, and future royalties expected to be received pursuant to the Secura APA that were not constrained. The Company determined all other future potential milestones were excluded from the transaction price, as all other milestone amounts were fully constrained under the guidance as of December 31, 2022. During the year ended December 31, 2021, the Company recognized $1.4 million of sale of COPIKTRA license and related assets revenue within the statements of operations and comprehensive loss. The sale of COPIKTRA license and related assets revenue for the year ended December 31, 2021 primarily related to two regulatory milestone for $1.3 million achieved by Secura’s sublicensee and $0.2 million related to royalties received and expected to be received pursuant to the Secura APA. During the year ended December 31, 2021, the Company also recognized $0.6 million in transition services revenue within the statements of operations and comprehensive loss. The Company determined all other future potential milestones were excluded from the transaction price, as all other milestone amounts were fully constrained under the guidance as of December 31, 2021. 14. Notes Payable In February 2023, the Company entered into a finance agreement with AFCO Premium Credit LLC (“AFCO”). Pursuant to the terms of the agreement, AFCO loaned the Company the principal amount of $1.4 million, which accrues interest at 7.4% per annum, to fund a portion of the Company’s insurance policies. The Company is required to make monthly payments of $0.1 million through October 2023 including principal and interest. The agreement assigns AFCO a security interest in (i) all unearned premiums and dividends which may become payable under the insurance policies financed pursuant to this agreement, (ii) loss payments which reduce the unearned premiums, and (iii) the Company’s interest in any state insurance guarantee fund related to any of the insurance policies financed pursuant to this agreement. The outstanding balance at December 31, 2023 was $0.0 million. 15. Employee benefit plan In June 2011, the Company adopted a 401(k) retirement and savings plan (the 401(k) Plan) covering all employees. The 401(k) Plan allows employees to make pre-tax or post-tax contributions up to the maximum allowable amount set by the Internal Revenue Service. Under the 401(k) Plan, the Company may make discretionary F-37 Table of Contents contributions as approved by the board of directors. The Company made contributions to the 401(k) Plan of approximately $0.8 million in each of the years ended December 31, 2023, 2022, and 2021. 16. Subsequent events The Company reviews all activity subsequent to year end but prior to the issuance of the consolidated financial statements for events that could require disclosure or that could impact the carrying value of assets or liabilities as of the consolidated balance sheet date. The Company is not aware of any material subsequent events other than the following: Oxford Loan Agreement On January 4, 2024, the Company amended its Loan Agreement to extend the outside date for the period during which the Company may draw the Term C Loan from March 31, 2024, to March 31, 2025. Refer to Note 5. Long-term debt for additional details on the Loan Agreement. Option Exchange On January 17, 2024, the Company’s stockholders, upon recommendation of the board of directors, approved a one-time stock option exchange program (the “Option Exchange Program”) for certain employees, executive officers and non-employee directors of the Company who held certain underwater options and remained employed or otherwise engaged by the Company through the completion of the Exchange Offer. The Company’s offer to participate in the Option Exchange Program commenced on February 8, 2024, and expired on March 8, 2024 (the “Exchange Offer”). Pursuant to the Exchange Offer, 42 eligible holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 603,330 shares of the Company’s common stock. On March 11, 2024, promptly following the expiration of the Exchange Offer, the Company granted new options to purchase 603,330 shares of common stock, pursuant to the terms of the Exchange Offer and the 2021 Plan. The exercise price of the new options granted pursuant to the Option Exchange Offer was $11.44 per share, which was the closing price of the common stock on the Nasdaq Capital Market on the grant date of the new options. The stock option exchange is considered a modification of those options exchanged. The incremental compensation expense will be measured as the excess, if any, of the fair value of each new option granted measured as of the date the new options are granted, over the fair value of the eligible options surrendered, measured immediately prior to the grant of the new options. This incremental compensation expense will be recognized ratably over the remaining requisite service period of the new options subject to continued employment or service with the Company. Unrecognized compensation cost associated with stock options surrendered will be recognized in future periods subject to continued employment or service with the Company. The Company is continuing to evaluate the incremental compensation cost associated with the Option Exchange Program. F-38 List of Registrant’s Subsidiaries Verastem Securities Company, incorporated in Massachusetts, a wholly owned subsidiary. Verastem Europe GmbH, incorporated in Germany, a wholly owned subsidiary. Exhibit 21.1 Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form S-8 No. 333-180475) pertaining to the 2010 Equity Incentive Plan and the 2012 Incentive Plan of Verastem, Inc., (2) Registration Statement (Form S-8 No. 333-190578) pertaining to the 2012 Incentive Plan of Verastem, Inc., (3) Registration Statement (Form S-8 No. 333-201075) pertaining to the 2014 Inducement Award Program of Verastem, Inc., (4) Registration Statement (Form S-8 No. 333-201076) pertaining to the 2012 Incentive Plan of Verastem, Inc., (5) Registration Statement (Form S-8 No. 333-211235) pertaining to the 2012 Incentive Plan of Verastem, Inc., (6) Registration Statement (Form S-8 No. 333-218768) pertaining to the 2014 Inducement Award Program of Verastem, Inc., (7) Registration Statement (Form S-8 No. 333-218769) pertaining to the 2012 Incentive Plan of Verastem, Inc., (8) Registration Statement (Form S-8 No.333-223616) pertaining to the 2014 Inducement Award Program of Verastem, Inc., (9) Registration Statement (Form S-8 No.333-228309) pertaining to the 2014 Inducement Award Program of Verastem, Inc., (10) Registration Statement (Form S-8 No.333-229430) pertaining to the 2018 Employee Stock Purchase Plan, 2012 Amended and Restated Incentive Plan, and 2014 Inducement Award Program of Verastem, Inc., (11) Registration Statement (Form S-8 No. 333-238877) pertaining to the 2012 Amended and Restated 2012 Incentive Plan of Verastem, Inc., (12) Registration Statement (Form S-3 No. 333-237332) of Verastem, Inc., (13) Registration Statement (Form S-8 No. 333-257111) pertaining to the 2021 Equity Incentive Plan of Verastem, Inc., (14) Registration Statement (Form S-3 No. 333-270794) of Verastem, Inc., and (15) Registration Statement (Form S-3 No. 333-275408) of Verastem, Inc. of our report dated March 14, 2024 with respect to the consolidated financial statements of Verastem, Inc. included in this Annual Report (Form 10-K) of Verastem, Inc. for the year ended December 31, 2023. /s/ Ernst & Young LLP Boston, Massachusetts March 14, 2024 Exhibit 31.1 CERTIFICATIONS I, Daniel W. Paterson certify that: 1. I have reviewed this Annual Report on Form 10-K of Verastem, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. /s/ DANIEL W. PATERSON Daniel W. Paterson President and Chief Executive Officer Date: March 14, 2024 Exhibit 31.2 CERTIFICATIONS I, Daniel Calkins, certify that: 1. I have reviewed this Annual Report on Form 10-K of Verastem, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 14, 2024 /s/ DANIEL CALKINS Daniel Calkins Chief Financial Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 In connection with the Annual Report on Form 10-K of Verastem, Inc. (the “Company”) for the period ended December 31, 2023 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), the undersigned, Daniel W. Paterson, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ DANIEL W. PATERSON Daniel W. Paterson President and Chief Executive Officer Date: March 14, 2024 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.2 In connection with the Annual Report on Form 10-K of Verastem, Inc. (the “Company”) for the period ended December 31, 2023 as filed with the Securities and Exchange Commission (the “SEC”) on the date hereof (the “Report”), the undersigned, Daniel Calkins, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ DANIEL CALKINS Daniel Calkins Chief Financial Officer Date: March 14, 2024 A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. VERASTEM, INC. Policy for Recoupment of Incentive Compensation Exhibit 97.1 1. Introduction In accordance with Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the regulations thereunder, the Board of Directors (the “Board”) of Verastem, Inc. (the “Company”) has adopted this policy (the “Policy”) providing for the Company’s recoupment of certain incentive-based compensation received by Covered Executives (as defined below) in the event that the Company is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under the securities laws. This Policy is designed to comply with, and shall be construed and interpreted to be consistent with, Section 10D of the Exchange Act, Rule 10D-1 promulgated under the Exchange Act and the related listing rules of the Nasdaq Stock Market. 2. Administration Administration and enforcement of this Policy is delegated to the Compensation Committee of the Board (as constituted from time to time, and including any successor committee, the “Committee”). The Committee shall make all determinations under this Policy in its sole discretion. Determinations of the Committee under this Policy need not be uniform with respect to any or all Covered Executives and will be final and binding. 3. Effective Date This Policy shall be effective with respect to Covered Compensation (as defined below) that is received by Covered Executives on or after October 2, 2023 (the “Effective Date”). 4. Covered Executives This Policy covers each current or former officer of the Company subject to Section 16 of the Exchange Act (each, a “Covered Executive”). 5. Covered Compensation This Policy applies to any cash-based or equity-based incentive compensation, bonus, and/or award that is or was received by a Covered Executive and that is based, wholly or in part, upon the attainment of any financial reporting measure (“Covered Compensation”). For the avoidance of doubt, none of the following shall be deemed to be Covered Compensation: base salary, a bonus that is paid solely at the discretion of the Committee or Board and not paid from a bonus pool determined by satisfying a financial reporting measure performance goal, and cash or equity-based awards that are earned solely upon satisfaction of one or more subjective or strategic standards. This Policy shall apply to any Covered Compensation received by an employee who served as a Covered Executive at any time during the performance period for that Covered Compensation. 6. Financial Restatements; Recoupment In the event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (such an accounting restatement, a “Restatement”), the Committee shall review the Covered Compensation received by a Covered Executive during the three-fiscal year period preceding the Required Financial Restatement Date (as defined below) as well as any transition period that results from a change in the Company’s fiscal year within or immediately following those three completed fiscal years. Regardless of whether the Company files the restated financial statements, the Committee shall seek recoupment of any Covered Compensation, whether in the form of cash or equity, received by a Covered Executive (computed without regard to any taxes paid), if and to the extent: a. b. the amount of the Covered Compensation was calculated based upon the achievement of certain financial results that were subsequently the subject of a Restatement; and the amount of the Covered Compensation that would have been received by the Covered Executive had the financial results been properly reported would have been lower than the amount actually awarded (any such amount, “Erroneously-Awarded Compensation”). To the extent Covered Compensation was based on the achievement of a financial reporting measure, but the amount of such Covered Compensation was not awarded or paid on a formulaic basis, the Committee shall determine the amount, if any, of such Covered Compensation that is deemed to be Erroneously-Awarded Compensation. For purposes of this Policy, the “Required Financial Restatement Date” is the earlier to occur of: a. the date the Board, a committee of the Board, or any officer or officers authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement; or b. the date a court, regulator, or other legally authorized body directs the Company to prepare a Restatement. For the avoidance of doubt, a Covered Executive will be deemed to have received Covered Compensation in the Company’s fiscal period during which the financial reporting measure specified in the award is attained, even if the Covered Executive remains subject to additional payment conditions with respect to such award. 7. Method of Recoupment The Committee will determine, in its sole discretion, the method for recouping Erroneously- Awarded Compensation, which may include, without limitation: a. requiring reimbursement of cash incentive compensation previously paid; b. cancelling or rescinding some or all outstanding vested or unvested equity (and/or equity- based) awards; c. adjusting or withholding from unpaid compensation or other set-off to the extent permitted by applicable law; and/or d. reducing or eliminating entitlements to future salary increases, cash-based or equity-based incentive compensation, bonuses, awards or severance. 8. Impracticability Exceptions The Committee shall not seek recoupment of any Erroneously-Awarded Compensation to the extent it determines that: a. b. c. the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount of Erroneously-Awarded Compensation to be recovered; recovery would violate home country law where that law was adopted prior to November 28, 2022; and/or recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to Company employees, to fail to meet the requirements of Sections 401(a)(13) and 411(a) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. 9. No Indemnification For the avoidance of doubt, the Company shall not indemnify any Covered Executive against the loss of any Erroneously-Awarded Compensation or any Covered Compensation that is recouped pursuant to the terms of this Policy, or any claims relating to the Company’s enforcement of its rights under this Policy. 10. Severability If any provision of this Policy or the application of any such provision to any Covered Executive shall be adjudicated to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Policy, and the invalid, illegal or unenforceable provisions shall be deemed amended to the minimum extent necessary to render any such provision or application enforceable. 11. Amendments The Committee may amend, modify or terminate this Policy in whole or in part at any time and may adopt such rules and procedures that it deems necessary or appropriate to implement this Policy or to comply with applicable laws and regulations. 12. No Impairment of Other Remedies The remedies under this Policy are in addition to, and not in lieu of, any legal and equitable claims the Company may have, the Company’s ability to enforce, without duplication, the recoupment provisions set forth in any separate Company policy or in any Company plan, program or agreement (each, a “Separate Recoupment Policy” and collectively, the “Separate Recoupment Policies”), or any actions that may be imposed by law enforcement agencies, regulators or other authorities. Notwithstanding the foregoing, in the event that there is a conflict between the application of this Policy to a Covered Executive in the event of a Restatement and any additional recoupment provisions set forth in a Separate Recoupment Policy to which a Covered Executive is subject, the provisions of this Policy shall control. The Company may also adopt additional Separate Recoupment Policies in the future or amend existing requirements as required by law or regulation. VERASTEM, INC. CLAWBACK POLICY ACKNOWLEDGMENT Reference is made to the Verastem, Inc. Policy for Recoupment of Incentive Compensation, effective as of October 2, 2023 (the “Clawback Policy”). By signing in the space indicated below, you acknowledge and agree that you have received and understand the Clawback Policy and that effective as of [DATE] the Clawback Policy applies and will continue to apply to you during and after your employment or other service in accordance with its terms. EXECUTIVE: ____________________________________ Name: [NAME] DATE: [DATE] Exhibit 99.1 Verastem Oncology Reports Fourth Quarter and Full Year 2023 Financial Results and Highlights Recent Business Updates Iniated confirmatory Phase 3 RAMP 301 trial evaluang avutomenib and defacnib combinaon in recurrent low-grade serous ovarian cancer; on track to submit rolling NDA for accelerated approval in H1 2024; preparaons underway for potenal commercial launch in 2025 Granted FDA Fast Track designaon for avutomenib and sotorasib combinaon for the treatment of KRAS G12C-mutant non-small cell lung cancer Announced oral KRAS G12D inhibitor GFH375 (VS-7375) as lead program in discovery and development collaboraon with GenFleet Therapeucs Mulple data readouts evaluang combinaon therapies in low-grade serous ovarian cancer, non-small cell lung cancer and pancreac cancer ancipated in 2024 BOSTON--(BUSINESS WIRE)--Mar. 14, 2024--Verastem Oncology (Nasdaq: VSTM), a biopharmaceucal company commied to advancing new medicines for paents with cancer, today reported financial results for the three months and full year ended December 31, 2023, and highlighted recent progress. “In 2023, we made significant progress toward expanding the opportunies for avutomenib combinaon therapies across RAS/MAPK driven cancers and I am extremely proud of the team’s accomplishments,” said Dan Paterson, president and chief execuve officer of Verastem Oncology. “2024 is expected to be a pivotal year with the planned NDA submission for our avutomenib and defacnib combinaon in recurrent LGSOC, and mulple clinical data readouts across our programs including inial data from the RAMP 205 trial in metastac pancreac cancer and data from the combinaon with G12C inhibitors in NSCLC. We look forward to connuing to deliver results across our programs.” Fourth Quarter 2023 and Recent Highlights Avutomenib and Defacnib Combinaon in Low-Grade Serous Ovarian Cancer (LGSOC) ● Iniated internaonal confirmatory Phase 3 RAMP 301 trial evaluang the avutomenib and defacnib combinaon versus standard of care chemotherapy or hormonal therapy for the treatment of recurrent LGSOC in December 2023 to support potenal full approval. ● Reported results of a planned subgroup analysis of Part A of the Phase 2 RAMP 201 trial evaluang avutomenib and defacnib combinaon in recurrent LGSOC, which demonstrated promising efficacy in paents regardless of number and class of prior therapies including aer poor response to prior therapy at the Annual Global Meeng of the Internaonal Gynecologic Cancer Society meeng in November 2023. ● Launched paent and healthcare professional programs, including Let’s Talk About LGSOC, to support clinicians in the diagnosis and management of LGSOC and provide informaon and resources to paents. ● Received Orphan Drug Designaon from the U.S. Food and Drug Administraon (FDA) in March 2024 for avutomenib alone or in combinaon with defacnib for the treatment of all paents with recurrent LGSOC. Verastem ancipates the following milestones for avutomenib and defacnib combinaon in LGSOC in 2024: ● On track to submit a rolling New Drug Applicaon (NDA) for Accelerated Approval for the avutomenib and defacnib combinaon in LGSOC in H1 2024. Preparaons for a potenal U.S. commercial launch in 2025 are ongoing and plans to iniate discussions with European and Japanese regulatory authories to address paent needs outside the U.S. connue to advance. ● Plan to announce updated topline data from RAMP 201 trial in LGSOC in H1 2024. Avutomenib in Combinaon with KRAS G12C Inhibitors in Non-Small Cell Lung Cancer (NSCLC) ● Received Fast Track designaon from the FDA for avutomenib, in combinaon with Amgen’s G12C inhibitor, LUMAKRAS™ (sotorasib), for the treatment of paents with KRAS G12C-mutant metastac NSCLC who have received at least one prior systemic therapy and have not been previously treated with a KRAS G12C inhibitor, in January 2024. ● Presented inial results from Phase 1/2 RAMP 203 trial evaluang the efficacy and safety of avutomenib and sotorasib in paents with KRAS G12C-mutant NSCLC who have or have not been previously treated with a KRAS G12C inhibitor at the AACR-NCI-EORTC Internaonal Conference on Molecular Targets and Cancer Therapeucs in October 2023. The confirmed objecve rate of response (ORR) was 25% with responses observed in both KRAS G12C inhibitor resistant and naïve paents, and a recommended Phase 2 dose was selected. ● Added defacnib to RAMP 203 trial of avutomenib with sotorasib based on stronger tumor regressions in KRAS G12C-mutant NSCLC preclinical models when FAKi is added along with G12Ci + avutomenib. Verastem ancipates the following milestones for avutomenib in combinaon with KRAS G12C inhibitors in 2024: ● Data updates from paents with KRAS G12C-mutant NSCLC in the Phase 1/2 RAMP 203 trial evaluang avutomenib and sotorasib and the Phase 1/2 RAMP 204 trial evaluang avutomenib and adagrasib are planned for mid-2024. Avutomenib and Defacnib Combinaon in Frontline Metastac Pancreac Cancer ● Plan to present inial safety and efficacy results from RAMP 205 trial of avutomenib and defacnib in combinaon with current standard of care gemcitabine and nab-paclitaxel in frontline metastac pancreac cancer in H1 2024. GFH375 (VS-7375): Oral KRAS G12D (ON/OFF) Inhibitor ● Completed invesgaonal new drug (IND)-enabling studies for oral KRAS G12D (ON/OFF) inhibitor GFH375 (VS-7375), the lead program in the collaboraon with GenFleet Therapeucs (“GenFleet”). ● GenFleet is expected to submit an IND applicaon for GFH375 (VS-7375) in China in H1 2024 with plans to begin a Phase 1 trial in H2 2024. Discovery/lead opmizaon connues for second and third programs. Upcoming Presentaons Verastem previously announced the acceptance of mulple abstracts for presentaon at upcoming medical conferences: ● Mulple abstracts were selected for oral and poster presentaons at the Society of Gynecologic Oncology (SGO) 2024 Annual Meeng on Women’s Cancer on March 16-18 in San Diego. These presentaons will include a late-breaking oral presentaon on a planned subgroup analysis of Part A of the Phase 2 RAMP 201 trial of avutomenib and defacnib combinaon of heavily pretreated paents with LGSOC and a plenary oral presentaon of preclinical efficacy data of avutomenib in combinaon with a FAK inhibitor in recurrent LGSOC as well as a trials-in-progress poster about the Phase 3 RAMP 301 trial. See press release here. ● Five preclinical data abstracts were accepted for poster presentaon at the American Associaon for Cancer Research (AACR) Annual Meeng 2024 on April 5-10 in San Diego. These presentaons will highlight an-tumor efficacy data of GFH375 (VS-7375), data on RAF/MEK clamp avutomenib and FAK inhibion in pancreac ductal adenocarcinoma models supporng the ongoing RAMP 205 trial, and avutomenib and a FAK inhibitor combinaon in cutaneous melanoma models to overcome resistance to BRAF and MEK inhibitors, resistance to immunotherapy, and brain metastasis. See press release here. Corporate Updates ● Strengthened the execuve leadership team with appointments of Mike Crowther to Chief Commercial and Business Strategy Officer and the promoon of Dan Calkins to Chief Financial Officer in October 2023. Fourth Quarter 2023 Financial Results Verastem Oncology ended the fourth quarter of 2023 with cash, cash equivalents and investments of $137.1 million. Total operang expenses for the three months ended December 31, 2023 (the “2023 Quarter”) were $31.1 million, compared to $16.8 million for the three months ended December 31, 2022 (the “2022 Quarter”). Research & development expenses for the 2023 Quarter were $22.5 million, compared to $10.7 million for the 2022 Quarter. The increase of $11.8 million, or 110.3%, primarily resulted from increased contract research organizaon costs, increased drug substance and drug product costs, and increased personnel costs, including non-cash stock compensaon. Selling, general & administrave expenses for the 2023 Quarter were $8.6 million, compared to $6.1 million for the 2022 Quarter. The increase of $2.5 million, or 41.0%, was primarily related to increased personnel costs, including non-cash stock compensaon, increased consulng and professional fees, and addional costs in ancipaon of a potenal launch of avutomenib and defacnib in LGSOC. Net loss for the 2023 Quarter was $27.4 million, or $1.02 per share (basic and diluted), compared to a net loss of $16.8 million, or $0.99 per share (basic and diluted, each as adjusted for the Company’s reverse stock split), for the 2022 Quarter. For the 2023 Quarter, non-GAAP adjusted net loss was $29.6 million, or $1.10 per share (diluted), compared to non-GAAP adjusted net loss of $15.4 million, or $0.90 per share (diluted, as adjusted for the Company’s reverse stock split), for the 2022 Quarter. Please refer to the GAAP to Non-GAAP Reconciliaon aached to this press release. Full-Year 2023 Financial Results Total operang expenses for the year ended December 31, 2023 (the “2023 Period”) were $92.1 million, compared to $75.5 million for the year ended December 31, 222 (the “2022 Period”). Research & development expenses for the 2023 Period were $61.4 million, compared to $50.6 million for the 2022 Period. The increase of $10.8 million, or 21.3%, was primarily related to increases in contract research organizaon costs, the $2.0 million upfront payment made to GenFleet pursuant to the collaboraon and opon agreement, and including non-cash stock compensaon. increased personnel costs, Selling, general & administrave expenses for the 2023 Period were $30.7 million, compared to $25.0 million for the 2022 Period. The increase of $5.7 million, or 22.8%, was primarily related to increased personnel costs, including non-cash stock compensaon, addional costs in ancipaon of a potenal launch of avutomenib and defacnib in LGSOC, and increased consulng and professional fees. Net loss for the 2023 Period was $87.4 million, or $3.96 per share (basic and diluted, each as adjusted for the Company’s reverse stock split), compared to $73.8 million, or $4.57 per share (basic and diluted, each as adjusted for the Company’s reverse stock split) for the 2022 Period. For the 2023 Period, non-GAAP adjusted net loss was $85.2 million, or $3.86 per share (diluted, as adjusted for the Company’s reverse stock split), compared to non-GAAP adjusted net loss of $67.4 million, or $4.18 per share (diluted, as adjusted for the Company’s reverse stock split), for the 2022 Period. Please refer to the GAAP to non-GAAP Reconciliaon aached to this press release. Use of Non-GAAP Financial Measures To supplement Verastem Oncology’s condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounng principles in the United States (GAAP), the Company uses the following non-GAAP financial measures in this press release: non-GAAP adjusted net loss and non-GAAP net loss per share. These non-GAAP financial measures exclude certain amounts or expenses from the corresponding financial measures determined in accordance with GAAP. Management believes this non-GAAP informaon is useful for investors, taken in conjuncon with the Company’s GAAP financial statements, because it provides greater transparency and period-over- period comparability with respect to the Company’s operang performance and can enhance investors’ ability to idenfy operang trends in the Company’s business. Management uses these measures, among other factors, to assess and analyze operaonal results and trends and to make financial and operaonal decisions. Non-GAAP informaon is not prepared under a comprehensive set of accounng rules and should only be used to supplement an understanding of the Company’s operang results as reported under GAAP, not in isolaon or as a substute for, or superior to, financial informaon prepared and presented in accordance with GAAP. In addion, these non-GAAP financial measures are unlikely to be comparable with non-GAAP informaon provided by other companies. The determinaon of the amounts that are excluded from non-GAAP financial measures is a maer of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts. Reconciliaons between these non-GAAP financial measures and the most comparable GAAP financial measures for the three months and year ended December 31, 2023 and 2022 are included in the tables accompanying this press release aer the unaudited condensed consolidated financial statements. About the Avutomenib and Defacnib Combinaon Avutomenib is a RAF/MEK clamp that induces inacve complexes of MEK with ARAF, BRAF and CRAF potenally creang a more complete and durable an-tumor response through maximal RAS/MAPK pathway inhibion. In contrast to currently available MEK-only inhibitors, avutomenib blocks both MEK kinase acvity and the ability of RAF to phosphorylate MEK. This unique mechanism allows avutomenib to block MEK signaling without the compensatory acvaon of MEK that appears to limit the efficacy of other MEK-only inhibitors. The U.S. Food and Drug Administraon (FDA) granted Breakthrough Therapy designaon for the combinaon of Verastem Oncology’s invesgaonal RAF/MEK clamp avutomenib, with defacnib, a selecve FAK inhibitor, for the treatment of all paents with recurrent LGSOC regardless of KRAS status aer one or more prior lines of therapy, including planum-based chemotherapy. Avutomenib alone or in combinaon with defacnib was also granted Orphan Drug Designaon by the FDA for the treatment of LGSOC. Verastem Oncology is currently conducng clinical trials with its RAF/MEK clamp avutomenib in RAS/MAPK driven tumors as part of its (Raf And Mek Program). RAMP 301 (NCT06072781) is a Phase 3 confirmatory trial evaluang the combinaon of avutomenib and defacnib versus standard chemotherapy or hormonal therapy for the treatment of recurrent LGSOC. RAMP 201 (NCT04625270) is a Phase 2 registraon-directed trial of avutomenib in combinaon with defacnib in paents with recurrent LGSOC and enrollment has been completed in each of the dose opmizaon and expansion phases and the low-dose evaluaon. Verastem Oncology has established clinical collaboraons with Amgen and Mira to evaluate LUMAKRAS™ (sotorasib) in combinaon with avutomenib and defacnib and KRAZATI™ (adagrasib) in combinaon with avutomenib in KRAS G12C mutant NSCLC as part of the RAMP 203 (NCT05074810) and RAMP 204 (NCT05375994) trials, respecvely. Supported by the “Therapeuc Accelerator Award” received from PanCAN, Verastem Oncology is conducng RAMP 205 (NCT05669482), a Phase 1b/2 clinical trial evaluang avutomenib and defacnib with gemcitabine/nab-paclitaxel in paents with front-line metastac pancreac cancer. About GFH375 (VS-7375) GFH375 (VS-7375) is a potenal best-in-class, potent and selecve oral KRAS G12D (ON/OFF) inhibitor, idenfied as the lead program from the Verastem Oncology discovery and development collaboraon with GenFleet Therapeucs. GenFleet plans to submit an IND in China for GFH375 (VS-7375) in the first half of 2024, and upon approval GenFleet is expected to iniate a Phase 1 trial in China in the second half of 2024. The collaboraon includes three discovery programs, the first being the KRAS G12D inhibitor, and will provide Verastem Oncology with exclusive opons to obtain licenses to each of the three compounds in the collaboraon aer successful compleon of pre-determined milestones in Phase 1 trials. The licenses would give Verastem Oncology development and commercializaon rights outside of the GenFleet territories of mainland China, Hong Kong, Macau, and Taiwan. About Verastem Oncology Verastem Oncology (Nasdaq: VSTM) is a late-stage development biopharmaceucal company commied to the development and commercializaon of new medicines to improve the lives of paents diagnosed with cancer. Our pipeline is focused on novel small molecule drugs that inhibit crical signaling pathways in cancer that promote cancer cell survival and tumor growth, including RAF/MEK inhibion and FAK inhibion. For more informaon, please visit www.verastem.com and follow us on LinkedIn. Forward-Looking Statements Noce This press release includes forward-looking statements about Verastem Oncology’s strategy, future plans and prospects, including statements related to the expected outcome and benefits of the collaboraon with GenFleet, the potenal clinical value of various of its clinical trials, the ming of commencing and compleng trials, including topline data reports, interacons with regulators, the potenal for and ming of commercializaon of product candidates and potenal for addional development programs involving Verastem Oncology’s lead compound. The words "ancipate," "believe," "esmate," "expect," "intend," "may," "plan," "predict," "project," "target," "potenal," "will," "would," "could," "should," "connue," “can,” “promising” and similar expressions are intended to idenfy forward-looking statements, although not all forward-looking statements contain these idenfying words. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertaines that could cause actual results to differ materially from those expressed or implied in such statement. Applicable risks and uncertaines include the risks and uncertaines, among other things, regarding: the success in the development and potenal commercializaon of our product candidates, including avutomenib in combinaon with other compounds, including defacnib, LUMAKRAS™ and others; the uncertaines inherent in research and development, such as negave or unexpected results of clinical trials, the occurrence or ming of applicaons for our product candidates that may be filed with regulatory authories in any jurisdicons; whether and when regulatory authories in any jurisdicons may approve any such applicaons that may be filed for our product candidates, and, if approved, whether our product candidates will be commercially successful in such jurisdicons; our ability to obtain, maintain and enforce patent and other intellectual property protecon for our product candidates; the scope, ming, and outcome of any legal proceedings; decisions by regulatory authories regarding trial design, labeling and other maers that could affect the ming, availability or commercial potenal of our product candidates; whether preclinical tesng of our product candidates and preliminary or interim data from clinical trials will be predicve of the results or success of ongoing or later clinical trials; that the ming, scope and rate of reimbursement for our product candidates is uncertain; that third-party payors (including government agencies) may not reimburse; that there may be compeve developments affecng our product candidates; that data may not be available when expected; that enrollment of clinical trials may take longer than expected; that our product candidates will cause adverse safety events and/or unexpected concerns may arise from addional data or analysis, or result in unmanageable safety profiles as compared to their levels of efficacy; that our product candidates may experience manufacturing or supply interrupons or failures; that any of our third party contract research organizaons, contract manufacturing organizaons, clinical sites, or contractors, among others, who we rely on fail to fully perform; that we face substanal compeon, which may result in others developing or commercializing products before or more successfully than we do which could result in reduced market share or market potenal for our product candidates; that we will be unable to successfully iniate or complete the clinical development and eventual commercializaon of our product candidates; that the development and commercializaon of our product candidates will take longer or cost more than planned, including as a result of conducng addional studies; that we may not have sufficient cash to fund our contemplated operaons; that we may not aract and retain high quality personnel; that we or Chugai Pharmaceucal Co., Ltd. will fail to fully perform under the avutomenib license agreement; that our target market for our product candidates might be smaller than we are presently esmang; that Secura Bio, Inc. will fail to fully perform under the asset purchase agreement with Secura Bio, Inc., including in relaon to milestone payments; that we will not see a return on investment on the payments we have and may connue to make pursuant to the collaboraon and opon agreement with GenFleet or that GenFleet will fail to fully perform under the agreement; that we may be unable to obtain adequate financing in the future through product licensing, co-promoonal arrangements, public or private equity, debt financing or otherwise; that we will not pursue or submit regulatory filings for our product candidates; and that our product candidates will not receive regulatory approval, become commercially successful products, or result in new treatment opons being offered to paents. Other risks and uncertaines include those idenfied under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securies and Exchange Commission (SEC) on March 14, 2024 and in any subsequent filings with the SEC. The forward- looking statements contained in this press release reflect Verastem Oncology’s views as of the date hereof, and the Company does not assume and specifically disclaims any obligaon to update any forward-looking statements whether as a result of new informaon, future events or otherwise, except as required by law. For Investor and Media Inquiries: Julissa Viana Vice President, Corporate Communicaons and Investor Relaons investors@verastem.com or media@verastem.com Verastem Oncology Condensed Consolidated Balance Sheets (in thousands) (unaudited) Cash, cash equivalents, & investments Accounts receivable, net Prepaid expenses and other current assets Property and equipment, net Right-of-use asset, net Restricted cash and other assets Total assets $ $ Current Liabilities Long term debt Lease liability, long-term Preferred stock tranche liability Converble preferred stock Stockholders’ equity Total liabilies, converble preferred stock and stockholders’ equity$ $ December 31, 2023 December 31, 2022 137,129 — 6,553 37 1,171 4,828 149,718 26,380 40,086 530 4,189 21,159 57,374 149,718 $ $ $ $ 87,894 31 4,945 92 1,789 299 95,050 21,663 24,526 1,470 — — 47,391 95,050 Verastem Oncology Condensed Consolidated Statements of Operaons (in thousands, except per share amounts) (unaudited) Three months ended December 31, Year ended December 31, 2023 2022 2023 2022 Revenue: Sale of COPIKTRA license and related assets revenue $ Total revenue Operang expenses: — $ — — $ — — $ — Research and development Selling, general and administrave 22,502 8,637 31,139 (31,139) (49) 1,869 (1,120) 10,740 6,106 16,846 (16,846) (7) 769 (724) 61,356 30,728 92,084 (92,084) (109) 6,214 (4,139) 3,071 (27,368) $ — (16,808) $ 2,751 (87,367) $ 2,596 2,596 50,558 24,975 75,533 (72,937) 47 1,215 (2,137) — (73,812) (1.02) $ (0.99)(1) $ (3.96)(1) $ (4.57)(1) 26,808 17,042(1) 22,054(1) 16,138(1) Total operang expenses Loss from operaons Other income (expense) Interest income Interest expense Change in fair value of preferred stock tranche liability Net loss Net loss per share—basic and diluted Weighted average common shares outstanding used in compung: Net loss per share – basic and diluted $ $ (1) Amounts have been retroacvely restated to reflect the 1-for-12 reverse stock split effected on May 31, 2023 Verastem Oncology Reconciliaon of GAAP to Non-GAAP Financial Informaon (in thousands, except per share amounts) (unaudited) Net loss reconciliaon Net loss (GAAP basis) Adjust: Stock-based compensaon expense Non-cash interest, net Change in fair value of preferred stock tranche liability Severance and other Adjusted net loss (non-GAAP basis) Three months ended December 31, 2023 2022 Year ended December 31, 2022 2023 $ (27,368) $ (16,808) $ (87,367) $ (73,812) 1,598 (837) (3,071) 113 1,287 (3) — 109 $ (29,565) $ (15,415) $ 5,860 (1,132) (2,751) 199 (85,191) 6,047 228 — 109 $ (67,428) Reconciliaon of net loss per share Net loss per share – diluted (GAAP Basis) Adjust per diluted share: $ Stock-based compensaon expense Non-cash interest, net Change in fair value of preferred stock tranche liability Severance and other Adjusted net loss per share – diluted (non-GAAP basis) Weighted average common shares outstanding used in compung net loss per share—diluted (1.02) $ (0.99)(1) $ (3.96)(1) $ (4.57)(1) 0.06 (0.03) (0.11) — 0.09(1) —(1) — — 0.26(1) (0.05)(1) (0.12)(1) 0.01(1) 0.38(1) 0.01(1) — 0.01(1) $ (1.10) $ (0.90)(1) $ (3.86)(1) $ (4.18)(1) 26,808 17,042(1) 22,054(1) 16,138(1) (1) Amounts have been retroacvely restated to reflect the 1-for-12 reverse stock split effected on May 31, 2023 

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