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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2020

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: 001-38663

 

Gritstone Oncology, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

47-4859534

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

5959 Horton Street, Suite 300

Emeryville, California

 

94608

(Address of Principal Executive Offices)

 

(Zip Code)

(510) 871-6100

(Registrant’s Telephone Number, Including Area Code)

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

GRTS

 

The Nasdaq Global Select Market

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

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

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No  

As of October 31, 2020, there were 37,764,085 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.


Gritstone Oncology, Inc.

Table of Contents

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

1

Item 1.

 

Financial Statements (unaudited)

 

1

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

 

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019

 

2

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019

 

3

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019

 

5

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

6

Item 2.

 

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

 

23

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risks

 

33

Item 4.

 

Controls and Procedures

 

33

 

 

 

 

 

PART II. OTHER INFORMATION

 

34

Item 1.

 

Legal Proceedings

 

34

Item 1A.

 

Risk Factors

 

34

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

84

Item 3.

 

Defaults Upon Senior Securities

 

85

Item 4.

 

Mine Safety Disclosures

 

85

Item 5.

 

Other Information

 

85

Item 6.

 

Exhibits

 

86

 

 

 

 

 

SIGNATURES

 

87

 

 


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Gritstone Oncology, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share

amounts and par value)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

57,648

 

 

$

57,408

 

Marketable securities

 

 

12,897

 

 

 

70,368

 

Prepaid expenses and other current assets

 

 

3,202

 

 

 

3,497

 

Total current assets

 

 

73,747

 

 

 

131,273

 

Property and equipment, net

 

 

23,306

 

 

 

26,911

 

Operating lease right-of-use assets

 

 

22,706

 

 

 

23,427

 

Deposits and other long-term assets

 

 

2,749

 

 

 

2,778

 

Total assets

 

$

122,508

 

 

$

184,389

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,284

 

 

$

4,621

 

Accrued compensation

 

 

4,911

 

 

 

4,598

 

Accrued liabilities

 

 

664

 

 

 

1,041

 

Accrued research and development expenses

 

 

2,557

 

 

 

1,779

 

Lease liabilities, current portion

 

 

5,069

 

 

 

2,505

 

Deferred revenue, current portion

 

 

5,528

 

 

 

4,956

 

Total current liabilities

 

 

22,013

 

 

 

19,500

 

Other non-current liabilities

 

 

634

 

 

 

 

Lease liabilities, net of current portion

 

 

20,791

 

 

 

20,985

 

Deferred revenue, net of current portion

 

 

7,086

 

 

 

9,560

 

Total liabilities

 

 

50,524

 

 

 

50,045

 

Commitments and contingencies (Notes 6 and 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 300,000,000 shares authorized at

September 30, 2020 and December 31, 2019; 37,763,266 and

36,332,956 shares issued and outstanding at September 30, 2020

and December 31, 2019

 

 

17

 

 

 

17

 

Additional paid-in capital

 

 

371,097

 

 

 

355,291

 

Accumulated other comprehensive gain

 

 

5

 

 

 

24

 

Accumulated deficit

 

 

(299,135

)

 

 

(220,988

)

Total stockholders’ equity

 

 

71,984

 

 

 

134,344

 

Total liabilities and stockholders’ equity

 

$

122,508

 

 

$

184,389

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration

 

$

795

 

 

$

984

 

 

$

2,544

 

 

$

3,481

 

Contribution

 

 

144

 

 

 

 

 

 

144

 

 

 

 

Total revenues

 

 

939

 

 

 

984

 

 

 

2,688

 

 

 

3,481

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

22,050

 

 

 

24,886

 

 

 

65,807

 

 

 

59,314

 

General and administrative

 

 

5,031

 

 

 

4,582

 

 

 

15,751

 

 

 

13,794

 

Total operating expenses

 

 

27,081

 

 

 

29,468

 

 

 

81,558

 

 

 

73,108

 

Loss from operations

 

 

(26,142

)

 

 

(28,484

)

 

 

(78,870

)

 

 

(69,627

)

Interest income, net

 

 

69

 

 

 

936

 

 

 

723

 

 

 

2,898

 

Net loss

 

 

(26,073

)

 

 

(27,548

)

 

 

(78,147

)

 

 

(66,729

)

Other comprehensive gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities,

   net of tax

 

 

(45

)

 

 

(45

)

 

 

(19

)

 

 

116

 

Net and comprehensive loss

 

$

(26,118

)

 

$

(27,593

)

 

$

(78,166

)

 

$

(66,613

)

Net loss per share, basic and diluted

 

$

(0.69

)

 

$

(0.77

)

 

$

(2.10

)

 

$

(2.04

)

Weighted-average number of shares used in computing

   net loss per share, basic and diluted

 

 

37,750,145

 

 

 

35,690,600

 

 

 

37,268,318

 

 

 

32,762,176

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

Three Months Ended September 30, 2020:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2020

 

 

37,713,218

 

 

$

17

 

 

$

369,223

 

 

$

50

 

 

$

(273,062

)

 

$

96,228

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

(45

)

Issuance of common stock upon exercise of

   stock options

 

 

50,048

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,837

 

 

 

 

 

 

 

 

 

1,837

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,073

)

 

 

(26,073

)

Balance at September 30, 2020

 

 

37,763,266

 

 

$

17

 

 

$

371,097

 

 

$

5

 

 

$

(299,135

)

 

$

71,984

 

Three Months Ended September 30, 2019:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2019

 

 

35,654,631

 

 

$

17

 

 

$

348,021

 

 

$

76

 

 

$

(165,736

)

 

$

182,378

 

Unrealized loss on marketable securities,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

(45

)

Lapse of repurchase rights related to

   common stock issued pursuant to early

   exercises

 

 

48,174

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

17

 

Issuance of common stock upon exercise of

   stock options

 

 

31,276

 

 

 

 

 

 

61

 

 

 

 

 

 

 

 

 

61

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,532

 

 

 

 

 

 

 

 

 

1,532

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,548

)

 

 

(27,548

)

Balance at September 30, 2019

 

 

35,734,081

 

 

$

17

 

 

$

349,631

 

 

$

31

 

 

$

(193,284

)

 

$

156,395

 

 

Continued on next page.

 

See accompanying notes to the unaudited condensed consolidated financial statements.


3


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Stockholders’ Equity - Continued

(Unaudited)

(In thousands, except share amounts)

Nine Months Ended September 30, 2020:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

36,332,956

 

 

$

17

 

 

$

355,291

 

 

$

24

 

 

$

(220,988

)

 

$

134,344

 

Issuance of common stock under at the

   market ("ATM") equity offering

   program, net of issuance costs of $104

 

 

1,160,963

 

 

 

 

 

 

9,670

 

 

 

 

 

 

 

 

 

9,670

 

Issuance of common stock under employee

   stock purchase plan (“ESPP”)

 

 

96,234

 

 

 

 

 

 

527

 

 

 

 

 

 

 

 

 

527

 

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Lapse of repurchase rights related to

   common stock issued pursuant to early

   exercises

 

 

30,874

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Issuance of common stock upon exercise of

   stock options

 

 

142,239

 

 

 

 

 

 

183

 

 

 

 

 

 

 

 

 

183

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,415

 

 

 

 

 

 

 

 

 

5,415

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(78,147

)

 

 

(78,147

)

Balance at September 30, 2020

 

 

37,763,266

 

 

$

17

 

 

$

371,097

 

 

$

5

 

 

$

(299,135

)

 

$

71,984

 

 

 

Nine Months Ended September 30, 2019:

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2018

 

 

28,823,130

 

 

$

16

 

 

$

275,593

 

 

$

(85

)

 

$

(126,402

)

 

$

149,122

 

Cumulative effect of adoption of Topic 842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(153

)

 

 

(153

)

Issuance of common stock upon public

  offering at $11.50 per share for cash, net

  of issuance costs of $556

 

 

6,500,000

 

 

 

1

 

 

 

69,708

 

 

 

 

 

 

 

 

 

69,709

 

Unrealized gain on marketable securities,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

116

 

 

 

 

 

 

116

 

Lapse of repurchase rights related to

   common stock issued pursuant to early

   exercises

 

 

149,051

 

 

 

 

 

 

51

 

 

 

 

 

 

 

 

 

51

 

Issuance of common stock upon exercise of

   stock options

 

 

261,900

 

 

 

 

 

 

423

 

 

 

 

 

 

 

 

 

423

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,856

 

 

 

 

 

 

 

 

 

3,856

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66,729

)

 

 

(66,729

)

Balance at September 30, 2019

 

 

35,734,081

 

 

$

17

 

 

$

349,631

 

 

$

31

 

 

$

(193,284

)

 

$

156,395

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

4


Gritstone Oncology, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(78,147

)

 

$

(66,729

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,951

 

 

 

3,303

 

Net amortization of premiums and discounts on marketable securities

 

 

(123

)

 

 

(1,248

)

Stock-based compensation

 

 

5,415

 

 

 

3,856

 

Non-cash operating lease expense

 

 

5,621

 

 

 

4,491

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

853

 

 

 

(1,785

)

Operating lease right-of-use assets

 

 

 

 

 

(3,328

)

Deposits and other long-term assets

 

 

29

 

 

 

(281

)

Accounts payable

 

 

(200

)

 

 

1,600

 

Accrued compensation

 

 

311

 

 

 

(226

)

Accrued and other non-current liabilities

 

 

1,041

 

 

 

104

 

Accrued research and development expenses

 

 

778

 

 

 

2,989

 

Lease liability

 

 

(2,512

)

 

 

(1,824

)

Deferred revenue

 

 

(1,902

)

 

 

(3,481

)

Net cash used in operating activities

 

 

(63,885

)

 

 

(62,559

)

Investing activities

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(8,809

)

 

 

(28,329

)

Maturities of marketable securities

 

 

60,982

 

 

 

96,094

 

Sales of marketable securities

 

 

5,401

 

 

 

 

Purchase of property and equipment

 

 

(3,243

)

 

 

(10,575

)

Net cash provided by investing activities

 

 

54,331

 

 

 

57,190

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

10,473

 

 

 

70,684

 

Payments of deferred financing costs

 

 

(104

)

 

 

(556

)

Net cash provided by financing activities

 

 

10,369

 

 

 

70,128

 

Net increase in cash, cash equivalents and restricted cash

 

 

815

 

 

 

64,759

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

58,400

 

 

 

53,175

 

Cash, cash equivalents and restricted cash at end of period

 

$

59,215

 

 

$

117,934

 

Supplemental disclosures of non-cash investing and financing

   information

 

 

 

 

 

 

 

 

Property and equipment purchases accrued but not yet paid

 

$

96

 

 

$

3,615

 

Remeasurement of operating lease right-of-use asset for lease modification

 

$

3,174

 

 

$

99

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

5


Gritstone Oncology, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.

Organization

Description of Business

Gritstone Oncology, Inc. (“Gritstone” or the “Company”) is an immuno-oncology company developing personalized cancer immunotherapies to fight multiple cancer types. The Company was incorporated in the state of Delaware on August 5, 2015, and is based in Emeryville, California and Cambridge, Massachusetts, with a manufacturing facility in Pleasanton, California. The Company operates in one segment.

2.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited and are comprised of the consolidation of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. The Company has no unconsolidated subsidiaries or investments accounted for under the equity method.

The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of Securities and Exchange Commission (“SEC”) for interim reporting.

The condensed consolidated financial statements are unaudited and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation for interim reporting. The results of operations for any interim period are not necessarily indicative of results of operations for any future period.

Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s financial statements as of and for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 11, 2020.

Need for Additional Capital

The Company has incurred operating losses and has an accumulated deficit as a result of ongoing efforts to develop drug product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. The Company had cash, cash equivalents, and marketable securities of $70.5 million and $127.8 million as of September 30, 2020 and December 31, 2019, respectively. The Company had an accumulated deficit of $299.1 million and $221.0 million as of September 30, 2020 and December 31, 2019, respectively. The Company had net losses of $26.1 million and $78.1  million for the three and nine months ended September 30, 2020, respectively, and $27.5 million and $66.7 million for the three and nine months ended September 30, 2019, respectively, and net cash used in operating activities of $63.9 million and $62.6 million for the nine months ended September 30, 2020 and 2019, respectively. To date, none of the Company’s product candidates have been approved for sale and therefore the Company has not generated any revenue from sales of commercial products. Management expects operating losses to continue for the foreseeable future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of the issuance of these financial statements. As a result, the Company will need to raise additional capital. The Company intends to raise such capital through the sale of convertible stock, additional equity, debt financings or strategic alliances with third parties. However, there can be no assurance that the Company will be successful in acquiring additional funding at levels sufficient to fund its operations or on terms acceptable to the Company. If the Company is unsuccessful in its efforts to raise additional capital or if sufficient funds on acceptable terms are not available when needed, the Company could be required to significantly reduce operating expenses and delay, reduce the scope of or eliminate one or more of its development programs or its future commercialization efforts, out-license intellectual

6


property rights to its product candidates and sell unsecured assets, or a combination of the above, any of which may have a material adverse effect on the Company’s business, results of operations, financial condition and/or its ability to fund its scheduled obligations on a timely basis or at all. Failure to manage discretionary spending or raise additional capital, as needed, may adversely impact the Company’s ability to achieve its intended business objectives. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses in the condensed consolidated financial statements and accompanying notes during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to preclinical and clinical study trial accruals, fair value of assets and liabilities, the fair value of right-of-use assets (“ROU assets”) and lease liabilities, revenue recognition, and the fair value of stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, and marketable securities. Cash, cash equivalents and marketable securities are invested through banks and other financial institutions in the United States. Such deposits may be in excess of federally insured limits. The Company maintains cash equivalents and marketable securities with various high-credit-quality and capitalized financial institutions. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds.

The Company’s investment policy limits investments to certain types of securities issued by the U.S. government, its agencies, and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents, and marketable securities and issuers of marketable securities to the extent recorded on the balance sheets. Through September 30, 2020, the Company has no off-balance sheet concentrations of credit risk.

Other Risks and Uncertainties

The Company is subject to a number of risks similar to those of other early-stage immuno-oncology companies, including dependence on key individuals; the need to develop commercially viable therapeutics; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequate additional financing to fund the development of its product candidates. The Company currently depends on