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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2024


☐	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: 001-39344

Fusion Pharmaceuticals Inc.

(Exact Name of Registrant as Specified in its Charter)


Canada	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
270 Longwood Rd., S. Hamilton, ON, Canada	L8P 0A6
(Address of principal executive offices)	(Zip Code)

(289) 799-0891

(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 shares, no par value per share

    FUSN

    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, a 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.

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 April 29, 2024, the registrant had 85,059,965 common shares, with no par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	2
	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION	45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
Signatures		49

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


	March 31, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	27,790		$	61,456
Accounts receivable		—			7
Short-term investments		182,735			172,153
Prepaid expenses and other current assets		9,923			9,310
Restricted cash		469			469
Total current assets		220,917			243,395
Property and equipment, net		6,584			5,304
Deferred tax assets		4,366			3,961
Restricted cash		849			849
Long-term investments		72,585			13,735
Operating lease right-of-use assets		17,861			18,592
Other non-current assets		652			—
Total assets	$	323,814		$	285,836
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	2,503		$	1,860
Accrued expenses and other current liabilities		13,632			9,864
Deferred revenue		333			333
Operating lease liabilities		4,288			4,163
Total current liabilities		20,756			16,220
Long-term debt, net of discount		49,686			34,775
Income taxes payable, net of current portion		301			301
Deferred revenue, net of current portion		667			667
Operating lease liabilities, net of current portion		10,573			11,393
Total liabilities		81,983			63,356
Commitments and contingencies (Note 15)
Shareholders’ equity:
Common shares, no par value, unlimited shares authorized as of March 31, 2024 and December 31, 2023; 84,865,021 and 79,700,262 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Additional paid-in capital		652,842			599,002
Accumulated other comprehensive (loss) income		(582	)		237
Accumulated deficit		(410,429	)		(376,759	)
Total shareholders’ equity		241,831			222,480
Total liabilities and shareholders’ equity	$	323,814		$	285,836

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

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2024			2023
Collaboration revenue	$	—		$	28
Operating expenses:
Research and development		21,312			15,877
General and administrative		14,548			9,006
Total operating expenses		35,860			24,883
Loss from operations		(35,860	)		(24,855	)
Other income (expense):
Interest income		3,508			1,921
Interest expense		(1,852	)		(1,223	)
Other income (expense), net		297			(145	)
Total other income (expense), net		1,953			553
Loss before benefit for income taxes		(33,907	)		(24,302	)
Income tax benefit		237			11
Net loss	$	(33,670	)	$	(24,291	)
Unrealized (loss) gain on investments		(819	)		384
Comprehensive loss	$	(34,489	)	$	(23,907	)

Net loss per share—basic and diluted	$	(0.40	)	$	(0.45	)

Weighted-average common shares outstanding—basic and diluted		83,775,652			53,775,985

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

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


	Common Shares				Additional Paid-in		Accumulated			Accumulated Other			Total Shareholders’
	Shares		Amount		Capital		Deficit			Comprehensive Loss			Equity
Balances at December 31, 2023		79,700,262	$	—	$	599,002	$	(376,759	)	$	237		$	222,480
Issuance of common share warrants under Loan Agreement		—		—		227		—			—			227
Issuance of common shares from at-the-market offering, net of issuance costs		4,945,148		—		48,469		—			—			48,469
Issuance of common shares upon exercise of common share warrants		162,936		—		—		—			—			—
Issuance of common shares upon exercise of stock options		56,675		—		627		—			—			627
Share-based compensation expense		—		—		4,517		—			—			4,517
Unrealized loss on investments		—		—		—		—			(819	)		(819	)
Net loss		—		—		—		(33,670	)		—			(33,670	)
Balances at March 31, 2024		84,865,021	$	—	$	652,842	$	(410,429	)	$	(582	)	$	241,831


	Common Shares				Additional Paid-in		Accumulated			Accumulated Other			Total Shareholders’
	Shares		Amount		Capital		Deficit			Comprehensive Loss			Equity
Balances at December 31, 2022		44,805,627	$	—	$	444,552	$	(281,862	)	$	(469	)	$	162,221
Issuance of common shares from private placement financing, net of issuance costs		17,648,596		—		56,003		—			—			56,003
Issuance of common shares from at-the-market offering, net of issuance costs		747,336		—		3,367		—			—			3,367
Share-based compensation expense		—		—		3,149		—			—			3,149
Unrealized gain on investments		—		—		—		—			384			384
Net loss		—		—		—		(24,291	)		—			(24,291	)
Balances at March 31, 2023		63,201,559	$	—	$	507,071	$	(306,153	)	$	(85	)	$	200,833

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

FUSION PHARMACEUTICALS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(33,670	)	$	(24,291	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		4,517			3,149
Depreciation and amortization expense		361			273
Non-cash lease expense		859			405
Non-cash interest expense		223			127
(Accretion) amortization of (discounts) premiums on investments, net		(1,214	)		(1,101	)
Deferred tax benefit		(405	)		(494	)
Other		(323	)		(1	)
Changes in operating assets and liabilities:
Accounts receivable		7			(28	)
Prepaid expenses and other current assets		(613	)		(2,663	)
Other non-current assets		(652	)		177
Accounts payable		445			(704	)
Accrued expenses and other current liabilities		3,658			(35	)
Income taxes payable		—			97
Operating lease liabilities		(499	)		(346	)
Net cash used in operating activities		(27,306	)		(25,435	)
Cash flows from investing activities:
Purchases of investments		(118,607	)		(62,422	)
Maturities of investments		49,570			39,117
Purchases of property and equipment		(1,334	)		(1,223	)
Net cash used in investing activities		(70,371	)		(24,528	)
Cash flows from financing activities:
Proceeds from issuance of debt		14,915			—
Proceeds from issuance of common shares from private placement		—			60,005
Proceeds from issuance of common shares from at-the-market offering, net of issuance costs		48,469			3,367
Payment of offering costs		—			(3,857	)
Proceeds from issuance of common shares upon exercise of stock options		627			—
Net cash provided by financing activities		64,011			59,515
Net (decrease) increase in cash, cash equivalents and restricted cash		(33,666	)		9,552
Cash, cash equivalents and restricted cash at beginning of period		62,774			45,333
Cash, cash equivalents and restricted cash at end of period	$	29,108		$	54,885
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,629		$	1,096
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—		$	12,560
Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses	$	308		$	169
Common share issuance costs included in accounts payable and accrued expenses	$	—		$	145

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

FUSION PHARMACEUTICALS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nature of the Business and Basis of Presentation

Fusion Pharmaceuticals Inc., together with its consolidated subsidiary (“Fusion” or the “Company”), is a clinical-stage oncology company focused on developing next-generation radiopharmaceuticals as precision medicines. The Company was formed and subsequently incorporated as Fusion Pharmaceuticals Inc. in December 2014 under the Canada Business Corporations Act. The Company was founded to advance certain intellectual property relating to radiopharmaceuticals that had been developed by the Centre for Probe Development and Commercialization, a radiopharmaceutical research and good manufacturing practice production center. The Company is headquartered in Hamilton, Ontario.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of overall market conditions, the ability to secure additional capital to fund operations and commercial success of its product candidates. Product candidates currently under development will require extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiary, Fusion Pharmaceuticals US Inc. All intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations primarily with proceeds from sales of its convertible preferred shares, including borrowings under a convertible promissory note, which converted into convertible preferred shares, proceeds from sales of its former Irish subsidiary’s preferred exchangeable shares, proceeds from its initial public offering completed in June 2020, proceeds from its “at-the-market” equity offering program (see Note 9), proceeds from its loan and security agreement with Oxford Finance LLC executed in April 2022 (see Note 8), and proceeds from private placement financings completed in February 2023 and May 2023 (see Note 9). The Company has incurred recurring losses since its inception, including net losses of $33.7 million and $24.3 million for the three months ended March 31, 2024 and 2023, respectively. In addition, as of March 31, 2024, the Company had an accumulated deficit of $410.4 million. The Company expects to continue to generate operating losses for the foreseeable future. As of the issuance date of these condensed consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

As a result, the Company will need substantial additional funding to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. The Company may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If the Company fails to raise capital or enter into such agreements as and when needed, the Company would have to significantly delay, reduce or eliminate the development and commercialization of one or more of its product candidates or delay its pursuit of potential in-licenses or acquisitions.

Impact of Market Conditions on Our Business

The Company believes its financial results for the three months ended March 31, 2024 and year ended December 31, 2023 were not significantly impacted by market conditions. However, disruption of global financial markets and a recession or market correction, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, the ongoing conflict in Israel and the Middle East, and other global macroeconomic factors such as inflation and the recent banking industry volatility, could reduce the Company’s ability to access capital, which could, in the future, negatively affect its business and the value of its common shares.

Arrangement Agreement

On March 18, 2024, the Company, AstraZeneca AB, a public company with limited liability (Aktiebolag) incorporated under the laws of Sweden (“Parent”) and 15863210 Canada Inc., a corporation formed under the Canada Business Corporations Act (the “CBCA”) (“Purchaser”), entered into a definitive arrangement agreement (the “Arrangement Agreement”), under which Purchaser will acquire all of the issued and outstanding common shares of the Company for a price of $21.00 per share in cash at closing plus a non-transferable contingent value right (“CVR”) of $3.00 per share in cash payable upon the achievement of a specified regulatory milestone, subject to certain terms and conditions. The acquisition of the Company’s common shares will be completed by way of a statutory plan of arrangement under the CBCA (the “Arrangement”). The Arrangement is expected to close in the second quarter of 2024.

Completion of the Arrangement is subject to a number of conditions, including: (i) the approval of 66 2⁄3% of the votes cast by the Company’s shareholders and a simple majority of the votes cast by Shareholders (excluding certain shareholders required to be excluded in accordance with Multi-lateral Instrument 61-101 of the Canadian Securities Administrators) (the “Required Shareholder Approval”), at a special meeting of shareholders (ii) approval of the Ontario Superior Court of Justice (Commercial List); (iii) the accuracy of the representations and warranties contained in the Arrangement Agreement, subject to specified thresholds and exceptions; (iv) compliance in all material respects with the covenants contained in the Arrangement Agreement; (v) the absence of a Material Adverse Effect (as defined in the Arrangement Agreement) with respect to the Company; and (vi) satisfaction of regulatory conditions, including receipt of approval or expiration of the applicable waiting period, under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the Competition Act (Canada), each as amended.

The parties may terminate the Arrangement Agreement in certain circumstances, including by the Company, prior to obtaining the Required Shareholder Approval, to enter into a definitive written agreement with respect to a Superior Proposal (as defined in the Arrangement Agreement), subject to compliance with specified process and notice requirements. The Arrangement Agreement provides for the payment by the Company to Parent of a termination fee of $71.7 million if the Arrangement Agreement is terminated in certain circumstances, including termination by the Company to accept and enter into a definitive agreement with respect to a Superior Proposal. The Arrangement Agreement also provides for the payment by Parent to the Company of a termination fee of $102.4 million if the Arrangement Agreement is terminated by either party if the Effective Time (as defined in the Arrangement Agreement) does not occur on or prior to a mutually agreed date and all closing conditions other than required antitrust approvals are otherwise satisfied (or will be satisfied at the Effective Time) or if there is a legal restraint prohibiting the consummation of the Arrangement relating to the required antitrust approvals (in each case other than the Investment Canada Act).

Summary of Significant Accounting Policies

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses, valuations of share-based awards, valuation allowance of deferred tax assets, and revenue recognition. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2024, the condensed consolidated statement of operations and comprehensive loss, and the condensed consolidated statement of shareholders’ equity, and the condensed consolidated statement of cash flows for the three months ended March 31, 2024 and 2023 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2024 and the results of its operations and its cash flows for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

The accompanying balance sheet as of December 31, 2023 has been derived from the Company’s audited financial statements for the year ended December 31, 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial

statements should be read in conjunction with the audited annual consolidated financial statements as of December 31, 2023, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 20, 2024.

Foreign Currency and Currency Translation

The reporting currency of the Company is the U.S. dollar. The functional currency of the Company’s operating company in Canada and operating company in the U.S. is also the U.S. dollar. As a result, the Company records no cumulative translation adjustments related to translation of unrealized foreign exchange gains or losses.

For the remeasurement of local currencies to the U.S. dollar functional currency of the Canadian entity, assets and liabilities are translated into U.S. dollars at the exchange rate in effect on the balance sheet date, and income items and expenses are translated into U.S. dollars at the average exchange rate in effect during the period. Resulting transaction gains (losses) are included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss, as incurred.

Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss, as incurred.

During the three months ended March 31, 2024 and 2023, the Company recorded $0.1 million and $(0.3) million, respectively, of foreign currency gains (losses) in the condensed consolidated statements of operations and comprehensive loss.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of standard checking accounts, money market accounts, and all highly liquid investments with an original maturity of three months or less at the date of purchase.

As of March 31, 2024 and December 31, 2023, the Company was required to maintain a separate cash balance of $0.2 million to collateralize corporate credit cards with a bank, which was classified as restricted cash, current, on its condensed consolidated balance sheets. The Company also maintained a $0.1 million guaranteed investment certificate to fulfill certain contractual obligations which was classified as restricted cash, current, as of March 31, 2024 and December 31, 2023.

In connection with the Company’s lease agreement entered into in October 2019 (see Note 14), the Company maintained a letter of credit of $1.5 million for the benefit of the landlord, which was reduced to $1.0 million during the year ended December 31, 2023. As of March 31, 2024 and December 31, 2023, $0.2 million and $0.8 million of the underlying cash balance collateralizing this letter of credit was classified as restricted cash, current and non-current, respectively, on the Company’s condensed consolidated balance sheets based on the release date of the restrictions of this cash.

As of March 31, 2024 and December 31, 2023, the cash, cash equivalents and restricted cash of $29.1 million and $62.8 million, respectively, presented in the condensed consolidated statements of cash flows included cash and cash equivalents of $27.8 million and $61.5 million, respectively, and restricted cash of $1.3 million for both periods.

Investments

The Company determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company classifies its investments as current or non-current based on each instrument’s underlying maturity date. Investments with original maturities of greater than three months and remaining maturities less than twelve months are classified as current and are included in short-term investments in the condensed consolidated balance sheets. Investments with remaining maturities greater than one year from the balance sheet date are classified as non-current and are included in long-term investments in the condensed consolidated balance sheets. The Company’s investments are classified as available-for-sale, are reported at fair value and consist of U.S. and Canadian government agency debt securities, corporate bonds, and commercial paper. Unrealized gains and losses are included in other comprehensive (loss) income as a component of shareholders’ equity until realized. Amortization and accretion of premiums and discounts are recorded in interest income. Realized gains and losses on debt securities are included in other (expense) income, net.

The Company reviews its portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below cost have resulted from a credit-related loss or other factors. If the decline in fair value is due to credit-related factors, a loss is recognized in net loss, and if the decline in fair value is not due to credit-related factors, the loss is recorded in other comprehensive loss. No credit losses were recorded during the periods presented.

Collaborative Arrangements

The Company considers the nature and contractual terms of arrangements and assesses whether an arrangement involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the activity. If the Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the activity, the Company accounts for such arrangement as a collaborative arrangement under ASC 808, Collaborative Arrangements. ASC 808 describes arrangements within its scope and considerations surrounding presentation and disclosure, with recognition matters subjected to other authoritative guidance, in certain cases by analogy.

For arrangements determined to be within the scope of ASC 808 where a collaborative partner is not a customer for certain research and development activities, the Company accounts for payments received for the reimbursement of research and development costs as a contra-expense in the period such expenses are incurred. This reflects the joint risk sharing nature of these activities within a collaborative arrangement. The Company classifies payments owed or receivables recorded as other current liabilities or prepaid expenses and other current assets, respectively, in the Company’s consolidated balance sheets.

If payments from the collaborative partner to the Company represent consideration from a customer in exchange for distinct goods and services provided, then the Company accounts for those payments within the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). Please refer to Note 3, “Collaboration Agreement” for additional details regarding the Company’s Strategic Collaboration Agreement with AstraZeneca UK Limited (“AstraZeneca”) (the “AstraZeneca Agreement”).

Revenue from Contracts with Customers

In accordance with ASC 606, 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. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps: (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 within the contract and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the Company’s arrangements typically consist of a license to the Company’s intellectual property and/or research and development services. The Company may provide customers with options to additional items in such arrangements, which are accounted for separately when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. Amounts received, or that are unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract are recognized as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date

are classified as the current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.

The Company’s revenue generating arrangements typically include upfront license fees, milestone payments and/or royalties.

If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

At the inception of an agreement that includes research and development milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach. The Company primarily uses the most likely amount approach as this approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of the estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty). The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

For the three months ended March 31, 2024, the Company did not record any revenue under collaboration agreements. For the three months ended March 31, 2023, the Company recorded less than $0.1 million of revenue under collaboration agreements. Please refer to Note 3, “Collaboration Agreement” for additional details regarding revenue recognition under the AstraZeneca Agreement.

Business Combinations

In determining whether an acquisition should be accounted for as a business combination or asset acquisition, the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is not deemed to be a business, and is instead deemed to be an asset. If this is not the case, the Company then further evaluates whether the single identifiable asset or group of similar identifiable assets and activities includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. If so, the Company concludes that the single identifiable asset or group of similar identifiable assets and activities is a business.

The Company accounts for business combinations using the acquisition method of accounting. Application of this method of accounting requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill, which is not amortized for accounting purposes but is subject to testing for impairment at least annually. Acquired in-process research and development (“IPR&D”) is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. Transaction costs related to business combinations are expensed as incurred. Determining the fair value of assets acquired and liabilities assumed in a business combination requires management to use significant judgment and estimates, especially with respect to intangible assets.

During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, all adjustments are recorded in the consolidated statements of operations as operating expenses or income.

To date, the Company has not recorded any acquisitions as a business combination.

Asset Acquisitions

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire IPR&D with no alternative future use is charged to expense at the acquisition date.

Contingent consideration in asset acquisitions payable in the form of cash is recognized when payment becomes probable and reasonably estimable, unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the asset acquisition cost when acquired. Contingent consideration payable in the form of a fixed number of the Company’s own shares is measured at fair value as of the acquisition date and recognized when the issuance of the shares becomes probable. Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets, or, if related to IPR&D with no alternative future use, charged to expense.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 4). The carrying values of the Company’s amounts due for Canadian harmonized sales tax, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.

Leases

The Company accounts for leases in accordance with ASC 842, Leases. At contract inception, the Company determines if an arrangement is or contains a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If determined to be or contain a lease, the lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease. For each lease with a term greater than twelve months, the Company records a right-of-use asset and lease liability.

A right-of-use asset represents the economic benefit conveyed to the Company by the right to use the underlying asset over the lease term. A lease liability represents the obligation to make lease payments arising from the lease. The Company records amortization of operating right-of-use assets and accretion of lease liabilities as a single lease cost on a straight-line basis over the lease term. The Company elected the practical expedient to not separate lease and non-lease components and therefore measures each lease payment as the total of the fixed lease and associated non-lease components. Lease liabilities are measured at the lease commencement date and calculated as the present value of the future lease payments in the contract using the rate implicit in the contract, when available. If an implicit rate is not readily determinable, the Company uses its incremental borrowing rate measured as the rate at which the Company could borrow, on a fully collateralized basis, a commensurate loan in the same currency over a period consistent with the lease term at the commencement date. Right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments, less lease incentives granted by the lessor. The lease term is measured as the noncancelable period in the contract, adjusted for any options to extend or terminate when it is reasonably certain the Company will extend the lease term via such options based on an assessment of economic factors present as of the lease commencement date. The Company elected the practical expedient to not recognize leases with a lease term of twelve months or less.

The Company assesses its right-of-use assets for impairment consistent with the assessment performed for long-lived assets used in operations. If an impairment is recognized on operating lease right-of-use assets, the lease liability continues to be recognized using

the same effective interest method as before the impairment and the operating lease right-of-use asset is amortized over the remaining term of the lease on a straight-line basis.

The Company’s operating leases are presented in the condensed consolidated balance sheet as operating lease right-of-use assets, classified as noncurrent assets, and operating lease liabilities, classified as current and noncurrent liabilities based on the discounted lease payments to be made within the proceeding twelve months. Variable costs associated with a lease, such as maintenance and utilities, are not included in the measurement of the lease liabilities and right-of-use assets but rather are expensed when the events determining the amount of variable consideration to be paid have occurred.

Research, Development and Manufacturing Contract Costs and Accruals

The Company has entered into various research, development and manufacturing contracts with research institutions and other companies. These agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research, development and manufacturing costs. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations to those third parties as of period end. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research, development and manufacturing activities, invoicing to date under the contracts, communication from the research institutions and other companies of any actual costs incurred during the period that have not yet been invoiced and the costs included in the contracts. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made by the Company. The historical accrual estimates made by the Company have not been materially different from the actual costs.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in shareholders’ equity that result from transactions and economic events other than those with shareholders. For the three months ended March 31, 2024 and 2023, unrealized gains and losses on investments are included in other comprehensive (loss) income as a component of shareholders’ equity until realized.

Net Loss per Share

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share is computed by dividing the diluted net income (loss) by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares. For purposes of this calculation, outstanding stock options, restricted stock units and warrants are considered potential dilutive common shares.

In periods in which the Company reported a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for the three months ended March 31, 2024 and 2023.

Recently Issued Accounting Pronouncements

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of ASU 2023-07 will have on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The amendments in this update expand income tax disclosure requirements, including additional information pertaining to the rate reconciliation, income taxes paid, and other disclosures. This update is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of ASU 2023-09 will have on its condensed consolidated financial statements.

Collaboration Agreement

Strategic Collaboration Agreement with AstraZeneca UK Limited

In October 2020, the Company and AstraZeneca entered into the AstraZeneca Agreement pursuant to which the Company and AstraZeneca will work to jointly discover, develop and commercialize next-generation alpha-emitting radiopharmaceuticals and combination therapies for the treatment of cancer globally by leveraging the Company’s Targeted Alpha Therapies (“TATs”) platform and expertise in radiopharmaceuticals with AstraZeneca’s leading portfolio of antibodies and cancer therapeutics, including DNA damage response inhibitors (“DDRis”). Each party retains full ownership over its existing assets.

The AstraZeneca Agreement consists of two distinct collaboration programs: novel TATs and combination therapies. Under the AstraZeneca Agreement, the parties may develop up to three novel TATs (the “Novel TATs Collaboration”). The parties will also evaluate potential combination strategies involving the Company’s existing assets, including the Company’s lead candidate FPI-1434, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers (the “Combination Therapies Collaboration”).

The AstraZeneca Agreement expires on a TAT-by-TAT and combination-by-combination basis upon the later of the expiration of development and exclusivity obligations relating to such TAT or combination or, if such TAT or combination is commercialized as a product under the AstraZeneca Agreement, the expiration of the commercial life of such product. The Company and AstraZeneca can each terminate the AstraZeneca Agreement for the other party’s uncured material breach following the applicable notice period. Each of the Company and AstraZeneca may also terminate the AstraZeneca Agreement with respect to any TAT or combination product if such party determines that the continued development of such TAT or combination product is not commercially viable, or for a material safety issue with respect to such TAT or combination product.

Novel TATs Collaboration

As part of the Novel TATs Collaboration, the parties may develop up to three novel TATs. The Company and AstraZeneca will share development costs equally (with each party responsible for the cost of its own supply in connection with such development). Either party has the right to opt out of the co-development and co-commercialization arrangement at pre-determined timepoints and obtain exclusive rights to a novel TAT in exchange for milestone payments to the other party of up to $145.0 million per novel TAT and a low or high single-digit royalties on potential sales (depending on the opt out time point). If neither party opts out, and unless otherwise agreed by the parties, AstraZeneca will lead worldwide commercialization activities for the novel TATs, subject to the Company’s option to co-promote the TATs in the U.S. All profits and losses resulting from such commercialization activities will be shared equally. In January 2022, the Company announced the nomination of the first novel TAT candidate under the Novel TATs Collaboration, which the Company refers to as FPI-2068. FPI-2068 is a TAT designed to deliver actinium-225 (“225Ac”) to various solid tumors that express epidermal growth factor receptor (“EGFR”) and mesenchymal epithelial transition factor (“cMET”). In April 2023, the Company announced the clearance of investigational new drug applications (“INDs”) for FPI-2068 and its corresponding imaging analogue, FPI-2107, by the U.S. Food and Drug Administration (the “FDA”).

The Novel TATs Collaboration is within the scope of ASC 808 as the Company and AstraZeneca are both active participants in the research and development activities and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. The research and development activities are a unit of account under the scope of ASC 808 and are not promises to a customer under the scope of ASC 606.

The Company records its portion of the research and development expenses as the related expenses are incurred. All payments received or amounts due from AstraZeneca for reimbursement of shared costs are accounted for as an offset to research and development expense. For the three months ended March 31, 2024 and 2023, the Company incurred $1.8 million and $1.6 million, respectively, in research and development expenses relating to the Novel TATs Collaboration which was offset by $0.6 million in amounts due from AstraZeneca for reimbursement of shared costs for both periods. As of March 31, 2024 and December 31, 2023, the Company recorded $1.2 million and $0.9 million, respectively, in amounts due from AstraZeneca for reimbursement of shared costs in prepaid expenses and other current assets.

Combination Therapies Collaboration

As part of the Combination Therapies Collaboration, the parties will evaluate potential combination strategies involving the Company’s existing assets, including the Company’s FPI-1434 product candidate, in combination with certain of AstraZeneca’s existing therapeutics for the treatment of various cancers. The Company received an upfront payment of $5.0 million from AstraZeneca in December 2020 associated with the Combination Therapies Collaboration. AstraZeneca will fully fund all research and development activities for the combination strategies, until such point as the Company may opt-in to the clinical development activities.

The Company also has the right to opt-out of clinical development activities relating to these combination therapies. In such instance, the Company will be responsible for repaying its share of the development costs via a royalty on the additional combination sales only if its drug is approved on the basis of clinical development solely conducted by AstraZeneca, in which case the royalty payments shall also include a variable risk premium based on the number of the Company’s product candidates to have received regulatory approval at that time.

Each party will have the sole right, on a country-by-country basis, to commercialize its respective contributed compound as a component of any combination therapy for which such party’s contributed compound may be commercialized under a separate marketing authorization from the other party’s contributed compound to such combination therapy. The parties will negotiate in good faith on a combination therapy-by-combination therapy basis the terms and conditions to co-commercialize any combination therapy that is to be commercialized under a single marketing authorization. During the period of time commencing with the inclusion of an available molecular target in the selection pool for development as a combination therapy and ending upon the end of the nomination period or earlier removal of such combination target from such pool, the Company will not undertake any preclinical or clinical studies combining the Company’s TAT platform with any compound modulating the activity of such combination target. Following selection of a target under the AstraZeneca Agreement and payment of an exclusivity fee by AstraZeneca, and provided that AstraZeneca enrolls its first patient in a clinical trial as further defined in the AstraZeneca Agreement within a pre-defined period of time of such selection, the Company will not undertake any preclinical or clinical studies combining the Company’s TAT platform with compounds modulating the same combination target for the duration of the evaluation period for such combination target, as further defined in the AstraZeneca Agreement. Within a certain time period following initiation of the evaluation period with respect to a combination target, AstraZeneca has the exclusive right to undertake, alone or in collaboration with the Company, all further clinical or preclinical combination studies with respect to a combination target by paying certain exclusivity fees. The Company is currently eligible to receive future payments of up to $25.0 million, including those for the achievement of certain clinical milestones and exclusivity fees.

The Company determined the research and development activities associated with the Combination Therapies Collaboration are a key component of its central operations and AstraZeneca has contracted with the Company to obtain goods and services which are an output of the Company’s ordinary activities in exchange for consideration. Further, the Company does not share the risks and rewards of the underlying research activities making AstraZeneca a customer for the Combination Therapies Collaboration which falls within the scope of ASC 606.

To determine the appropriate amount of revenue to be recognized under ASC 606, the Company performed the following steps: (i) identify the promised goods or services in the contract, (ii) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract, (iii) measure the transaction price, including the constraint on variable consideration, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

Under ASC 606 the Company accounts for (i) the license it conveyed to AstraZeneca with respect to certain intellectual property and (ii) the obligations to perform research and development services as part of the Combination Therapies Collaboration as a single performance obligation under the AstraZeneca Agreement. The Company concluded AstraZeneca’s right to purchase exclusive options to obtain certain development, manufacturing and commercialization rights represent customer options that are not performance obligations as they do not contain any discounts or other rights that would be considered a material right in the arrangement. Such options will be accounted for upon AstraZeneca’s election.

The Company determined the transaction price under ASC 606 at the inception of the AstraZeneca Agreement to be the $5.0 million upfront payment. The cost reimbursement payments for all costs incurred by the Company under the Combination Therapies Collaboration represent variable consideration that is not constrained. Additionally, the clinical milestone payments represent variable consideration that is constrained. In making this assessment, the Company considered several factors, including the fact that achievement of the milestones are outside its control and contingent upon the future success of clinical trials and AstraZeneca’s actions. The payments related to the achievement of certain clinical milestones do not relate to separate, distinct performance obligations.

Under ASC 606, the Company recognizes revenue using the cost-to-cost method, which it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. Under ASC 606, the estimated transaction price includes variable consideration that is not constrained. The Company does not include variable

consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will occur when any uncertainty associated with the variable consideration is resolved. The estimate of the Company’s measurement of progress and estimate of variable consideration to be included in the transaction price will be updated at each reporting date as a change in estimate.

For the clinical milestone payments, the Company utilizes the most likely amount method to determine the amounts recognized and timing of recognition. Once the constraint is removed, the clinical milestone payments will be accounted for with the research and development services for the purposes of revenue recognition which will occur over time as the services are provided. Upon the achievement of any milestone for specified clinical development events, the Company will utilize the same cost-to-cost model with a cumulative catch-up recognized in the period in which any such event occurs.

The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved, or other changes in circumstances occur, adjust its estimate of the transaction price if necessary. The Company initially recorded the $5.0 million upfront fee as a contract liability for deferred revenue in its consolidated balance sheet.

The following table presents changes in the Company’s accounts receivable and contract liabilities for the three months ended March 31, 2024 (in thousands):


	Balance as of							Balance as of
	December 31, 2023		Additions		Deductions			March 31, 2024
Accounts receivable	$	7	$	—	$	(7	)	$	—
Contract liabilities:
Deferred revenue	$	1,000	$	—	$	—		$	1,000

During the three months ended March 31, 2024 and 2023, the Company did not recognize any revenue from amounts included in deferred revenue at the beginning of the period.

The current portion of deferred revenue and deferred revenue, net of current portion, are $0.3 million and $0.7 million as of March 31, 2024, respectively, which reflects the Company’s estimate of the revenue it expects to recognize within the next 12 months and beyond 12 months, respectively. The Company expects to recognize the revenue associated with the AstraZeneca Agreement in subsequent periods through the year ending December 31, 2026.

Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values (in thousands):


	Fair Value Measurements as of March 31, 2024 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	10,888	$	—	$	—	$	10,888
Canadian Government agency debt securities		—		4,405		—		4,405
Investments:
Commercial paper		—		44,035		—		44,035
Corporate bonds		—		42,108		—		42,108
Canadian Government agency debt securities		—		11,130		—		11,130
U.S. Government agency debt securities		—		158,047		—		158,047
	$	10,888	$	259,725	$	—	$	270,613


	Fair Value Measurements as of December 31, 2023 Using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	1,329	$	—	$	—	$	1,329
Canadian Government agency debt securities		—		2,932		—		2,932
U.S. Government agency debt securities		—		993		—		993
Investments:
Commercial paper		—		41,987		—		41,987
Corporate bonds		—		16,110		—		16,110
Canadian Government agency debt securities		—		13,753		—		13,753
U.S. Government agency debt securities		—		114,038		—		114,038
	$	1,329	$	189,813	$	—	$	191,142

During the three months ended March 31, 2024 and the year ended December 31, 2023, there were no transfers between Level 1, Level 2 and Level 3.

Investments

Investments consisted of the following (in thousands):


	March 31, 2024
	Amortized Cost		Fair Value
Due within one year or less	$	183,099	$	182,735
Due after one year through three years		72,803		72,585
	$	255,902	$	255,320


	December 31, 2023
	Amortized Cost		Fair Value
Due within one year or less	$	171,936	$	172,153
Due after one year through three years		13,715		13,735
	$	185,651	$	185,888

As of March 31, 2024, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Current		Non-Current
Commercial paper	$	44,072	$	6	$	(43	)	$	44,035	$	44,035	$	—
Corporate bonds		42,254		2		(148	)		42,108		16,103		26,005
Canadian Government agency debt securities		11,237		4		(111	)		11,130		11,130		—
U.S. Government agency debt securities		158,339		16		(308	)		158,047		111,467		46,580
	$	255,902	$	28	$	(610	)	$	255,320	$	182,735	$	72,585

As of December 31, 2023, the amortized cost and estimated fair value of investments, by contractual maturity, was as follows (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Current		Non-Current
Commercial paper	$	41,967	$	30	$	(10	)	$	41,987	$	41,987	$	—
Corporate bonds		16,126		4		(20	)		16,110		9,750		6,360
Canadian Government agency debt securities		13,523		243		(13	)		13,753		13,753		—
U.S. Government agency debt securities		114,035		91		(88	)		114,038		106,663		7,375
	$	185,651	$	368	$	(131	)	$	185,888	$	172,153	$	13,735

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	March 31, 2024		December 31, 2023
Prepaid external research and development expenses	$	2,452	$	2,249
Prepaid insurance		477		981
Prepaid software subscriptions		348		397
Income tax receivable		1,950		2,117
Interest receivable		1,343		822
Other receivable due from AstraZeneca		1,163		931
Canadian harmonized sales tax receivable		224		338
Refundable deposits due from counterparties		1,534		1,257
Other		432		218
	$	9,923	$	9,310

Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	March 31, 2024		December 31, 2023
Accrued employee compensation and benefits	$	2,606	$	4,956
Accrued external research and development expenses		4,466		3,925
Accrued professional and consulting fees		6,511		899
Other		49		84
	$	13,632	$	9,864

Debt

Long-term debt, net of discount, consisted of the following (in thousands):


	March 31, 2024			December 31, 2023
Principal amount of long‑term debt	$	50,000		$	35,000
Less: Current portion of long‑term debt		—			—
Long‑term debt, net of current portion		50,000			35,000
Accretion of Final Fee		577			440
Debt discount		(891	)		(665	)
Long‑term debt, net of discount	$	49,686		$	34,775

Loan Agreement

On April 4, 2022 (the “Original Closing Date”), the Company entered into a loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC, as collateral agent and lender (the “Lender”). The Lender initially agreed to make available to the Company term loans in an aggregate principal amount of up to $75.0 million under the Loan Agreement. The Company plans to use the proceeds of the term loans for working capital and general corporate purposes. The Loan Agreement initially provided a term loan commitment of $75.0 million in three potential tranches: (i) a $25.0 million Term A loan facility, with $10.0 million funded on the Original Closing Date and the remaining $15.0 million to be funded at the request of the Company on a one-time basis at any time prior to April 4, 2023,

(ii) a $25.0 million Term B loan facility to be funded at the request of the Company, subject to certain conditions being met, no later than June 30, 2023, and (iii) a $25.0 million Term C loan facility to be funded at the Lender’s sole discretion. The term loan facilities have a maturity date of April 1, 2027. Initially borrowings under all three loan facilities bear interest at a floating per annum rate equal to the greater of (i) 8.00% and (ii) the sum of (a) the greater of (x) 1 Month LIBOR Rate and (y) 0.10% plus (b) 7.90%.

On August 23, 2022, the Company and the Lender entered into a Consent and First Amendment to Loan and Security Agreement to amend certain terms of the Loan Agreement.

On September 21, 2022, the Company and the Lender entered into a Second Amendment to Loan and Security Agreement (the “Second Amendment”). The Second Amendment provides a term loan commitment of $75.0 million in four potential tranches: (i) a $10.0 million Term A loan facility, funded on the Original Closing Date, (ii) a $25.0 million Term B loan facility, funded at the request of the Company subject to certain conditions having been met, for which funding took place in connection with the execution of the Second Amendment, (iii) a $15.0 million Term C loan facility to be funded at the request of the Company, subject to certain conditions being met, no later than April 4, 2023, and (iv) a $25.0 million Term D loan facility to be funded at the Lender’s sole discretion. The term loan facilities have a maturity date of April 1, 2027. The floating per annum rate of interest for borrowings under all four loan facilities was amended to the greater of (i) 8.00% and (ii) the sum of (a) 1-Month CME Term SOFR (as defined in the Second Amendment), (b) 0.10% and (c) 7.90%.

Additionally, on March 30, 2023, the Company and the Lender entered into a Third Amendment to Loan and Security Agreement (together with the Loan Agreement, Consent and First Amendment to Loan and Security Agreement, and Second Amendment, the “Amended Loan Agreement”) to amend the availability of the Term C loan facility, which is to be funded at the request of the Company, subject to certain conditions being met, no later than March 31, 2024, under the Amended Loan Agreement.

On January 11, 2024, the Term C loan facility under the Amended Loan Agreement with Oxford was funded at the request of the Company. The Company received $14.9 million in net proceeds from the funding of the Term C loan facility. Prior to funding, all conditions for the drawdown of the Term C loan facility had been satisfied.

As the terms of the amendments were not substantially different than the terms of the Loan Agreement, the amendments were accounted for as a debt modification. Issuance costs paid to the Lender in connection with the amendments were recorded as an additional debt discount and will be amortized to interest expense over the remaining term, together with unamortized original issuance costs, using the effective interest method.

The Company is permitted to make interest-only payments on any outstanding amount due under the term loans through June 1, 2025, after which time principal will also be repaid based on an amortization schedule.

The Company is obligated to pay a fee equal to 4.00% of the aggregate amount of the term loans funded (the “Final Fee”), to occur upon the earliest of (i) the maturity date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. The Company accretes the Final Fee that will be due at final repayment to outstanding debt by charges to interest expense over the term of the loans using the effective-interest method.

The Company has the option to prepay all, but not less than all, of the outstanding principal balance of the term loans under the Loan Agreement. If the Company prepays all or a portion of the term loans prior to the maturity date, it is obligated to pay the Lender a prepayment fee based on a percentage of the outstanding principal balance of the loans, equal to 3.00% if the payment occurs on or before 12 months after the funding date of the applicable loan, 2.00% if the prepayment occurs more than 12 months after, but on or before 24 months after, the funding date of the applicable loan, or 1.00% if the prepayment occurs more than 24 months after, but on or before 36 months after, the funding date of the applicable loan, and no prepayment fee is required thereafter.

The Loan Agreement contains financial covenants that require the Company to maintain certain minimum cash balances generally equal to 55% of the outstanding principal or 110% of the outstanding principal in cases where the cash balances are not maintained in accounts pledged as collateral for the benefit of the Lender. The Company was in compliance with all such covenants as of March 31, 2024. The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% per annum may be applied to the outstanding loan balances, and the Lender

may declare all outstanding obligations immediately due and payable. The Company’s obligations under the Loan Agreement are collateralized by a first priority security interest in substantially all of its assets.

As of March 31, 2024, the estimated future principal payments due were as follows (in thousands):


Year Ending December 31,
2024 (nine months)	$	—
2025		15,217
2026		26,087
2027		8,696
2028		—
Thereafter		—
	$	50,000

In connection with the Loan Agreement and the funding of the Term A loan facility, the Company issued warrants to the Lender (the “Term A Warrants”) (see Note 9) to purchase an aggregate of 26,110 common shares, equal to 2.00% of the $10.0 million funded from the Term A loan facility divided by the exercise price of $7.66 per share.

In connection with the funding of the Term B loan facility, the Company issued warrants to the Lender (the “Term B Warrants”) (see Note 9) to purchase an aggregate of 170,010 common shares, equal to 2.00% of the $25.0 million funded from the Term B loan facility divided by the exercise price of $2.94 per share.

In connection with the funding of the Term C loan facility, the Company issued warrants to the Lender (the “Term C Warrants”) (see Note 9) to purchase an aggregate of 33,818 common shares, equal to 2.00% of the $15.0 million funded from the Term C loan facility divided by the exercise price of $8.87 per share.

The Company is obligated to issue additional warrants (the “Additional Warrants”) to the Lender in the event the Term D loan facility is funded. The Additional Warrants will also be equal to 2.00% of the term loan funded. Each warrant will terminate ten years from the date of its original issuance.

The Company accounted for the Term A Warrants, Term B Warrants and Term C Warrants as equity instruments since they were indexed to the common shares and met the criteria for equity classification. The relative fair value of the Term A Warrants, Term B Warrants and Term C Warrants were $0.1 million, $0.4 million and $0.2 million, respectively, and were recorded as a debt discount. This amount is being amortized to interest expense over the term of the loans using the effective-interest method. The Company estimated the fair value of the Term A Warrants, Term B Warrants and Term C Warrants using the Black-Scholes option-pricing model.

Equity

Common Shares

On May 10, 2023, the Company entered into a Securities Purchase Agreement (the “May 2023 Purchase Agreement”) with the purchasers named therein (the “May 2023 Investors”). Pursuant to the May 2023 Purchase Agreement, the Company agreed to sell an aggregate of 4,784,689 of its common shares, no par value per share, at a purchase price of $4.18 per share, to the May 2023 Investors for net proceeds of approximately $20.0 million after deducting fees and offering costs (collectively, the “May 2023 Offering”). The May 2023 Offering closed on May 15, 2023.

On February 13, 2023, the Company entered into a Securities Purchase Agreement (the “February 2023 Purchase Agreement”) with the purchasers named therein (the “February 2023 Investors”). Pursuant to the February 2023 Purchase Agreement, the Company agreed to sell an aggregate of 17,648,596 of its common shares, no par value per share, at a purchase price of $3.40 per share, to the February 2023 Investors for net proceeds of approximately $56.0 million after deducting fees and offering costs (collectively, the “February 2023 Offering”). The February 2023 Offering closed on February 16, 2023.

In July 2021, the Company entered into an Open Market Sales AgreementSM (the “Sales Agreement”) with Jefferies LLC to issue and sell common shares of up to $100.0 million in gross proceeds, from time to time during the term of the Sales Agreement, through an “at-the-market” equity offering program under which Jefferies LLC will act as the Company’s agent and/or principal (the “ATM Facility”). The ATM Facility provides that Jefferies LLC will be entitled to compensation for its services in an amount of up to 3.0% of the gross proceeds of any shares sold under the ATM Facility. The Company has no obligation to sell any shares under the ATM Facility and may, at any time, suspend solicitation and offers under the Sales Agreement.

On January 19, 2024, the Company and Jefferies LLC entered into an amendment to the Sales Agreement to increase the aggregate offering price of the common shares that the Company may offer under the Sales Agreement by $100.0 million for an aggregate of $200.0 million. The material terms and conditions of the Sales Agreement otherwise remain unchanged.

As of March 31, 2024, the Company has sold 18,504,652 common shares for net proceeds of $119.4 million under the Sales Agreement.

As of March 31, 2024, the Company’s articles of the corporation, as amended and restated, authorized the Company to issue unlimited common shares, each with no par value per share.

Each common share entitles the holder to one vote on all matters submitted to a vote of the Company’s shareholders. Common shareholders are entitled to receive dividends, if any, as may be declared by the board of directors. Through March 31, 2024, no cash dividends had been declared or paid by the Company.

Warrants

In April 2022, in connection with the Loan Agreement with Oxford Finance LLC (see Note 8) and the funding of the Term A loan facility, the Company issued warrants to the Lender to purchase an aggregate of 26,110 common shares, equal to 2.00% of the $10.0 million funded from the Term A loan facility divided by the exercise price of $7.66 per share.

In September 2022, the Term B loan facility was funded by Oxford Finance LLC and the Company issued warrants to the Lender to purchase an aggregate of 170,010 common shares, equal to 2.00% of the $25.0 million funded from the Term B loan facility divided by the exercise price of $2.94 per share.

On January 11, 2024, the Term C loan facility was funded by Oxford Finance LLC and the Company issued warrants to the Lender to purchase an aggregate of 33,818 common shares, equal to 2.00% of the $15.0 million funded from the Term C loan facility divided by the exercise price of $8.87 per share.

The Company is obligated to issue additional warrants to the Lender in the event the Term D loan facility is funded.

On March 20, 2024, the Lender exercised warrants to purchase 196,120 common shares through a cashless exercise, and the Company issued 162,936 common shares. The remaining warrants to purchase 33,184 common shares were cancelled to settle the exercise price. As of March 31, 2024, warrants to purchase 33,818 common shares were outstanding.

10.

Share-based Compensation

2020 Stock Option and Incentive Plan

On June 18, 2020, the Company’s board of directors adopted the 2020 Stock Option and Incentive Plan (the “2020 Plan”), which became effective on June 24, 2020. The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, non-employee directors and consultants. The number of shares initially reserved for issuance under the 2020 Plan was 4,273,350, which is cumulatively increased each January 1 by 4% of the number of the Company’s common shares outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s compensation committee of the board of directors. The common shares underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of shares, expire or are otherwise terminated (other than by exercise) under the 2020 Plan and the Company’s 2017 Equity Incentive Plan (the “2017 Plan”) will be added back to the common shares available for issuance under the 2020 Plan. The total number of common shares reserved for issuance under the 2020 Plan was 13,297,209 shares as of March 31, 2024.

As of March 31, 2024, 1,907,122 shares remained available for future grant under the 2020 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2020 Plan.

2017 Equity Incentive Plan

The 2017 Plan provides for the Company to grant incentive stock options or nonqualified stock options, restricted share awards and restricted share units to employees, officers, directors and non-employee consultants of the Company.

As of March 31, 2024 and December 31, 2023, no shares remained available for future grant under the 2017 Plan. Shares that are expired, forfeited, canceled or otherwise terminated without having been fully exercised will be available for future grant under the 2020 Plan.

2020 Employee Share Purchase Plan

On June 18, 2020, the Company’s board of directors adopted the 2020 Employee Share Purchase Plan (the “ESPP”), which became effective on June 24, 2020. A total of 450,169 common shares were reserved for issuance under this plan. In addition, the number of common shares that may be issued under the ESPP is automatically increased each January 1 by the lesser of (i) 900,338 common shares, (ii) 1% of the number of the Company’s common shares outstanding on the immediately preceding December 31 and (iii) such lesser number of shares as determined by the Company’s compensation committee of the board of directors. As of March 31, 2024, 190,971 shares were issued under the ESPP. The total number of common shares reserved for issuance under the ESPP was 2,543,223 shares as of March 31, 2024.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected share volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employee consultants is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:


	Three Months Ended March 31,
	2024			2023
Risk-free interest rate		4.05	%		3.85	%
Expected term (in years)		6.1			6.0
Expected volatility		70.6	%		65.2	%
Expected dividend yield		0	%		0	%

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2023:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
						(in years)		(in thousands)
Outstanding as of December 31, 2023		14,084,895		$	5.99		7.4	$	61,965
Granted		1,798,100			9.17
Exercised		(56,675	)		8.16
Forfeited/cancelled		(107,379	)		6.21
Outstanding as of March 31, 2024		15,718,941		$	6.34		7.5	$	235,402
Vested and expected to vest as of March 31, 2024		15,673,408		$	6.33		7.5	$	234,973
Options exercisable as of March 31, 2024		8,212,826		$	6.68		6.4	$	120,236

Included in the table above are 3,430,576 options outstanding as of March 31, 2024 that were granted outside of the 2020 Plan. The grants were made pursuant to the NASDAQ inducement grant exception in accordance with NASDAQ Listing Rule 5635(c)(4).

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those options that had exercise prices lower than the fair value of the Company’s common shares. The intrinsic value for stock options exercised during the three months ended March 31, 2024 was $0.2 million. There were no

stock options exercised during the three months ended March 31, 2023. The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2024 and 2023 was $6.05 and $2.31 per share, respectively.

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity since December 31, 2023:


	Number of Shares			Weighted- Average Grant Date Fair Value

Unvested as of December 31, 2023		43,800		$	5.91
Granted		1,667,300			8.44
Vested		—			—
Forfeited		(4,100	)		8.44
Unvested as of March 31, 2024		1,707,000		$	8.38

Share-based Compensation

Share-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Research and development expenses	$	1,863	$	1,138
General and administrative expenses		2,654		2,011
	$	4,517	$	3,149

As of March 31, 2024, total unrecognized share-based compensation expense related to unvested stock options was $26.7 million, which is expected to be recognized over a weighted-average period of 2.7 years. Additionally, as of March 31, 2024, the Company has unrecognized share-based compensation expense of $0.4 million related to 45,533 unvested stock options with performance-based vesting conditions for which performance has not been deemed probable.

As of March 31, 2024, total unrecognized share-based compensation expense related to unvested restricted stock units was $13.1 million, which is expected to be recognized over a weighted-average period of 2.7 years.

11.

License Agreements and Asset Acquisitions

License Agreement with the Centre for Probe Development and Commercialization Inc.

In November 2015, the Company entered into a license agreement with the Centre for Probe Development and Commercialization Inc. (“CPDC”), a related party (the “CPDC Agreement”). Under the CPDC Agreement, the Company was granted an exclusive, sublicensable, nontransferable, worldwide license under CPDC’s patent rights related to CPDC’s radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans, whether diagnostic or therapeutic. The Company has the right to grant sublicenses of its rights. The CPDC Agreement was amended in 2017; however, there were no material changes to the terms of the CPDC Agreement. Also in 2017, the Company entered into a second license agreement with CPDC, under which the Company was granted an exclusive, sublicensable, worldwide license under CPDC’s patent rights related to certain CPDC radiopharmaceutical linker technology to develop, market, make, use and sell certain products for all disease indications and uses in humans. The Company has the right to grant sublicenses of its rights.

The Company has no obligations under any of the agreements with CPDC to make any milestone payments or to pay any royalties or annual maintenance fees to CPDC.

During the three months ended March 31, 2024 and 2023, the Company did not make any payments to CPDC or recognize any research and development expenses under the license agreements with CPDC.

License Agreement with ImmunoGen, Inc.

In December 2016, the Company entered into a license agreement with ImmunoGen, Inc. (“ImmunoGen”) (the “ImmunoGen Agreement”). Under the ImmunoGen Agreement, the Company was granted an exclusive, sublicensable, worldwide license under

ImmunoGen’s patent rights to use, develop, manufacture and commercialize any radiopharmaceutical conjugate that includes a certain compound and any resulting commercialized products. The Company has the right to grant sublicenses of its rights.

Under the ImmunoGen Agreement, the Company paid an upfront fee of $0.2 million to ImmunoGen. In addition, the Company is obligated to make aggregate milestone payments to ImmunoGen of up to $15.0 million upon the achievement of specified development and regulatory milestones and of up to $35.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay tiered royalties of a low to mid single-digit percentage based on potential annual net sales by the Company and any of its affiliates and sublicensees. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country until ten years following the date of the first commercial sale in the United States and five years following the date of the first commercial sale in all non-U.S. countries. In addition, the Company is responsible for all costs and expenses incurred related to the development, manufacture, regulatory approval and commercialization of all licensed products.

Prior to regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 90 days’ prior written notice to ImmunoGen. Upon receipt of its first regulatory approval of a licensed product in any country, the Company has the right to terminate the agreement upon 180 days’ prior written notice to ImmunoGen. If the Company or ImmunoGen fails to comply with any of its obligations or otherwise breaches the agreement, the other party may terminate the agreement. The ImmunoGen Agreement expires upon the expiration date of the last-to-expire royalty term.

During the three months ended March 31, 2024 and 2023, the Company did not make any payments to ImmunoGen or recognize any research and development expenses under the ImmunoGen Agreement.

Asset Acquisition from Rainier Therapeutics, Inc. and License Agreement with Genentech, Inc.

In March 2020 (the “Closing”), the Company and Rainier Therapeutics, Inc. (“Rainier”) entered into an asset acquisition agreement (the “Rainier Agreement”). Under the Rainier Agreement, the Company purchased all rights, title and interest to Rainier’s, and any of its affiliates’ and sublicensees’, patents and other tangible and intangible assets to perform research and to develop, manufacture and commercialize a specified compound of antibody molecules that bind to targets for the prevention, treatment and diagnosis of all diseases and conditions only using such compound as an antibody drug conjugate. The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset.

In connection with the asset acquisition, the Company paid an upfront fee of $1.0 million to Rainier and recognized this amount as research and development expense in the condensed consolidated statement of operations and comprehensive loss during the year ended December 31, 2020, as the IPR&D acquired had no alternative future use as of the acquisition date.

Unless the Rainier Agreement was terminated pursuant to its terms, which termination initially could not have occurred later than eight months following the Closing (the “Outside Date”), the Company was obligated to pay Rainier an additional amount of $3.5 million and to issue 313,359 of the Company’s common shares on the Outside Date. Since the Rainier Agreement was not terminated by the Outside Date, as further described below, the Company is also obligated to make aggregate milestone payments to Rainier of up to $22.5 million and to issue up to 156,679 of the Company’s common shares upon the achievement of specified development and regulatory milestones and of up to $42.0 million upon the achievement of specified sales milestones.

In the event the Company enters into a transaction with a non-affiliated party relating to the license or sale of substantially all the Company’s rights to develop the specified compound of antibody molecules, the Company will be obligated to pay Rainier a specified percentage of the revenue from such transaction, in an amount ranging from 10% to 30%, based on how long after the Closing the transaction takes place.

The Rainier Agreement could have been terminated at any time prior to the Outside Date upon 30 days’ notice by the Company to Rainier or upon the mutual written consent of both parties. In October 2020, the Company and Rainier entered into a first amendment to the Rainier Agreement (the “First Amended Rainier Agreement”) to extend certain terms of the Rainier Agreement. Specifically, the Outside Date was amended such that termination may not occur later than eleven months following the Closing, or February 10, 2021 (the “Revised Outside Date”). In February 2021, the Company and Rainier entered into a second amendment to the First Amended Rainier Agreement, as amended (the “Second Amended Rainier Agreement”). Pursuant to the Second Amended Rainier Agreement, the Outside Date was further amended such that termination may not occur later than July 1, 2021, and such amendment was made in consideration for early payment of the additional $3.5 million owed to Rainier which the Company paid and recorded as research and development expense during the year ended December 31, 2021. In May 2021, the Company notified Rainier of its intent to continue development of the asset and issued 313,359 of its common shares to Rainier on July 1, 2021. In August 2022, the Company announced the dosing of the first patient in a Phase 1 study of FPI-1966 and paid a $2.0 million milestone payment and issued 156,679 common shares to Rainier. In May 2023, the Company ceased further clinical development of FPI-1966 as a result of a portfolio prioritization decision.

During the three months ended March 31, 2024 and 2023, the Company did not recognize any research and development expense associated with the Second Amended Rainier Agreement.

In connection with the Rainier Agreement, in March 2020, the Company was assigned all of Rainier’s rights and obligations under an exclusive license agreement between BioClin Therapeutics, Inc. and Genentech, Inc. (“Genentech”) (the “Genentech License Agreement”). Pursuant to the Genentech License Agreement, the Company has an exclusive, worldwide, sublicensable license to make, use, research, develop, sell and import certain intellectual property and technology of Genentech relating to a specified antibody and any mutant antibody thereof (the “Licensed Antibodies”), including any products that contain a Licensed Antibody as an active ingredient (the “Products”), for all human uses.

Pursuant to the Genentech License Agreement, the Company is obligated to use commercially reasonable efforts to develop and commercialize at least one Product and the Company is solely responsible for the costs associated with the development, manufacturing, regulatory approval and commercialization of any Products. The manufacture of the antibody by any third-party contract development and manufacturing organization (“CDMO”) must be approved in advance by Genentech. Additionally, Genentech retains the right to use the Licensed Antibodies solely to research and develop molecules other than the Licensed Antibodies.

Under the Genentech License Agreement, the Company is obligated to make aggregate milestone payments to Genentech of up to $44.0 million upon the achievement of specified sales milestones. The Company is also obligated to pay to Genentech tiered royalties of a mid to high single-digit percentage based on annual net sales by the Company, and any of its affiliates and sublicensees, for the specified compound of antibody molecules and of a mid to high single-digit percentage based on annual net sales by the Company, and any of its affiliates and sublicensees, for any other compound containing mutant antibody molecules of the specified compound. In addition, the Company is obligated to pay to Genentech royalties of a low single-digit percentage based on quarterly net sales in any country in which the specified compound is not covered by a valid patent claim, and those sales will not be subject to the tiered royalties described above. All royalties may be reduced if the Company obtains a license under a third-party patent that includes the specified compound. Royalties will be paid by the Company on a country-by-country basis beginning upon the first commercial sale in such country until the later of (i) ten years following the date of the first commercial sale of a Product or (ii) the date the specified compound is no longer covered by an enforceable patent. Upon the expiration of the royalty term, the Company will have a fully paid-up license.

The Company has the right to terminate the Genentech License Agreement upon written notice to Genentech if the Company determines in its sole discretion that development or commercialization of Products is not economically or scientifically feasible or appropriate. In addition, if the Company or Genentech fails to comply with any of its obligations or otherwise breaches the agreement, the other party may terminate the agreement. The Genentech License Agreement expires on the date on which all obligations under the agreement related to milestone payments or royalties have passed or expired. In May 2023, the Company ceased further clinical development of FPI-1966 as a result of a portfolio prioritization decision.

During the three months ended March 31, 2024 and 2023, the Company did not make any payments to Genentech or recognize any research and development expenses under the Genentech License Agreement.

Collaboration Agreement and Supply Agreement with TRIUMF Innovations, Inc.

In December 2020, the Company entered into a Collaboration Agreement and Supply Agreement (the “Collaboration Agreement”) with TRIUMF Innovations Inc. and TRIUMF JV (collectively, “the TRIUMF entities”) for the development, production and supply of 225Ac to the Company. Under the Collaboration Agreement as executed in December 2020, the Company is obligated to pay the TRIUMF entities an aggregate of $5.0 million CAD upon the achievement of certain milestones. The Collaboration Agreement contemplated that the parties would enter into an amendment thereto to expand the scope of the project and provide for additional milestone payments.

As of December 31, 2023, the TRIUMF entities had achieved certain milestones under the Collaboration Agreement totaling $3.0 million CAD (equivalent to $2.3 million at the time of payment) which were paid during the year ended December 31, 2021 and were recognized as research and development expense over the period of performance by the TRIUMF entities. During the three months ended March 31, 2023, the Company recognized the amortization of less than $0.1 million as research and development expense under the Collaboration Agreement.

As previously contemplated, in August 2021, the parties amended the Collaboration Agreement in order to expand the scope of the project and the Company agreed to make an additional financial investment of up to $15.0 million CAD in connection with development of new process technology for the manufacture of 225Ac upon the achievement of certain milestones under an amendment to the Collaboration Agreement (the “Amended Collaboration Agreement”). In connection with the Amended Collaboration Agreement, the parties formed a company (“NewCo”) to hold certain intellectual property derived from the collaboration. NewCo is jointly owned and managed by the Company and the TRIUMF entities and its purpose is to manufacture 225Ac for the research, clinical and commercial needs of the Company, and in certain circumstances, other third parties. The supply of 225Ac by NewCo to the Company shall be done

under a commercial supply agreement, to be negotiated by NewCo and the Company. The Company is expected to purchase at least 50% of its annual 225Ac requirements from NewCo, unless NewCo is unable to supply such necessary quantities to the Company, in which case the Company may use other 225Ac suppliers to meet its commercial needs. As of March 31, 2024, there were no assets held by NewCo.

As of December 31, 2023, the TRIUMF entities had achieved certain milestones under the Amended Collaboration Agreement totaling $8.5 million CAD (equivalent to $6.6 million at the time of payment), of which $2.6 million was paid during the year ended December 31, 2022 and $3.9 million was paid during the year ended December 31, 2021. These amounts were recognized as research and development expense over the period of performance by the TRIUMF entities. During the three months ended March 31, 2023, the Company recognized the amortization of $0.3 million as research and development expense under the Amended Collaboration Agreement.

The Collaboration Agreement and the Amended Collaboration Agreement were terminated in December 2023. During the year ended December 31, 2023, all unrecognized research and development expenses in connection with the Collaboration Agreement and the Amended Collaboration Agreement were recognized in the consolidated statement of operations and comprehensive loss.

Asset Acquisition from Ipsen Pharma SAS

In March 2021, the Company and Ipsen Pharma SAS (“Ipsen”) announced that the parties had entered into an asset purchase agreement (the “Ipsen Agreement”) whereby the Company agreed to acquire Ipsen’s intellectual property and assets related to IPN-1087, a small molecule targeting neurotensin receptor 1 (“NTSR1”), a protein expressed on multiple solid tumor types. The Company intends to combine its expertise and proprietary TAT platform with IPN-1087 to create an alpha-emitting radiopharmaceutical targeting solid tumors expressing NTSR1. The Company and Ipsen submitted a pre-merger notification and report form with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice in accordance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). The acquisition closed after completion of this antitrust review in April 2021. The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset.

Upon closing of the asset acquisition, the Company paid €0.6 million ($0.8 million at the date of payment) and issued an aggregate of 600,000 common shares to Ipsen under a share purchase agreement which was entered into concurrently with the Ipsen Agreement. Such common shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Company is also obligated to pay Ipsen up to an additional €67.5 million upon the achievement of certain development and regulatory milestones; low single digit royalties on potential net sales; and up to €350.0 million in net sales milestones, in each case, relating to products covered by the asset purchase agreement. The Company is responsible for paying to a third-party licensor up to a total of €70.0 million in development milestones for up to three indications and mid to low double-digit royalties on potential net sales of products covered by the license agreement.

During the three months ended March 31, 2024 and 2023, the Company did not make any payments to Ipsen or recognize any research and development expenses under the Ipsen Agreement.

The Ipsen Agreement includes a royalty step down whereby royalties owed to Ipsen will be reduced by certain percentages not to exceed 50%, in the aggregate, of the royalty owed under certain circumstances relating to loss of patent exclusivity, loss of regulatory exclusivity or generics entering a market. Under the asset purchase agreement Ipsen has agreed not to develop a molecule that targets NTSR1 and combines at least one NTSR1 binding moiety and a radionuclide or cytotoxic agent until the earlier of (i) the seventh anniversary of the closing date or (ii) the date of data base lock after completion of the first phase 3 clinical trial for IPN-1087.

Agreement with Merck & Co.

In May 2021, the Company entered into an agreement with two subsidiaries of Merck & Co. (“Merck”). Pursuant to the agreement, Merck will provide to the Company, at no cost, its anti-PD-1 (programmed death receptor-1) therapy, KEYTRUDA® (pembrolizumab) to evaluate in combination with the Company’s lead candidate, FPI-1434. The planned Phase 1 combination trial will evaluate safety, tolerability and pharmacokinetics of FPI-1434 in combination with pembrolizumab and is expected to initiate approximately six to nine months after achieving the recommended Phase 2 dose in the ongoing Phase 1 study of FPI-1434 monotherapy. Under the agreement, the Company will sponsor, fund and conduct the combination trial in accordance with an agreed-upon protocol and Merck agreed to manufacture and supply its compound, at its cost and for no charge to the Company, for use in the clinical trial.

Collaboration and Supply Agreement with Niowave, Inc.

In June 2022, the Company entered into a Collaboration and Supply Agreement with Niowave, Inc. (“Niowave”) (as amended from time to time, the “Niowave Agreement”) for the development, production and supply of 225Ac to the Company. Under the Niowave Agreement, the Company is obligated to pay Niowave an aggregate of $5.0 million upon the achievement of certain milestones.

In September 2022, the Company entered into an amendment to the Niowave Agreement to amend certain terms of the Niowave Agreement, but made no change to the aggregate milestone payments owed under the Niowave Agreement.

On December 7, 2023, the Company entered into an amendment to the Niowave Agreement in order to expand the scope of the project, pursuant to which the Company agreed to make an additional financial investment of up to $15.0 million in connection with development of new process technology for the manufacture of 225Ac upon the achievement of certain milestones.

As of March 31, 2024, Niowave had achieved certain milestones under the Niowave Agreement totaling $5.3 million, of which $2.5 million was paid during the three months ended March 31, 2024, $1.9 million was paid during the year ended December 31, 2023, and $0.9 million was paid during the year ended December 31, 2022. These amounts are being recognized as research and development expense in the period of performance by Niowave. During the three months ended March 31, 2024, the Company recognized $2.5 million as research and development expense under the Niowave Agreement. During the three months ended March 31, 2023, the Company recognized $0.2 million as research and development expense under the Niowave Agreement.

RadioMedix Option and Asset Purchase Agreement

In November 2022, the Company and RadioMedix, Inc. (“RadioMedix”) entered into an option and asset purchase agreement (the “RadioMedix Agreement”), pursuant to which RadioMedix granted to the Company the exclusive right, but not the obligation (the “RadioMedix Option”), to acquire certain of RadioMedix’s assets related to its on-going Phase 2 clinical trial evaluating 225Ac PSMA I&T (the “TATCIST Study”), a small molecule targeting prostate specific membrane antigens, expressed on prostate tumors. Such assets include, among other things, the investigational new drug application for the TATCIST Study, any third-party license held, or later acquired, by RadioMedix relating to 225Ac PSMA, and clinical and other data for the TATCIST Study (collectively, the “RadioMedix Assets”). The Company paid RadioMedix an option fee of $0.8 million upon the execution of the RadioMedix Agreement, which was recorded as research and development expense in its consolidated statements of operations and comprehensive loss during the year ended December 31, 2022.

On February 10, 2023, the Company notified RadioMedix of its decision to exercise the RadioMedix Option, paid the $1.5 million option exercise fee and closed the acquisition. During the three months ended March 31, 2023, the Company recognized the $1.5 million option exercise fee as research and development expense under the RadioMedix Agreement.

The alpha-emitting radiopharmaceutical being evaluated in the TATCIST Study is now referred to as FPI-2265.

Pursuant to the terms of the RadioMedix Agreement, the Company is obligated to pay RadioMedix (i) up to an additional $14.5 million upon the achievement of certain clinical and regulatory milestones, (ii) low to mid-single-digit royalties on potential net sales, subject to specified reductions, and (iii) up to an additional $50.0 million in net sales milestones; in each case, relating to products covered by the RadioMedix Agreement.

Pursuant to the RadioMedix Agreement, the Company is prohibited from terminating or deprioritizing the development of 225Ac PSMA I&T, subject to specified exceptions. If the Company terminates or deprioritizes the development of 225Ac PSMA I&T, and does not sell, license or otherwise transfer its rights to a third-party within 12 months of such termination, the Company and RadioMedix are required to negotiate the return of 225Ac PSMA I&T and related assets to RadioMedix in return for specified reimbursement costs to the Company.

RadioMedix has agreed, subject to certain exceptions, not to develop or research a molecule that targets PSMA for a certain period of time following the closing date.

The Company and the Excel Diagnostics and Nuclear Oncology Center (“Excel”), an affiliate of RadioMedix, entered into a clinical trial agreement at the closing of the RadioMedix Agreement, pursuant to which Excel shall remain a clinical trial site for the TATCIST Study. Additionally, at the closing of the RadioMedix Agreement, the Company and RadioMedix entered into manufacturing

agreements under which RadioMedix will supply FPI-2265 to the Company for use in clinical trials. RadioMedix will not be the sole manufacturer to supply FPI-2265 for use in clinical trials.

Asset Purchase Agreement with Undisclosed Third-Party

On June 1, 2023, the Company and an undisclosed, unrelated third-party entered into an asset purchase agreement (the “Third-Party Agreement”), pursuant to which the undisclosed third-party granted to the Company the rights to all know-how and information related to an unspecified target, including governmental authorizations, regulatory materials, books and records, patents, third party claims and causes of action, and all other assets, rights and properties. The Company concluded to account for this purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset. During the year ended December 31, 2023, the Company paid an upfront payment of $0.7 million under the Third-Party Agreement which was recognized as research and development expense.

Pursuant to the terms of the Third-Party Agreement, the Company is obligated to pay (i) up to an additional $7.5 million upon the achievement of certain clinical and regulatory milestones, (ii) low single-digit royalties on potential net sales, subject to specified reductions, and (iii) up to an additional $50.0 million in net sales milestones; in each case, relating to products covered by the Third-Party Agreement.

12.

Income Taxes

The Company is domiciled in Canada and is primarily subject to taxation in that country. During the three months ended March 31, 2024 and 2023, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in Canada in each period due to its uncertainty of realizing a benefit from those items. During the three months ended March 31, 2024, the Company recorded a tax benefit of $0.2 million, primarily driven by the Company’s foreign-derived intangible income deduction and U.S. research and development tax credits, partially offset by discrete share-based compensation items. During the three months ended March 31, 2023, the Company recorded a tax benefit of less than $0.1 million, primarily related to the Company’s foreign-derived intangible income deduction, partially offset by discrete share-based compensation items.

The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate (“AETR”), adjusted for the effect of discrete items arising in that quarter. The impact of such inclusions could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter. For the three months ended March 31, 2024 and 2023, the Company excluded Canada from the calculation of the AETR as the Company anticipates an ordinary loss in this jurisdiction for which no tax benefit can be recognized.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets both in the United States and Canada, which primarily consist of net operating loss carryforwards in Canada. The Company has considered its history of cumulative net losses in Canada, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its Canadian deferred tax assets. As a result, as of March 31, 2024 and December 31, 2023, the Company has recorded a full valuation allowance against its net deferred tax assets in Canada.

13.

Net Loss per Share

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share amounts):


	Three Months Ended March 31,
	2024			2023
Numerator:
Net loss	$	(33,670	)	$	(24,291	)

Denominator:
Weighted-average common shares outstanding—basic and diluted		83,775,652			53,775,985
Net loss per share —basic and diluted	$	(0.40	)	$	(0.45	)

The Company’s potentially dilutive securities, which include stock options, restricted stock units and common share warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Three Months Ended March 31,
	2024		2023
Options to purchase common shares		15,718,941		13,945,016
Unvested restricted stock units		1,707,000		65,500
Warrants to purchase common shares		33,818		196,120
		17,459,759		14,206,636

14.

Leases

In August 2018, the Company entered into an operating lease for office space in Hamilton, Ontario. This lease was amended in September 2020 (“New Lease Commencement Date”) and expires in August 2030 with a termination option upon twelve months written notice any time after the fifth anniversary of the New Lease Commencement Date. If the termination option is not exercised, the Company may exercise a renewal option to extend the term for an additional five-year period through August 2035. As the Company is not reasonably certain to extend the lease beyond the allowable termination date, the lease term was determined to end in August 2026 for the purposes of measuring this lease.

In October 2019, the Company entered into an operating lease for office space in Boston, Massachusetts, which expires February 2026 and has no renewal options. In connection with entering into the original lease agreement, the Company issued a letter of credit of $1.5 million for the benefit of the landlord, which was reduced to $1.0 million during the year ended December 31, 2023. As of March 31, 2024 and December 31, 2023, $0.2 million and $0.8 million of the underlying cash balance collateralizing this letter of credit was classified as restricted cash, current and non-current, respectively, on the Company’s condensed consolidated balance sheets based on the release date of the restrictions of this cash.

In March 2021, the Company entered into an amendment to its lease for office space in Boston, Massachusetts to expand the area under lease (“Expansion Premises”) and extend the term of the premises currently under lease (“Original Premises”) to align with the lease end date for the Expansion Premises. The additional rent for the Expansion Premises was determined to be commensurate with the additional right-of-use and is accounted for as a new operating lease that was recognized on the Company’s balance sheet since the Company was able to access the Expansion Premises upon execution of the amendment. The Company has made certain improvements to the Expansion Premises, for which the landlord has provided the Company an allowance of $0.2 million which was recorded as a reduction to operating lease right-of-use assets and operating lease liabilities as of December 31, 2021, and for which reimbursement was received during the year ended December 31, 2022. The rental payments for the Expansion Premises commenced on January 1, 2022. The lease end date for the Original Premises and the Expansion Premises is April 30, 2027, with no option to extend the lease term. The lease modification for the extension of the Original Premises and the recognition of the Expansion Premises resulted in increases to the Company’s right-of-use asset balance, which was obtained in exchange for operating lease liabilities, of $0.9 million and $1.2 million, respectively.

In June 2021, the Company entered into a lease for a manufacturing facility in Hamilton, Ontario. The Company’s rent for the manufacturing facility commenced in July 2023. The lease end date for the manufacturing facility is in June 2038. The lease has a five-year renewal option, which the Company is not reasonably certain to exercise and therefore was not included in the expected lease term. Upon execution of the lease in June 2021, the Company paid $2.5 million CAD (equivalent to $2.1 million at the time of payment) which represented an initial direct cost paid prior to the lease commencement date. The Company determined that the lease is an operating lease and commenced for accounting purposes on March 31, 2023, when the Company obtained access to the space for its’ intended use. In connection with the lease commencement for accounting purposes, the Company recorded an operating right-of-use asset of $10.8 million (including the $2.1 million payment that was previously recorded to prepaid rent as a component of other non-current assets) obtained in exchange for an operating lease liability of $8.9 million. In September 2023, the lease was modified for accounting purposes and the Company recorded an increase in operating right-of-use assets and operating lease liabilities from the modification of $0.8 million.

In January 2022, the Company entered into an operating lease for office space in Hamilton, Ontario. This lease was amended and commenced in February 2022 and is set to expire in August 2030. The lease has a five-year renewal option upon twelve months written notice prior to the expiration of the original term, which the Company is not reasonably certain to exercise and therefore was not included

in the lease term for the purposes of measuring the lease. As a result, the Company recognized an operating lease liability and operating lease right-of-use asset of $0.3 million at lease commencement in February 2022.

From time to time, the Company enters into arrangements with CDMOs for the manufacture of materials for research and development purposes, including the manufacture of clinical trial materials. These contracts generally provide for certain non-cancellable obligations. The Company concluded that two such agreements contain embedded leases as controlled environment rooms at third-party facilities are designated for the Company’s exclusive use during the term of the agreements. In February 2023, upon lease commencement for the first agreement, the Company recorded an operating right-of-use asset of $2.2 million and corresponding operating lease liability of $1.5 million. This arrangement expires in March 2025. In September 2023, upon lease commencement for the second agreement, the Company recorded an operating right-of-use asset of $1.8 million and corresponding operating lease liability of $1.6 million. This arrangement expires in January 2026.

The components of operating lease cost, which are included within operating expenses in the accompanying condensed consolidated statements of operations and comprehensive loss, are as follows (in thousands):


	Three Months Ended March 31,
	2024		2023
Operating lease cost	$	1,205	$	496
Variable lease cost		29		22
Total lease cost	$	1,234	$	518

The following table summarizes supplemental information for the Company’s operating leases:


	As of March 31,
	2024
Weighted-average remaining lease term (in years)		9.2
Weighted average discount rate		9.8	%
Cash paid for amounts included in the measurement of lease liabilities (in thousands)	$	973

As of March 31, 2024, the future maturities of operating lease liabilities are as follows (in thousands):


Year Ending December 31,
2024 (nine months)	$	3,485
2025		3,367
2026		2,400
2027		1,322
2028		1,290
Thereafter		12,191
Total lease payments	$	24,055
Less: imputed interest		(9,194	)
Total lease liabilities	$	14,861

15.

Commitments and Contingencies

Manufacturing Commitments

In January 2019, and as amended in September 2020, the Company entered into an agreement with CPDC, a related party, to manufacture clinical trial materials. In August 2022, this agreement was assigned and transferred to a third-party CDMO who is not a related party. As of March 31, 2024, the Company had non-cancelable minimum purchase commitments under the agreement totaling $0.5 million over the following twelve months.

In May 2019, the Company entered into an agreement with a third-party CDMO to manufacture clinical trial materials. As of March 31, 2024, the Company had non-cancelable minimum purchase commitments under the agreement totaling $0.3 million over the following twelve months.

License Agreements

The Company has entered into license agreements with various parties under which it is obligated to make contingent and non-contingent payments (see Note 11).

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and certain of its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not currently aware of any indemnification claims and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of March 31, 2024 or December 31, 2023.

Legal Proceedings

On February 13, 2023, the Company filed an Inter Partes Review (“IPR”) petition with the United States Patent and Trademark Office (the “USPTO”) to challenge the validity of a certain issued U.S. Patent relating to FPI-2265. On August 15, 2023, the IPR was instituted by the USPTO Patent Trial and Appeal Board (the “Board”). On February 16, 2024, the Company executed a settlement agreement and an exclusive license agreement with the Universität Heidelberg (“Heidelberg”) and represented by the European Commission, Joint Research Centre (“Euratom”), the owners of the patent challenged by the IPR. Pursuant to the terms of the settlement agreement, the parties filed a motion to terminate the IPR. On March 12, 2024, the Board granted the motion filed by the parties and the IPR was terminated.

The Company is not a party to any other litigation and does not have contingency reserves established for any litigation liabilities. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.

16.

Geographical Information

The Company has operating companies in the United States and Canada with long-lived assets in each geographic region. Property and equipment, net by geographic region was as follows (in thousands):


	March 31, 2024		December 31, 2023
United States	$	321	$	349
Canada		6,263		4,955
	$	6,584	$	5,304

As of March 31, 2024, the Company had operating lease right-of-use assets of $5.8 million and $12.1 million in the United States and Canada, respectively. As of December 31, 2023, the Company had operating lease right-of-use assets of $6.5 million and $12.1 million in the United States and Canada, respectively.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes appearing in Part I, Item I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K filed on March 20, 2024 with the U.S. Securities and Exchange Commission, or the SEC.

Some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, particularly including those risks identified in Part II, Item 1A “Risk Factors” and our other filings with the SEC.

Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a clinical-stage oncology company focused on developing next-generation radiopharmaceuticals as precision medicines. We have developed our Targeted Alpha Therapies, or TAT, platform to enable us to connect alpha particle emitting isotopes to various targeting molecules to selectively deliver the alpha particle payloads to tumors. Our TAT platform is underpinned by our ability to radiolabel various classes of targeting molecules (including antibodies, small molecules and peptides), our research and insights into the underlying chemistry and biology of alpha emitting radiopharmaceuticals, our differentiated capabilities in target identification, candidate generation, manufacturing and supply chain, our proprietary Fast-ClearTM linker technology used in conjunction with antibody-based targeting molecules, and development of imaging agents. We believe that our TATs have the potential to build on the successes of currently available radiopharmaceuticals and be broadly applicable across multiple targets and tumor types.

On March 18, 2024, we and AstraZeneca AB, a public company with limited liability (Aktiebolag) incorporated under the laws of Sweden, or Parent, and 15863210 Canada Inc., or Purchaser, a corporation formed under the Canadian Business Corporation Act, or CBCA, entered into a definitive arrangement agreement, or the Arrangement Agreement, under which Purchaser will acquire all of our issued and outstanding common shares on the terms and subject to the conditions set forth therein. The acquisition of our common shares will be completed by way of a statutory plan of arrangement under the CBCA, or the Arrangement. For more information on the Arrangement and Arrangement Agreement, refer to our Current Report on Form 8-K filed on March 19, 2024 with the SEC.

Our most advanced product candidate, FPI-2265, is a Phase 2 program acquired from RadioMedix, Inc., or RadioMedix, in February 2023 that targets prostate-specific membrane antigens, or PSMA, using actinium-225, or 225Ac. PSMA is a protein that is commonly found on the surface of normal prostate cells but is found in higher amounts on prostate cancer cells, as well as in lower amounts in other tissues, such as the small intestine and salivary glands. PSMA drives cancer invasion and metastases and is expressed in over 80% of men with prostate cancer, with higher PSMA expression being correlated to worse outcomes.

Pluvicto, a lutetium-177, or 177Lu, PSMA radioligand therapy, or RLT, is currently a U.S. Food and Drug Administration, or FDA, approved radiopharmaceutical-based therapy to treat patients with metastatic castration resistant prostate cancer, or mCRPC. There are no alpha emitting PSMA-targeted radiopharmaceuticals currently approved by the FDA for the treatment of mCRPC. We believe that the challenges associated with producing and securing a supply of 225Ac have proven to be a barrier for the clinical advancement of PSMA-targeted alpha emitting therapies and, as a result, the majority of programs evaluating PSMA-RLTs currently in development utilize a beta particle emitter.

Recent analysis of 488 patients (Sathekge, M. et al. Actinium-225-PSMA radioligand therapy of metastatic castration-resistant prostate cancer (WARMTH Act): a multicentre, retrospective study. The Lancet. Volume 25 Issue 2. January 2024) treated in investigator sponsored trials and compassionate use programs outside the U.S. with 225Ac-PSMA agents, including both patients previously treated

with 177Lu-PSMA-RLT and 177Lu-PSMA-RLT naïve patients, have shown compelling clinical data and biochemical response rates (including PSA50 response, which is the percentage of participants who had a prostate-specific antigen, or PSA, decline of at least 50 percent from baseline). In addition, the agents have shown a safety and tolerability profile that we feel supports further development of an 225Ac-based PSMA-RLT.

In April 2024, we announced interim efficacy and safety data from the Phase 2 TATCIST open-label clinical trial evaluating FPI-2265, at the American Association for Cancer Research, or AACR, Annual Meeting 2024. Results demonstrated that FPI-2265 is active in heavily pretreated patients with progressive mCRPC, including patients who received prior lutetium-based therapy. From the efficacy-evaluable patient population, PSA50 response (≥50% decline in prostate-specific antigen by 12 weeks after first treatment) was achieved in 10 out of 20 patients (50%) regardless of prior lutetium treatment. PSA50 was achieved in 7 out of 13 (54%) of lutetium-naïve participants and 3 out of 7 (43%) of lutetium-treated participants. FPI-2265 was generally well tolerated and in line with prior published data, with predominantly Grade 1-2 treatment-related adverse events, or TRAEs, observed, including xerostomia (dry mouth), thrombocytopenia, anemia, fatigue and dry eye. Xerostomia, the most common TRAE, was primarily Grade 1 with all incidences being Grade 1-2 (62% Grade 1 and 24% Grade 2). Safety, tolerability and clinical activity data were generally consistent with the other published studies of small molecule 225Ac-based PSMA-RLTs. One treatment-related death due to cerebral hemorrhage was reported in a patient with extensive (superscan) bone metastases per baseline bone scan, a known poor predictive factor for safety. Superscan is defined as a 99mTc-bone scan that demonstrates markedly increased skeletal radioisotope uptake relative to soft tissues in association with absent or faint renal uptake. Three out of 25 participants discontinued treatment due to TRAEs, including two participants with superscan status, however there were no discontinuations due to xerostomia. We believe these findings underscore the potential of FPI-2265 to provide a viable therapeutic option for patients with progressive mCRPC, including those who have previously undergone prior treatment with lutetium-based therapies.

We believe our access to 225Ac and expertise developing alpha therapies provides an opportunity for us to begin treating patients who progress on or after lutetium-based PSMA therapies as well as an opportunity to move to earlier lines of therapy both as a monotherapy and in combination with other agents. We have aligned with the FDA on a Phase 2/3 clinical trial protocol for FPI-2265. This trial is part of the updated development plan includes a Phase 2 dose optimization lead-in, which is expected to complete enrollment by the end of 2024, and the randomized controlled Phase 3 part of the trial is expected to begin in 2025. The Phase 2 portion of the trial is designed to evaluate the safety and efficacy of FPI-2265 across three dosing regimens in a total of 60 mCRPC patients with progressive disease after 177Lu-PSMA-RLT, such as Pluvicto. The Phase 3 portion of the trial is designed to be a registration-enabling global trial evaluating the efficacy and safety of FPI-2265 compared with the standard of care (an alternate androgen receptor pathway inhibitors, or “ARPI switch”) in approximately 550 mCRPC patients who progressed on or after 177Lu-PSMA-RLT. We are also pursuing the opportunity to potentially move our investigational therapy into earlier lines of treatment with combinations of FPI-2265 and Lynparza (olaparib), and we expect to initiate a combination trial in the second quarter of 2024.

Our second most advanced product candidate, FPI-1434, utilizes our Fast-Clear linker to connect a humanized monoclonal antibody that targets the insulin-like growth factor 1 receptor, or IGF-1R, with 225Ac. We are currently evaluating FPI-1434 as a monotherapy in the dose escalation portion of a Phase 1 clinical trial in patients with IGF-1R positive solid tumors to assess its safety, tolerability and pharmacokinetics as well as to identify the recommended Phase 2 dose. As part of the screening process, patients are administered the imaging analogue of FPI-1434, which utilizes the same linker and targeting molecule, but replaces 225Ac with the radioactive isotope indium-111, or 111In, and only those patients who meet predefined tumor uptake and show potential organ radiation exposure within the dosimetric limits for normal organs, are advanced into the trial. In our ongoing Phase 1 trial, we are currently exploring various dosing levels of FPI-1434 using a dosing regimen in which a small dose of cold antibody (naked IGF-1R antibody without the conjugated isotope) is administered prior to the imaging analogue and prior to each dose of FPI-1434. We refer to this dosing regimen as the “cold/hot” dosing regimen which was selected, in part, based on the results of a cold antibody sub-study, or CASS, that was performed as part of the Phase 1 study. In the CASS, we observed improved tumor uptake in most patients who received the cold IGF-1R antibody pre-administration and the tumor uptake was independent of anatomic location (including bone, mediastinum, lung, liver, and lymph nodes).

Following availability of the CASS data, we prioritized the “cold/hot” dosing regimen over a previously explored “hot only” regimen that did not include pre-administration of cold antibody. Preliminary Phase 1 clinical data were presented at the Society of Nuclear Medicine and Molecular Imaging, or SNMMI, Annual Meeting in June 2023. Three patients were dosed in the first cohort at a dose of 15 kBq/kg following pre-administration of cold antibody. In this first cohort, “cold/hot” dosing was observed to be generally well-tolerated with no treatment-related serious adverse events, or SAEs, or dose limiting toxicities, or DLTs. The data demonstrated that pre-administration of cold antibody improved tumor uptake while also reducing the risk of hematological toxicity at comparable exposures observed in the “hot only” dosing arm, which we believe may potentially enhance the therapeutic index. Further, the 15 kBq/kg “cold/hot” dosing arm showed comparable systemic exposure to approximately 40 kBq/kg of a “hot only” dose but with an improved hematological profile as measured by changes in platelet count.

We are currently enrolling the second cohort in the “cold/hot” dosing regimen at 25 kBq/kg. At this dose level, we saw encouraging early findings from this cohort in the ongoing FPI-1434 Phase 1 clinical trial, and no DLTs have been observed to date. Two out of three patients completed the DLT period, and one pancreatic cancer patient discontinued treatment due to disease progression before completion of the DLT period. One heavily treated patient with Ewing sarcoma showed evidence of anti-tumor activity after a single 25 kBq/kg dose of FPI-1434, and one patient with chordoma received four cycles of therapy and showed stable disease as best response. FPI-1434 was generally well tolerated, with transient Grade 1 thrombocytopenia at the 25 kBq/kg dose level and no DLTs. We plan to complete and analyze results from the second cohort and hold a Safety Review Committee meeting to evaluate the emerging data. We plan to share more details on the data and the FPI-1434 development program in mid-2024.

In preclinical studies, FPI-1434 has been evaluated in combination with approved checkpoint inhibitors and DNA damage response inhibitors, or DDRis, such as poly (ADP-ribose) polymerase, or PARP, inhibitors. Based on preclinical data, we believe that the synergies observed with either class of agent could expand the addressable patient populations for FPI-1434 and allow for potential use in earlier lines of treatment. We anticipate initiation of a Phase 1 combination study with FPI-1434 and KEYTRUDA® (pembrolizumab) to occur six to nine months following determination of the recommended Phase 2 dose of FPI-1434 monotherapy in connection with a collaboration agreement executed in May 2021 with Merck.

We submitted investigational new drug applications, or INDs, to the FDA for FPI-1966 and FPI-1967, the imaging analogue, for the treatment of cancers including head and neck and bladder cancers expressing fibroblast growth factor receptor 3, or FGFR3, in the second quarter of 2021 and announced FDA clearance of the INDs in July 2021. The Phase 1, non-randomized, open-label clinical trial of FPI-1966 in patients with solid tumors expressing FGFR3, intended to investigate safety, tolerability and pharmacokinetics and to establish the recommended Phase 2 dose, has been initiated with study sites open to patient recruitment. We dosed the first patient in August 2022. In May 2023, we ceased further clinical development of FPI-1966 as a result of a portfolio prioritization decision.

In November 2020, we announced a strategic collaboration agreement with AstraZeneca UK Limited, or AstraZeneca, to jointly discover, develop and commercialize next-generation alpha-emitting radiopharmaceuticals and combination therapies for the treatment of cancer. Under the terms of the collaboration agreement, we and AstraZeneca will jointly discover, develop and commercialize up to three novel TATs, which will utilize Fusion’s Fast-Clear linker technology platform with antibodies in AstraZeneca’s oncology portfolio. In January 2022, we announced the nomination of the first TAT candidate under the strategic collaboration agreement, a bispecific antibody owned by AstraZeneca radiolabeled with 225Ac utilizing our Fast-Clear linker technology, which we refer to as FPI-2068. FPI-2068 is a TAT designed to deliver 225Ac to various solid tumors that express epidermal growth factor receptor, or EGFR, and mesenchymal epithelial transition factor, or cMET. EGFR and cMET are both validated targets that are co-expressed in multiple tumor types, including head and neck squamous cell carcinoma, non-small cell lung cancer, colorectal cancer, and pancreatic ductal adenocarcinoma. The IND for FPI-2068 and its corresponding imaging analogue, FPI-2107, was cleared by the FDA in April 2023 and we are currently activating clinical trial sites for the Phase 1 trial. In addition, we and AstraZeneca will exclusively explore potential combination strategies involving our existing assets, including our FPI-1434 product candidate, and AstraZeneca therapeutics, for the treatment of various cancers. Each party will retain full rights to their respective assets.

In April 2021, we entered into an asset purchase agreement with Ipsen Pharma SAS, or Ipsen, to acquire Ipsen’s intellectual property and assets related to IPN-1087. IPN-1087 is a small molecule targeting neurotensin receptor 1, or NTSR1, a protein expressed on multiple solid tumor types. Using our TAT platform, we combined IPN-1087 with 225Ac to create an alpha-emitting radiopharmaceutical, FPI-2059, targeting solid tumors expressing NTSR1, including neuroendocrine differentiated prostate cancer, and colorectal, gastric and pancreatic cancers. The FDA cleared our IND for FPI-2059 and the corresponding imaging analogue, FPI-2058, in June 2022. Patient dosing in a Phase 1, non-randomized, open-label clinical trial of FPI-2059 in patients with solid tumors expressing NTSR1, intended to investigate safety, tolerability and pharmacokinetics and to establish the recommended Phase 2 dose is ongoing.

We have completed validation of our state-of-the-art good manufacturing practice, or GMP, manufacturing facility and are producing clinical doses of FPI-2265. The facility, which has clinical and commercial scale manufacturing capabilities, is designed to support our growing pipeline of TATs and is expected to be capable of producing more than 100,000 doses per year. Doses produced out of our manufacturing facility are expected to initially support the FPI-2265 clinical program and be expanded to include our other proprietary and partnered programs.

Since our inception in 2014, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights and conducting discovery, research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales. On June 30, 2020, we completed our initial public offering, or IPO, of our common shares and issued and sold 12,500,000 common shares at a public offering price of $17.00 per share, resulting in net proceeds of approximately $193.1 million after deducting underwriting fees and offering costs. Prior to our IPO, we funded our operations primarily with proceeds from sales of equity securities (including borrowings under a convertible promissory note, which converted into preferred shares). Through March 31, 2024, we had received net proceeds of $559.6 million from sales of equity securities (including borrowings under a convertible promissory note, which converted into preferred shares). In July 2021, we entered into, and subsequently amended in January 2024, an Open Market Sales AgreementSM, or the Sales Agreement, with Jefferies LLC to issue and sell up to $200.0 million of our common shares, from time to time during the term of the Sales Agreement, through an “at-the-market” equity offering program under which Jefferies LLC will act as our agent. As of March 31, 2024, we had received net proceeds of $119.4 million from sales of common shares under the Sales Agreement. In April 2022, we received net proceeds of $9.8 million from the funding of the Term A loan facility with Oxford Finance LLC, or Oxford. In September 2022, we received net proceeds of $24.9 million from the funding of the Term B loan facility with Oxford. In January 2024, we received net proceeds of $14.9 million from the funding of the Term C loan facility with Oxford. In February 2023, we received approximately $56.0 million in net proceeds from a private placement financing in which we issued and sold 17,648,596 of our common shares at an offering price of $3.40 per share. In May 2023, we received approximately $20.0 million in net proceeds from a private placement financing in which we issued and sold 4,784,689 of our common shares at an offering price of $4.18 per share.

We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $33.7 million and $24.3 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $410.4 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We expect that our expenses and capital expenditure requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

•

continue our research and development efforts and submit biologics license applications, or BLAs, for our lead product candidate and submit INDs and BLAs and new drug applications, or NDAs, for our other biologic and drug product candidates;

•

conduct preclinical studies and clinical trials for our current and future product candidates;

•

continue to develop our library of proprietary linkers for our Fast-Clear technology;

•

seek to identify additional product candidates;

•

acquire or in-license other product candidates, targeting molecules and technologies;

•

continue strategic investments in manufacturing and supply chain capabilities, including the production and supply of 225Ac;

•

add operational, financial and management information systems and personnel, including personnel to support the development of our product candidates;

•

hire and retain additional personnel, such as clinical, quality control, scientific, commercial and administrative personnel;

•

seek marketing approvals for any product candidates that successfully complete clinical trials;

•

establish a sales, manufacturing, marketing and distribution infrastructure and scale-up manufacturing capabilities, whether alone or with third parties, to commercialize any product candidates for which we may obtain regulatory approval, if any;

•

expand, maintain and protect our intellectual property portfolio; and

•

operate as a public company.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capabilities to support product sales, marketing and distribution.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may not be able to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or

at all. If we fail to raise capital or enter into such agreements as and when needed, we would have to significantly delay, reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of March 31, 2024, we had cash, cash equivalents and investments of $283.1 million. We believe that our existing cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025.

Impact of Market Conditions on Our Business

We believe our financial results for the three months ended March 31, 2024 and year ended December 31, 2023 were not significantly impacted by market conditions. However, disruption of global financial markets and a recession or market correction, the ongoing military conflict between Russia and Ukraine and the related sanctions imposed against Russia, the ongoing conflict in Israel and the Middle East, and other global macroeconomic factors such as inflation and the recent banking industry volatility, could reduce our ability to access capital, which could, in the future, negatively affect our business and the value of our common shares.

Components of Results of Operations

Revenue from Product Sales

To date, we do not have any approved product candidates and as such, have not generated any revenue from product sales, and we do not expect to generate any revenue from the sale of products for the foreseeable future. If our development efforts for our current or future product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.

Collaboration Revenue

On October 30, 2020, we and AstraZeneca entered into a strategic collaboration agreement, or the AstraZeneca Agreement, pursuant to which we and AstraZeneca will work to jointly discover, develop and commercialize next-generation alpha-emitting radiopharmaceuticals and combination therapies for the treatment of cancer globally by leveraging our TAT platform and expertise in radiopharmaceuticals with AstraZeneca’s leading portfolio of antibodies and cancer therapeutics, including DDRis. The AstraZeneca Agreement consists of two distinct collaboration programs: novel TATs and combination therapies. In January 2022, we announced the nomination of the first novel TAT candidate, a bispecific antibody owned by AstraZeneca radiolabeled with 225Ac utilizing our Fast-Clear linker technology. Each party retains full ownership over its existing assets.

We received an upfront payment of $5.0 million from AstraZeneca in December 2020 associated with the combination therapies program. AstraZeneca will fully fund all research and development activities for the combination strategies, until such point as we may opt-in to the clinical development activities. We also have the right to opt-out of clinical development activities relating to these combination therapies. In such instance, we will be responsible for repaying our share of the development costs via a royalty on the additional combination sales only if our drug is approved on the basis of clinical development solely conducted by AstraZeneca, in which case the royalty payments shall also include a variable risk premium based on the number of our product candidates that have received regulatory approval at that time. We are currently eligible to receive future payments of up to $25.0 million, including those for the achievement of certain clinical milestones and exclusivity fees.

We determined the research and development activities associated with the combination therapies, or the Combination Therapies Collaboration, are a key component of our central operations and AstraZeneca has contracted with us to obtain goods and services which are an output of our ordinary activities in exchange for consideration. Further, we do not share the risks and rewards of the underlying research activities making AstraZeneca a customer for the Combination Therapies Collaboration which falls within the scope of ASC 606, Revenue from Contracts with Customers, or ASC 606.

Under ASC 606 we account for (i) the license we conveyed to AstraZeneca with respect to certain intellectual property and (ii) the obligations to perform research and development services as part of the Combination Therapies Collaboration as a single performance obligation under the AstraZeneca Agreement. We recognize revenue using the cost-to-cost method, which we believe best

depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded as a percentage of the estimated transaction price based on the extent of progress towards completion. We recognize adjustments in revenue for changes in the estimated extent of progress towards completion under the cumulative catch-up method. Under this method, the impact of this adjustment on revenue recorded to date is recognized in the period the adjustment is identified.

During the three months ended March 31, 2024, we did not recognize any collaboration revenue under the AstraZeneca Agreement in the condensed consolidated statement of operations and comprehensive loss. During the three months ended March 31, 2023, we recognized less than $0.1 million in collaboration revenue under the AstraZeneca Agreement in the condensed consolidated statement of operations and comprehensive loss.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. These expenses include:

•

employee-related expenses, including salaries, related benefits and share-based compensation expense, for employees engaged in research and development functions;

•

expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with third parties, such as consultants and contract research organizations, or CROs;

•

the cost of manufacturing drug products for use in our preclinical studies and clinical trials, including under agreements with third parties, such as consultants and contract development and manufacturing organizations, or CDMOs;

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facilities, depreciation and other expenses, which include direct or allocated expenses for rent, maintenance of facilities and insurance;

•

costs related to compliance with regulatory requirements; and

•

payments made in connection with third-party licensing agreements and asset acquisitions of incomplete technology.

We expense research and development costs as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense when the goods have been delivered or the services have been performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

In connection with the AstraZeneca Agreement, we and AstraZeneca are both active participants in the research and development activities of the collaboration and we are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement with respect to the novel TATs program, or the Novel TATs Collaboration. As this arrangement falls within the scope of ASC 808, Collaborative Arrangements, or ASC 808, all payments received or amounts due from AstraZeneca for reimbursement of shared costs are accounted for as an offset to research and development expense. For the three months ended March 31, 2024 and 2023, the Company incurred $1.8 million and $1.6 million, respectively, in research and development expenses relating to the Novel TATs Collaboration which was offset by $0.6 million in amounts due from AstraZeneca for reimbursement of shared costs for both periods.

Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CDMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees incurred under third-party license agreements. We do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and our TAT platform and Fast-Clear linker technology and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and our technology platform and, therefore, we do not track these costs by program.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we complete a Phase 2 clinical trial of FPI-2265 in patients with mCRPC, a Phase 1 clinical trial of FPI-1434 as a monotherapy in patients with solid tumors expressing IGF-1R, complete preclinical development and pursue initial stages of clinical development of our FPI-1434 combination therapies, complete a Phase 1 clinical trial of FPI-2059 as a monotherapy in patients with solid tumors expressing NTSR1, complete a Phase 1 clinical trial of FPI-2068 as a monotherapy in patients with solid tumors expressing EGFR and cMET, and continue to progress our other early-stage programs.

The successful development and commercialization of our product candidates are highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. This is due to the numerous risks and uncertainties associated with product development, including the following:

•

timely completion of our preclinical studies and our current and future clinical trials, which may be significantly slower or more costly than we currently anticipate and will depend substantially upon the performance of third-party contractors;

•

our ability to complete IND-enabling studies and successfully submit INDs or comparable applications to allow us to initiate clinical trials for our current or any future product candidates;

•

whether we are required by the FDA or similar foreign regulatory authorities to conduct additional clinical trials or other studies beyond those planned to support the approval and commercialization of our product candidates or any future product candidates;

•

our ability to demonstrate to the satisfaction of the FDA or other foreign regulatory authorities the safety, potency, purity and acceptable risk-to-benefit profile of our product candidates or any future product candidates;

•

the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future product candidates, if any;

•

the timely receipt of necessary marketing approvals from the FDA or similar foreign regulatory authorities;

•

the willingness of physicians, operators of clinics and patients to utilize or adopt any of our product candidates or future product candidates as potential cancer treatments;

•

our ability and the ability of third parties with whom we contract to manufacture adequate clinical supplies of our product candidates or any future product candidates, remain in good standing with regulatory authorities and develop, validate and maintain manufacturing processes that are compliant with current good manufacturing practices; and

•

our ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates.

A change in the outcome of any of these variables with respect to the development of our product candidates could significantly change the costs and timing associated with the development of these product candidates. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. In addition, we may never succeed in obtaining regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates and technology platform. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with our continued growth as a public company.

Other Income (Expense)

Interest Income

Interest income consists primarily of interest income earned on our cash, cash equivalents and investment balances and the amortization of premiums or accretion of discounts associated with our investments. We expect that our interest income will fluctuate based on the timing and ability to raise additional funds as well as the amount of expenditures for the clinical development of our product candidates and ongoing business operations.

Interest Expense

Interest expense consists of interest owed on outstanding borrowings under our loan and security agreement with Oxford, as well as amortization of debt discount.

Other Income (Expense), Net

Other income (expense), net primarily consists of foreign currency transaction gains and losses as well as miscellaneous income and expense unrelated to our core operations, including government assistance.

Income Taxes

We are domiciled in Canada and are primarily subject to taxation in that country. Since our inception, we have recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each year by our operations in Canada due to our uncertainty of realizing a benefit from those items. As of December 31, 2023, we had $235.2 million of Canadian net operating loss carryforwards that begin to expire in 2035. In addition, as of December 31, 2023, we had $9.5 million of Canadian tax credit carryforwards that begin to expire in 2037 as well as Canadian capitalized research and development expenditures of $54.6 million that can be carried forward indefinitely. We have recorded a full valuation allowance against our Canadian net deferred tax assets as of December 31, 2023.

In prior periods, we have recorded an insignificant amount of income tax provision or benefit for our operating company in Canada and our operating company in the U.S., which typically generates a profit for tax purposes.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended March 31,
	2024			2023			Change
Collaboration revenue	$	—		$	28		$	(28	)
Operating expenses:
Research and development		21,312			15,877			5,435
General and administrative		14,548			9,006			5,542
Total operating expenses		35,860			24,883			10,977
Loss from operations		(35,860	)		(24,855	)		(11,005	)
Other income (expense):
Interest income		3,508			1,921			1,587
Interest expense		(1,852	)		(1,223	)		(629	)
Other income (expense), net		297			(145	)		442
Total other income (expense), net		1,953			553			1,400
Loss before benefit for income taxes		(33,907	)		(24,302	)		(9,605	)
Income tax benefit		237			11			226
Net loss	$	(33,670	)	$	(24,291	)	$	(9,379	)

Collaboration Revenue

We did not recognize any collaboration revenue for the three months ended March 31, 2024. Collaboration revenue was less than $0.1 million for the three months ended March 31, 2023.

Research and Development Expenses


	Three Months Ended March 31,
	2024		2023		Change
	(in thousands)
Direct research and development expenses by program:
FPI-2265	$	5,096	$	2,431	$	2,665
FPI-1434		1,185		2,128		(943	)
FPI-2059		1,218		836		382
FPI-2068		446		—		446
FPI-1966		—		1,165		(1,165	)
Platform development and unallocated research and development expenses:
TAT platform		5,292		2,999		2,293
Personnel related (including share-based compensation)		7,415		5,762		1,653
Other		660		556		104
Total research and development expenses	$	21,312	$	15,877	$	5,435

Research and development expenses were $21.3 million for the three months ended March 31, 2024, compared to $15.9 million for the three months ended March 31, 2023. The increase of $5.4 million was primarily due to an increase of $4.1 million in platform development and unallocated research and development costs and an increase of $1.4 million in direct costs related to our FPI-2265, FPI-1434, FPI-2059, FPI-2068 and FPI-1966 product candidates, described below.

The increase in FPI-2265 of $2.7 million was primarily due to continued expenditures related to our Phase 2 clinical trial of FPI-2265 as a monotherapy in mCRPC patients with progressive disease after 177Lu-PSMA-RLT and manufacturing-related costs. During the three months ended March 31, 2024, we also incurred program expenses for FPI-2068, a TAT designed to deliver 225Ac to various solid tumors that express EGFR and cMET, for which the clearance of the IND by the FDA occurred in April 2023. The increase in FPI-2059 of $0.4 million was due to the continued expenditures related to our Phase 1 clinical trial of FPI-2059 as a monotherapy in patients with solid tumors expressing NTSR1. In May 2023, we ceased further clinical development of FPI-1966 as a result of a portfolio prioritization decision, and as a result there was a $1.2 million decrease in FPI-1966 program costs for the three months ended March 31, 2024. The decrease in FPI-1434 of $0.9 million was primarily due to a decrease in manufacturing-related costs for our Phase 1 clinical trial of FPI-1434.

Platform development and unallocated research and development expenses were $13.4 million for the three months ended March 31, 2024, compared to $9.3 million for the three months ended March 31, 2023. The increase of $4.1 million was due to an increase of $2.3 million in costs related to our TAT platform, an increase of $1.7 million in personnel-related costs, and an increase in other costs of $0.1 million. The increase in TAT platform costs was primarily due to increased manufacturing-related expenditures and increased external costs for preclinical studies and other activities associated with the advancement of our TAT platform. Personnel-related costs for the three months ended March 31, 2024 and 2023 included share-based compensation of $1.9 million and $1.1 million, respectively.

General and Administrative Expenses

General and administrative expenses were $14.5 million and $9.0 million for the three months ended March 31, 2024 and 2023, respectively. The increase of $5.5 million was primarily due to an increase of $4.7 million in professional fees and an increase in personnel-related costs of $0.8 million. Professional fees increased primarily due to higher audit, legal and consulting expenses incurred in connection with the execution of the definitive agreement to be acquired by AstraZeneca. Personnel-related costs for the three months ended March 31, 2024 and 2023 included share-based compensation of $2.7 million and $2.0 million, respectively.

Other Income (Expense)

Interest Income. Interest income for the three months ended March 31, 2024 and 2023 was $3.5 million and $1.9 million, respectively. The increase of $1.6 million was primarily due to increases in interest income driven by increased investment balances and increases in market rates.

Interest Expense. Interest expense for the three months ended March 31, 2024 and 2023 was $1.9 million and $1.2 million, respectively. Interest expense consists of interest owed on outstanding borrowings under our loan and security agreement with Oxford, as well as amortization of debt discount.

Other Income (Expense), Net. Other income (expense), net for the three months ended March 31, 2024 and 2023 was $0.3 million and $(0.1) million, respectively. The net increase of $0.4 million was primarily related to net realized and unrealized foreign exchange losses incurred during the three months ended March 31, 2023.

Income Tax Benefit

The income tax benefit was $0.2 million and less than $0.1 million for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, we recorded a tax benefit of $0.2 million, primarily driven by our foreign-derived intangible income deduction and U.S. research and development tax credits, partially offset by discrete share-based compensation items. For the three months ended March 31, 2023, we recorded a tax benefit of less than $0.1 million, primarily related to our foreign-derived intangible income deduction, partially offset by discrete share-based compensation items.

Liquidity and Capital Resources

Since our inception in 2014, we have not generated any revenue from product sales, and have incurred significant operating losses and negative cash flows from our operations. On June 30, 2020, we completed our IPO of our common shares and issued and sold 12,500,000 common shares at a public offering price of $17.00 per share, resulting in net proceeds of approximately $193.1 million after deducting underwriting fees and offering costs. Prior to our IPO, we funded our operations primarily with proceeds from sales of equity securities (including borrowings under a convertible promissory note, which converted into preferred shares). From our inception through March 31, 2024, we had received net proceeds of $559.6 million from sales of equity securities (including borrowings under a convertible promissory note, which converted into preferred shares). In July 2021, we entered into, and subsequently amended in January 2024, the Sales Agreement with Jefferies LLC to issue and sell our common shares up to $200.0 million in gross proceeds, from time to time during the term of the Sales Agreement, through an “at-the-market” equity offering program under which Jefferies LLC will act as our agent and/or principal, or the ATM Facility. The ATM Facility provides that Jefferies LLC will be entitled to compensation for its services in an amount of up to 3.0% of the gross proceeds of any shares sold under the ATM Facility. We have no obligation to sell any shares under the ATM Facility and may, at any time, suspend solicitation and offers under the Sales Agreement. As of March 31, 2024, we had received net proceeds of $119.4 million from sales of common shares under the Sales Agreement. In April 2022, we received net proceeds of $9.8 million from the funding of the Term A loan facility with Oxford. In September 2022, we received net proceeds of $24.9 million from the funding of the Term B loan facility with Oxford. In January 2024, we received net proceeds of $14.9 million from the funding of the Term C loan facility with Oxford. In February 2023, we received approximately $56.0 million in net proceeds from a private placement financing in which we issued and sold 17,648,596 of our common shares at an offering price of $3.40 per share. In May 2023, we received approximately $20.0 million in net proceeds from a private placement financing in which we issued and sold 4,784,689 of our common shares at an offering price of $4.18 per share.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:


	Three Months Ended March 31,
	2024			2023
Net cash used in operating activities	$	(27,306	)	$	(25,435	)
Net cash used in investing activities		(70,371	)		(24,528	)
Net cash provided by financing activities		64,011			59,515
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(33,666	)	$	9,552

Operating Activities

During the three months ended March 31, 2024, operating activities used $27.3 million of cash, resulting from our net loss of $33.7 million, partially offset by non-cash charges of $4.0 million and net cash provided by changes in our operating assets and liabilities of $2.3 million. Net cash provided by changes in our operating assets and liabilities for the three months ended March 31, 2024 primarily consisted of a $3.7 million increase in accrued expenses and other current liabilities and a $0.4 million increase in accounts payable, partially offset by a $0.7 million increase in other non-current assets, a $0.6 million increase in prepaid expenses and other current assets, and a $0.5 million decrease in operating lease liabilities.

During the three months ended March 31, 2023, operating activities used $25.4 million of cash, resulting from our net loss of $24.3 million and net cash used in changes in our operating assets and liabilities of $3.5 million, partially offset by non-cash charges of $2.4 million. Net cash used in changes in our operating assets and liabilities for the three months ended March 31, 2023 primarily consisted of a $2.7 million increase in prepaid expenses and other current assets, a $0.7 million decrease in accounts payable and a $0.3 million decrease in operating lease liabilities.

Investing Activities

During the three months ended March 31, 2024, net cash used in investing activities was $70.4 million, consisting of purchases of investments of $118.6 million and purchases of property and equipment of $1.3 million, offset by maturities of investments of $49.6 million.

During the three months ended March 31, 2023, net cash used in investing activities was $24.5 million, consisting of purchases of investments of $62.4 million and purchases of property and equipment of $1.2 million, offset by maturities of investments of $39.1 million.

Financing Activities

During the three months ended March 31, 2024, net cash provided by financing activities was $64.0 million, primarily consisting of $48.5 million in proceeds from the issuance of common shares from our ATM Facility, net of issuance costs, $14.9 million in net proceeds from the issuance of debt in connection with our loan and security agreement, as amended, with Oxford and $0.6 million in proceeds from the issuance of common shares upon exercise of stock options.

During the three months ended March 31, 2023, net cash provided by financing activities was $59.5 million, consisting of $60.0 million in gross proceeds from the issuance of common shares in connection with our February 2023 private placement financing and $3.4 million in proceeds from the issuance of common shares from our ATM Facility, net of issuance costs, offset by $3.9 million in offering costs paid in connection with our February 2023 private placement financing.

Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates in development. In addition, we expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on:

•

the scope, progress, results and costs of researching and developing our product candidates;

•

the timing of, and the costs involved in, obtaining marketing approvals for our current and future product candidates;

•

the number of future product candidates and potential additional indications that we may pursue and their development requirements;

•

the cost of manufacturing our product candidates for clinical trials in preparation for regulatory approval and in preparation for commercialization;

•

the cost of strategic investments in manufacturing and supply chain, in particular for the production and supply of 225Ac;

•

the cost and availability of 225Ac or any other medical isotope we may incorporate into our product candidates;

•

if approved, the costs of commercialization activities for any approved product candidate to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

•

subject to receipt of regulatory approval and revenue, if any, received from commercial sales for any approved indications for any of our product candidates;

•

the extent to which we enter into collaborations with third parties, in-license or acquire rights to other products, product candidates or technologies;

•

our headcount growth and associated costs as we expand our research and development capabilities and establish a commercial infrastructure;

•

the costs of preparing, filing and prosecuting patent applications and maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and

•

the costs of operating as a public company.

We believe that our existing cash, cash equivalents and investments as of March 31, 2024 will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common shareholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares or declaring dividends. If we raise funds through collaborations, strategic alliances, distribution 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 or other arrangements when needed, we would 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.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 20, 2024. During the three months ended March 31, 2024, there were no material changes to our critical accounting policies from those previously disclosed.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies and our financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

We will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of our IPO, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

As of March 31, 2024 and December 31, 2023, we had an aggregate cash, cash equivalents, restricted cash and investments balance of $284.4 million and $248.7 million, respectively, which consisted of cash, money market funds, U.S. and Canadian Government agency debt securities, corporate bonds, municipal bonds and commercial paper. 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 the majority of our investments are short-term in nature. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we believe an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio. We have the ability to hold our investments until maturity, and therefore, we would not expect our operating results or cash flows to be affected to any significant degree, by the effect of a change in market interest rates on our investment portfolio.

As of March 31, 2024, we had $50.0 million of borrowings outstanding under the Loan Agreement. Interest on the outstanding borrowings under the Loan Agreement accrues at a floating per annum rate equal to the greater of (i) 8.00% and (ii) the sum of (a) 1-Month CME Term Secured Overnight Financing Rate, or SOFR, (b) 0.10% and (c) 7.90%. An immediate 10% change in the one-month SOFR rate would not have a material impact on our debt-related obligations, financial position or results of operations.

Foreign Currency Exchange Risk

Our reporting currency is the U.S. dollar. The functional currency of our operating company in Canada and operating company in the U.S. is also the U.S. dollar. As a result, we record no cumulative translation adjustments related to translation of unrealized foreign exchange gains or losses.

For the remeasurement of local currency to the U.S. dollar functional currency of the Canadian entity, assets and liabilities are translated into U.S. dollars at the exchange rate in effect on the balance sheet date, and income items and expenses are translated into U.S. dollars at the average exchange rate in effect during the period. Resulting transaction gains (losses) are included in other income (expense), net in the consolidated statements of operations and comprehensive loss, as incurred. During the three months ended March 31, 2024 and 2023, recognized transaction gains and losses were insignificant.

We do not believe that we are subject to significant risk related to foreign currency exchange rate changes, and we do not expect that foreign currency transaction gains and losses will have a material effect on our financial position or results of operations in the foreseeable future.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor, research supplies and materials and manufacturing raw materials. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2024 and 2023.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of March 31, 2024, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

On February 13, 2023, we filed an Inter Partes Review, or IPR, petition with the United States Patent and Trademark Office, or the USPTO, to challenge the validity of a certain issued U.S. Patent relating to FPI-2265. On August 15, 2023, the IPR was instituted by the USPTO Patent Trial and Appeal Board, or the Board. On February 16, 2024, we executed a settlement agreement and an exclusive license agreement with the University of Heidelberg and Euratom, the owners of the patent challenged by the IPR. Pursuant to the terms of the settlement agreement, the parties filed a motion to terminate the IPR. On March 12, 2024, the Board granted the motion filed by the parties and the IPR was terminated.

We are not currently a party to any other material legal proceedings. From time to time, we may become involved in other litigation or legal proceedings relating to claims arising from the ordinary course of business.

Item 1A. Risk Factors.

Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 includes a discussion of risk factors which could materially affect our business, financial condition, or results of operations. There have been no material changes to those risk factors, except as described below.

Careful consideration should be given to these risk factors, in addition to the other information set forth in this Quarterly Report on Form 10-Q and in other documents that we file with the SEC in evaluating our company and our business. Investing in our common shares involves a high degree of risk. If any of these risks actually occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

Risks Related to the Arrangement Agreement

Completion of the Arrangement is subject to a number of conditions that must be satisfied or waived.

The completion of the Arrangement is subject to a number of conditions precedent, some of which are outside of our control or that of Parent or Purchaser, including, without limitation, approval of our shareholders, receipt of the required Regulatory Approvals (as defined in the Arrangement Agreement), and the granting of the Final Order (as defined in the Arrangement Agreement). In addition, the completion of the Arrangement by Parent and Purchaser is conditional on, among other things, no material adverse effect having occurred and continuing since the date of the Arrangement Agreement. There can be no certainty, nor can we, Parent or Purchaser provide any assurance, that these conditions will be satisfied or, if satisfied, when they will be satisfied. Moreover, a substantial delay in obtaining the required approvals (including the Regulatory Approvals) could result in the Arrangement not being completed. If the Arrangement is not completed for any reason, there are risks that the announcement of the Arrangement and the dedication of our substantial resources to the completion of the Arrangement could have a negative impact on our current business relationships and could have a material adverse effect on our current and future operations, financial condition and prospects. In addition, failure to complete the Arrangement for any reason could negatively impact the trading price of our common shares. If the Arrangement is not completed and our board of directors decides to seek an alternative transaction, there can be no assurance that it will be able to find a party willing to pay consideration for our common shares that is equivalent to, or more attractive than, the consideration payable pursuant to the Arrangement.

The Arrangement Agreement may be terminated in certain circumstances, in which case an alternative transaction may not be available.

We and Parent have the right to terminate the Arrangement Agreement in certain circumstances. Accordingly, there is no certainty that the Arrangement Agreement will not be terminated by us or Parent before the completion of the Arrangement. Failure to complete the Arrangement could materially negatively impact the trading price of our common shares. If the Arrangement Agreement is terminated and our board of directors decides to seek an alternative transaction, there is no guarantee that it will be able to find a party willing to pay consideration for our common shares that is equivalent to, or more attractive than, the consideration payable pursuant to the Arrangement.

We will incur costs and may have to pay a termination fee.

Certain costs relating to the Arrangement, such as certain legal, accounting and financial advisor fees, must be paid by us even if the Arrangement is not completed. If the Arrangement is not completed for certain reasons, we may also be required to pay a termination fee of $71,680,000 to Parent. If we are required to pay this termination fee under the Arrangement Agreement, our financial condition and ability to fund our current operations could be materially adversely affected.

The termination fee may discourage other parties from proposing a significant business transaction with us.

We are required to pay a termination fee in the event that the Arrangement Agreement is terminated in circumstances related to a possible alternative transaction to the Arrangement. The termination fee may discourage other parties from attempting to propose a business transaction, even if such a transaction could provide better value to our shareholders than the Arrangement.

Our shareholders will no longer hold an interest in us following the Arrangement.

Following the Arrangement, our shareholders will no longer hold any of our common shares and other than potential value in connection with the contingent value right, or CVR, our shareholders will forego any future increase in value that might result from future growth and the potential achievement of our long-term plans.

Our shareholders may not receive any payments under the CVRs.

Under the Arrangement Agreement, our shareholders have the right to receive a CVR in respect of each common share owned immediately prior to the Effective Time (as defined in the Arrangement Agreement). Shareholders have an opportunity to realize additional value if the Milestone (as defined in the Arrangement Agreement) is achieved in accordance with the terms of the CVR Agreement (as defined in the Arrangement Agreement) within the time period prescribed therein, through an additional cash payment of $3.00 per CVR. Therefore, our shareholders’ right to receive any future payment with respect to the CVRs will be contingent upon whether the Milestone is achieved following the Effective Time by August 31, 2029. If the Milestone is not achieved by August 31, 2029, no payment will be made under the CVRs and the CVRs will expire valueless. Accordingly, the value, if any, of the CVRs is speculative, and the CVRs may ultimately have no value at all.

CVRs may not be assigned or transferred except in very limited circumstances, limiting the ability for holders to monetize the CVRs.

The CVRs will not be listed on any securities exchange and may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part other than (1) upon the death of a holder, by will or intestacy; (2) by instrument to an inter vivos or testamentary trust, (3) pursuant to a court order; (4) by operation of law (including by consolidation or merger) or without consideration in connection with the dissolution, liquidation or termination of any corporation, limited liability corporation, partnership or other entity; (5) in the case of CVRs held through book-entry or other similar nominee form, from a nominee to the beneficial owner and, if applicable, through an intermediary, to the extent allowable by the Depository Trust Company; or (6) pursuant to a holder’s right to abandon a CVR or the deemed acquisition of CVRs by Purchaser. This means that a holder may not have any ability to recognize the value of any payment to be made in accordance with the CVR Agreement prior to the receipt of such a payment, if any.

The Canadian federal income tax treatment of the CVRs is unclear.

The Canadian federal income tax consequences to a shareholder in respect of the receipt, holding and disposition of the CVRs and the receipt of payments under the CVRs are not entirely clear. Shareholders are urged to consult their own tax advisors regarding the Canadian federal income tax consequences to them of the receipt, holding and disposition of the CVRs and the receipt of payments thereunder.

Our business relationships may be subject to disruption due to uncertainty associated with the Arrangement.

Parties with which we currently do business or may do business in the future may experience uncertainty associated with the Arrangement, including with respect to current or future business relationships with us, Parent or Purchaser. Such uncertainty could be materially adverse to our business, financial condition, results of operations or prospects.

While the Arrangement is pending, we are restricted from taking certain actions.

The Arrangement Agreement includes covenants relating to the conduct of our business, which restrict us from taking specified actions without the consent of Parent until the Arrangement is completed. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement. The Arrangement Agreement also provides customary restrictions on our ability to solicit alternative acquisition proposals from third parties and engage in discussions or negotiations with third parties regarding such proposals. Notwithstanding these restrictions, we may under certain circumstances provide information to and participate in discussions or negotiations with third parties with respect to an unsolicited acquisition proposal that constitutes or would reasonably be expected to constitute or lead to a Superior Proposal (as defined in the Arrangement Agreement).

Certain of our directors and executive officers may have interests in the Arrangement that may be different from, or in addition to, the interests of our shareholders generally.

Certain of our directors and officers may have interests in the Arrangement that may be different from, or in addition to, the interests of our shareholders generally. These interests include severance and retention arrangements covering our executive officers, acceleration of unvested equity awards held by our directors and executive officers, and indemnification of our directors and executive officers following the completion of the Arrangement. Our board of directors was aware of and considered these interests, among other matters, in reaching its decision to approve the Arrangement and the Arrangement Agreement. In considering the recommendation of our board of directors to vote in favor of the Arrangement Resolution (as defined in the Arrangement Agreement), our shareholders should consider these interests.

Completion of the Arrangement is subject to the Required Shareholder Approval.

There can be no certainty, nor can we provide assurance, that the Required Shareholder Approval (as defined in the Arrangement Agreement) will be obtained. If such approval is not obtained and the Arrangement is not completed, the market price of our common shares may decline to the extent that the current market price reflects a market assumption that the Arrangement will be completed. If the Arrangement is not completed and our board of directors decides to seek another arrangement or alternative transaction, there can be no assurance that it will be able to find a party willing to pay an equivalent or greater price for our common shares than the consideration to be paid pursuant to the Arrangement.

Applicable tax authorities may not agree with certain tax matters related to the Arrangement.

There can be no assurance that the Canada Revenue Agency, the U.S. tax authorities or other applicable taxing authorities will agree with the anticipated Canadian federal income tax and the U.S. tax consequences of the Arrangement.

We will continue to face a number of risks regarding its business and prospects if the Arrangement is not completed.

If the Arrangement is not completed, we will continue to face the risks that we currently face with respect to our affairs, business and operations and future prospects.

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

Recent Sales of Unregistered Equity Securities

In connection with the funding of an additional term loan in the amount of $15.0 million under the Loan and Security Agreement with Oxford, we issued warrants to purchase an aggregate of 33,818 shares of our common shares on January 11, 2024. This transaction did not involve any underwriters, underwriting discounts or commissions, or any public offering. The warrants were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, or the Securities Act, as set forth in Section 4(a)(2) under the Securities Act as a transaction by an issuer not involving any public offering.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.


Exhibit Number		Description

2.1†^		Arrangement Agreement among the Company, AstraZeneca AB and 15863210 Canada Inc., dated as of March 18, 2024 (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 19, 2024 (File No. 001-39344) and incorporated by reference herein)

3.1		Articles of Amendment to the Articles of the Company (filed as Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A, filed with the SEC on June 22, 2020 (File No. 333-238968) and incorporated by reference herein)

3.2		Amended and Restated General By-Laws of the Company (filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed on March 20, 2024 (File No. 001-39344) and incorporated by reference herein)

4.1		Amended and Restated Investors’ Rights Agreement among the Registrant and certain of its shareholders, dated as of March 25, 2019 (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1, filed with the SEC on June 5, 2020 (File No. 333-238968) and incorporated by reference herein)

4.2		Form of Specimen Common Share Certificate (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-1/A, filed with the SEC on June 22, 2020 (File No. 333-238968) and incorporated by reference herein)

10.1†		License Agreement among the Company, Universität Heidelberg and Euratom represented by the European Commission, Joint Research Centre, dated as of February 16, 2024 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 16, 2024 (File No. 001-39344) and incorporated by reference herein)

10.2‡		Amendment to the Employment Agreement by and between the Company and Eric Burak, dated as of March 18, 2024 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 19, 2024 (File No. 001-39344 and incorporated by reference herein)

31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1#		Certification of Principal 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 Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.1		Form of Voting and Support Agreement by and between AstraZeneca AB and the signatories thereto, each dated as of March 18, 2024 (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 19, 2024 (File No. 001-39344) and incorporated by reference herein)

101.INS		Inline XBRL Instance Document (the instance does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH		Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

† Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission.

‡ Indicates management contract or compensatory plan or arrangement.

^ Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 for any schedules so furnished.

# This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, except to the extent specifically incorporated by reference into such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Fusion Pharmaceuticals Inc.

Date: May 7, 2024	By:	/s/ John Valliant
		John Valliant
		Chief Executive Officer

Date: May 7, 2024	By:	/s/ John Crowley
		John Crowley
		Chief Financial Officer

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Fusion Pharmaceuticals Inc. 10-Q