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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

or

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

For the transition period from        to       

Commission File Number: 001-40315

Reneo Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware

47-2309515

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Reneo Pharmaceuticals

12230 El Camino Real, Suite 230, San Diego, California

(Address of Principal Executive Offices)

92130

(Zip Code)

(Registrant’s telephone number, including area code): (858) 283-0280

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

Title of each class

  

Trading symbol

  

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

RPHM

The Nasdaq Stock Market LLC

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.

Large accelerated filer

  

  

Accelerated filer

Smaller reporting company

Non-accelerated filer

Emerging growth company

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

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

As of May 14, 2021, there were 24,286,253 shares of the registrant’s common stock, $0.0001 par value per share, outstanding.

Table of Contents

TABLE OF CONTENTS

  

Page

Part I

Financial Information

3

Item 1.

Financial Statements

3

Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020

3

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020 (Unaudited)

4

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit for the three months ended March 31, 2021 and 2020 (Unaudited)

5

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (Unaudited)

6

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

27

Item 4.

Controls and Procedures

27

Part II

Other Information

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

92

Item 3.

Defaults Upon Senior Securities

93

Item 4.

Mine Safety Disclosures

93

Item 5.

Other Information

93

Item 6.

Exhibits

93

Exhibit Index

94

Signatures

95

2

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and par value data)

    

MARCH 31, 

    

DECEMBER 31, 

2021

2020

Assets

(unaudited)

Current assets:

Cash and cash equivalents

$

91,221

$

53,613

Prepaid expenses and other current assets

 

2,339

 

1,412

Total current assets

 

93,560

 

55,025

Property and equipment, net

 

81

 

69

Other non-current assets

 

1,680

 

127

Total assets

$

95,321

$

55,221

Liabilities, convertible preferred stock and stockholders’ deficit

Current liabilities:

 

  

 

  

Accounts payable

$

556

$

908

Accrued expenses

 

3,374

 

3,672

Total current liabilities

 

3,930

 

4,580

Deferred rent

 

32

 

36

Total liabilities

 

3,962

 

4,616

Commitments and contingencies (Note 9)

 

  

 

  

Series A convertible preferred stock, $0.0001 par value; 24,302,472 shares authorized
at March 31, 2021 and December 31, 2020; 24,302,472 shares issued and
outstanding at March 31, 2021 and December 31, 2020, liquidation preference of
$49,127 at March 31, 2021 and December 31, 2020

 

45,652

 

45,652

Series B convertible preferred stock, $0.0001 par value; 46,881,028 shares authorized

at March 31, 2021 and December 31, 2020; 46,881,028 and 23,440,514 shares
issued and outstanding at March 31, 2021 and December 31, 2020, respectively;
liquidation preference of $94,770 and $47,385 as of March 31, 2021 and
December 31, 2020, respectively

 

94,424

 

47,068

Stockholders’ deficit:

 

  

 

  

Common stock, $0.0001 par value; 105,000,000 shares authorized at March 31, 2021
and December 31, 2020, 2,148,193 and 2,123,733 shares issued and outstanding at
March 31, 2021, respectively, and 2,053,070 shares issued and outstanding at
December 31, 2020

 

 

Additional paid-in capital

 

3,453

 

2,843

Accumulated deficit

 

(52,170)

 

(44,958)

Total stockholders’ deficit

 

(48,717)

 

(42,115)

Total liabilities, convertible preferred stock and stockholders’ deficit

$

95,321

$

55,221

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

3

Table of Contents

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

THREE MONTHS ENDED MARCH 31, 

    

2021

    

2020

    

Operating expenses:

Research and development

$

5,472

$

3,578

General and administrative

 

1,742

 

924

Total operating expenses

 

7,214

 

4,502

Loss from operations

 

(7,214)

 

(4,502)

Other income

 

2

 

71

Net loss

 

(7,212)

 

(4,431)

Unrealized gain on short-term investments

 

 

6

Comprehensive loss

$

(7,212)

$

(4,425)

Net loss per share attributable to common stockholders, basic and diluted

$

(3.48)

$

(2.20)

Weighted-average shares used in computing net loss per share, basic and diluted

 

2,070,935

 

2,015,029

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

4

Table of Contents

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit

(In thousands, except share data)

(Unaudited)

CONVERTIBLE

ACCUMULATED

PREFERRED STOCK

ADDITIONAL

OTHER

TOTAL

Series A

Series B

Common Stock

PAID-IN

COMPREHENSIVE

ACCUMULATED

STOCKHOLDERS'

    

SHARES

    

AMOUNT

    

SHARES

    

AMOUNT

    

SHARES

    

AMOUNT

    

CAPITAL

    

INCOME

    

DEFICIT

    

DEFICIT

Balances, December 31, 2020

24,302,472

$

45,652

23,440,514

$

47,068

2,053,070

$

$

2,843

$

$

(44,958)

$

(42,115)

Issuance of series B convertible preferred stock, net of issuance costs of $29

 

23,440,514

47,356

Stock-based compensation

 

471

471

Stock option exercise

 

70,663

139

139

Net loss

(7,212)

(7,212)

Balances, March 31, 2021

 

24,302,472

$

45,652

46,881,028

$

94,424

2,123,733

$

$

3,453

$

$

(52,170)

$

(48,717)

CONVERTIBLE

ACCUMULATED

PREFERRED STOCK

ADDITIONAL

OTHER

TOTAL

Series A

Series B

Common Stock

PAID-IN

COMPREHENSIVE

ACCUMULATED

STOCKHOLDERS'

    

SHARES

    

AMOUNT

    

  SHARES  

    

AMOUNT

    

SHARES

    

AMOUNT

    

CAPITAL

    

INCOME

    

DEFICIT

    

DEFICIT

Balances, December 31, 2019

24,302,472

$

45,652

$

2,008,905

$

$

2,363

$

3

$

(25,493)

$

(23,127)

Stock-based compensation

 

92

92

Stock option exercise

 

13,269

26

26

Change in unrealized holding gains and losses on short-term investments

6

6

Net loss

(4,431)

(4,431)

Balances, March 31, 2020

 

24,302,472

$

45,652

$

2,022,174

$

$

2,481

$

9

$

(29,924)

$

(27,434)

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

5

Table of Contents

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

THREE MONTHS ENDED

MARCH 31, 

2021

    

2020

Cash flows from operating activities

  

 

  

Net loss

$

(7,212)

$

(4,431)

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

 

  

 

  

Depreciation and amortization

 

10

 

9

Amortization/accretion on short-term investments

 

 

(15)

Stock-based compensation

 

471

 

92

Changes in operating assets and liabilities:

 

  

 

  

Accounts payable, accrued expenses and other

 

(927)

 

36

Prepaid expenses and other assets

 

(929)

 

(137)

Deferred rent

 

(2)

 

(1)

Net cash used in operating activities

 

(8,589)

 

(4,447)

Cash flows from investing activities

Purchase of property and equipment

 

(25)

 

(1)

Proceeds from maturities of available-for-sale short-term investments

 

 

5,200

Net cash (used in) provided by investing activities

 

(25)

 

5,199

Cash flows from financing activities

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

 

47,258

 

Proceeds from exercise of stock options

 

187

 

26

Costs paid in connection with initial public offering

(1,223)

Net cash provided by financing activities

 

46,222

 

26

Net increase in cash and cash equivalents

 

37,608

 

778

Cash and cash equivalents, beginning of period

 

53,613

 

17,501

Cash and cash equivalents, end of period

$

91,221

$

18,279

Supplemental cash flow information:

 

  

 

  

Property and equipment in accounts payable

$

2

$

Unpaid Series B convertible preferred stock issuance costs

$

19

$

Costs incurred in connection with initial public offering included in accrued expenses

$

361

$

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

6

Table of Contents

RENEO PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Business

Organization

Reneo Pharmaceuticals, Inc. (Reneo or the Company) was incorporated in the state of Delaware on September 22, 2014 (Inception). The Company is a clinical-stage pharmaceutical company focused on the development of therapies for patients with rare genetic mitochondrial diseases. In December 2017, the Company in-licensed REN001, a novel oral peroxisome proliferator-activated receptor (PPAR) agonist.

Reverse Stock Split

On April 5, 2021, the Company effected a 1-for-4.4748 reverse stock split of its common stock. The par value and the authorized number of shares of the common stock were not adjusted as a result of the reverse stock split. The reverse stock split resulted in an adjustment to the Series A and Series B convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

Initial Public Offering

On April 13, 2021, the Company completed an initial public offering (IPO) of its common stock. In connection with its IPO, the Company issued and sold 6,250,000 shares of its common stock at a price to the public of $15.00 per share. The gross proceeds from the IPO were approximately $93.8 million before deducting underwriting discounts and commissions of $6.6 million and offering expenses of approximately $2.4 million payable by the Company.

At the closing of the IPO, 71,183,500 shares of outstanding convertible preferred stock were automatically converted into 15,907,629 shares of common stock. Following the IPO, there were no shares of preferred stock outstanding.

Liquidity

The Company has incurred significant losses and negative cash flows from operations. From Inception through March 31, 2021, the Company has raised $146.7 million primarily from private financings to support its drug development efforts. As of March 31, 2021, the Company had cash and cash equivalents of $91.2 million and an accumulated deficit of $52.2 million. The Company had a net loss of $7.2 million and used cash of $8.6 million for operating activities for the three months ended March 31, 2021. In accordance with Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements - Going Concern, management is required to perform a two-step analysis over the Company’s ability to continue as a going concern. Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the date the condensed consolidated financial statements are issued. If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt.

Due to the Company’s continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future and may never become profitable. As a result, the Company will need to raise capital through public or private equity or debt financings, government or other third-party funding, collaborations, strategic alliances and licensing arrangements or a combination of these.

There can be no assurance that the Company will be successful in obtaining additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of

7

Table of Contents

operations, and future prospects. The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. The Company may not be able to secure additional financing in a timely manner or on favorable terms, if at all. In addition, successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.

As of March 31, 2021, the Company had $91.2 million in cash and cash equivalents. Management believes that the Company’s cash and cash equivalents as of March 31, 2021 and net proceeds of approximately $84.8 million from the Company’s IPO in April 2021 will be sufficient to fund operations for at least one year from date on which this Quarterly Report on Form 10-Q is issued.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements.  The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements at December 31, 2020, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company have been included.  Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, which are included in the Company’s prospectus, dated April 8, 2021, that forms a part of the Company’s Registration Statement on Form S-1 (File. No. 333-254534) as filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), on April 9, 2021.

The condensed consolidated financial statements include the accounts of Reneo Pharmaceuticals, Inc. and its wholly owned subsidiary, Reneo Pharma Ltd located in the United Kingdom (UK). All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure in the Company’s condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

Risks and Uncertainties

Any product candidates developed by the Company will require approvals from the U.S. Food and Drug Administration (FDA) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s current product candidates will meet desired efficacy and safety requirements to obtain the necessary approvals. If approval is denied or delayed, it may have a material adverse impact on the Company’s business and its financial statements.

The Company is subject to a number of risks similar to other clinical-stage pharmaceutical companies including, but not limited to, dependency on the clinical and commercial success of the Company’s product candidate, REN001, ability to obtain regulatory approval of REN001, the need for substantial additional financing to achieve its goals, uncertainty of

8

Table of Contents

broad adoption of its approved products, if any, by physicians, consumers and third-party payors, significant competition and untested manufacturing capabilities, and dependence on key individuals and sole source suppliers.

The Company’s business has been and could continue to be adversely affected by the evolving COVID-19 pandemic. For example, the COVID-19 pandemic has resulted in and could result in delays to the Company’s clinical trials for numerous reasons, including additional delays or difficulties in enrolling patients, diversion of healthcare resources away from the conduct of clinical trials, interruption or delays in the operations of the FDA or other regulatory authorities, and delays in clinical sites receiving the supplies and materials to conduct the Company’s clinical trials. At this time, the extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted.

Segment Reporting

The Company operates and manages its business as one operating segment, which is the business of developing novel therapies for rare genetic mitochondrial diseases. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. As of March 31, 2021 and December 31, 2020, the Company had cash balances deposited at a major financial institution. Cash balances are subject to minimal credit risk as the balances are with high credit quality financial institutions. Cash and cash equivalents include cash in readily available checking and money market accounts.

Short-term Investments

The Company accounts for short-term investments in accordance with ASC Topic 320, Investments – Debt and Equity Securities. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date.

The Company’s investments are classified as available-for-sale securities. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income in stockholders’ deficit. Realized gains and losses on sales of investments are included in interest income and are derived using the specific identification method for determining the cost of securities.

The Company recognizes an impairment charge when a decline in the fair value of its investments in debt securities below the amortized cost basis of such securities is judged to be other-than-temporarily impaired. Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and if the entity has the intent to sell the security, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. The Company did not recognize any other-than-temporary impairment charges on its short-term investments during the three months ended March 31, 2021 and 2020.

Money market account balances are included as cash and cash equivalents on the condensed consolidated balance sheets, which are also disclosed in Note 3, Fair Value Measurements.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment. Long-lived assets are tested for impairment when events and circumstances indicate the assets might be impaired by first comparing the estimated future undiscounted cash flows of the asset or asset group to the carrying value. If the carrying value exceeds the estimated future undiscounted cash flows, an impairment loss is recognized based on the amount that the carrying value exceeds the fair value of the asset or asset group. The Company did not recognize impairment losses during the three months ended March 31, 2021 and 2020.

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Convertible Preferred Stock

The Company records convertible preferred stock at fair value on the dates of issuance, net of issuance costs. Prior to the IPO, upon the occurrence of certain potential events that would have been outside the Company’s control, including a “deemed liquidation event” such as a merger, acquisition and sale of all or substantially all of the Company’s assets, holders of the convertible preferred stock could cause redemption for cash. Therefore, convertible preferred stock was classified as temporary equity (mezzanine) on the condensed consolidated balance sheets as events triggering the liquidation preferences are not solely within the Company’s control. The carrying values of the convertible preferred stock will be adjusted to their liquidation preferences if and when it becomes probable that such a liquidation event will occur.

Research and Development Costs and Accruals

All research and development costs are expensed as incurred. Research and development costs consist primarily of costs associated with manufacturing drug substance and drug product, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services), license fees, salaries and employee benefits.

The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites and others. Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones. Payments made in advance of or after the performance are reflected in the condensed consolidated balance sheets as prepaid expenses or accrued liabilities, respectively. Up-front costs, such as costs associated with setting up clinical trial sites for participation in the trials, are expensed immediately once the set-up has occurred as research and development expenses. The Company accrues the costs incurred under agreements with these third parties based on estimates of actual work completed in accordance with the respective agreements. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impact research and development expenses.

License Fees

The Company expenses amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain, and the technology has no alternative future use when acquired. Acquisitions of technology licenses are charged to expense or capitalized based upon management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use. The Company has determined that technological feasibility for its product candidate would be reached when the requisite regulatory approvals are obtained to make the product available for sale. Contingent milestone payments are recognized when the related contingency is resolved, and the amounts are paid or become payable. These amounts are expensed to research and development if there is no alternative future use associated with the license or capitalized as an intangible asset if alternative future use of the license exists.

Patent Costs

Costs related to filing and pursuing patent applications are expensed as incurred, as the recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses.

Stock-Based Compensation

Compensation expense related to stock options granted to employees and non-employees is measured at the grant date based on the estimated fair value of the award and is recognized on a straight-line basis over the requisite service period. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model.

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Foreign Currency Transactions

The functional currency of Reneo Pharma Ltd is the U.S. dollar. All foreign exchange transactional and remeasurement gains and losses are recognized in the condensed consolidated statement of operations and comprehensive loss. For the three months ended March 31, 2021 and 2020, total foreign currency gains and losses were not material.

Comprehensive Income or Loss

Comprehensive income or loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources.

Net Loss Per Share

The Company computes basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive. For purposes of this calculation, common stock equivalents include the Company’s stock options and convertible preferred stock, which are convertible into shares of the Company’s common stock. No shares related to the convertible preferred stock were included in the diluted net loss per share calculation for the three months ended March 31, 2021 and 2020 because the inclusion of such shares would have had an anti-dilutive effect. The shares to be issued upon exercise of all outstanding stock options were also excluded from the diluted net loss per share calculation for the three months ended March 31, 2021 and 2020 because such shares are anti-dilutive.

Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following:

    

March 31, 2021

    

March 31, 2020

    

Convertible preferred stock (as converted)

15,907,629

 

5,430,957

Common stock options

3,113,640

 

976,130

Total

19,021,269

 

6,407,087

New Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes. The standard simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. The new guidance will be effective for the Company as of January 1, 2022. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is in the process of evaluating the impact of the application of this accounting standard update on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction in the carrying value of the asset. Entities will no longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be recognized. This new guidance is effective for the Company as of January 1, 2023. The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its condensed consolidated financial statements and related disclosures.

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In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheets for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires a lessee to recognize a liability for lease payments (the lease liability) and a right-of-use asset (representing its right to use the underlying asset for the lease term) on the balance sheet. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the new guidance as of the adoption date, rather than as of the earliest period presented. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the effective date, unless the lease was modified, to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP. This ASU is effective for annual reporting periods beginning January 1, 2022 with early adoption permitted. The Company plans to adopt the ASU on January 1, 2022 and is currently in the process of evaluating the impact of the application of this accounting standard update on its condensed consolidated financial statements and related disclosures.

3. Fair Value Measurements

ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs, other than quoted prices in active markets, that are observable for the asset or liability, either directly or indirectly.

Level 3 – Unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company’s financial assets are subject to fair value measurements on a recurring basis.

The Company classifies its money market funds as Level 1 using the quoted prices in active markets. No assets or liabilities were transferred into or out of their classifications during the three months ended March 31, 2021 and 2020.

The recurring fair value measurement of the Company’s assets measured at fair value at March 31, 2021 consisted of the following (in thousands):

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

  

For Identical Items

Observable Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Cash equivalents

 

  

 

  

 

  

 

  

Money market investments

$

89,563

$

$

$

89,563

Total

$

89,563

$

$

$

89,563

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The recurring fair value measurement of the Company’s assets measured at fair value at December 31, 2020 consisted of the following (in thousands):

Quoted Prices in

Significant

Active Markets

Significant Other

Unobservable

  

For Identical Items

Observable Inputs

Inputs

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Cash equivalents

 

  

 

  

 

  

 

  

Money market investments

$

49,632

$

$

$

49,632

Total

$

49,632

$

$

$

49,632

4. Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

    

MARCH 31, 2021

    

DECEMBER 31, 2020

Computer, software and office equipment

$

144

$

122

Leasehold improvements

 

30

 

30

Total property and equipment, gross

 

174

 

152

Less: accumulated depreciation and amortization

 

(93)

 

(83)

Total property and equipment, net

$

81

$

69

Depreciation and amortization expense related to property and equipment was $10,000 and $9,000 for the three months ended March 31, 2021 and 2020, respectively.

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

    

MARCH 31, 2021

    

DECEMBER 31, 2020

Accrued development expenses

$

1,159

$

1,443

Accrued clinical expenses

 

997

 

1,019

Accrued compensation

 

514

 

888

Other accrued expenses

 

704

 

322

Total other accrued expenses

$

3,374

$

3,672

6. Convertible Preferred Stock and Stockholders’ Deficit

Series A Convertible Preferred Stock

In December 2017, January 2018, and May 2019, the Company issued a total of 24,302,472 shares of Series A convertible preferred stock to certain investors at $2.16 per share.

In connection with the IPO (Note 1) in April 2021, all outstanding shares of Series A convertible preferred stock were converted into 5,430,957 shares of common stock.

Series B Convertible Preferred Stock

In December 2020, the Company and certain investors entered into a Series B preferred stock purchase agreement, whereby the Company issued 23,440,514 shares of Series B convertible preferred stock at $2.0215 per share for total gross proceeds of approximately $47.4 million before deducting offering costs of $0.3 million, which constituted the closing of the first tranche of the Series B convertible preferred stock. In connection with the closing of the first tranche of Series B convertible preferred stock in December 2020, the Company issued rights to the purchasers for the purchase

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of an additional 23,440,514 shares of Series B convertible preferred stock under the same terms and conditions upon the board of directors’ determination of either (i) that the cash balance of the Company is below $10 million, or (ii) approving the Company’s initial public offering of shares of its common stock pursuant to a registration statement under the Securities Act (Series B Tranche Right).

The Company evaluated the Series B Tranche Right and concluded that it was not a free-standing instrument that met the definition of a derivative that required separate accounting.

In March 2021, the Company completed the Series B Tranche Right at $2.0215 per share. A total of 23,440,514 shares of Series B convertible preferred stock were issued for aggregate net proceeds of approximately $47.4 million.

In connection with the IPO in April 2021, all outstanding shares of Series B convertible preferred stock were converted into 10,476,672 shares of common stock.

The following are key features of the convertible preferred stock:

Voting Rights

Each holder of shares of the Series A and Series B convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of Series A and Series B convertible preferred stock could then be converted.

Dividends

The holders of Series A and Series B convertible preferred stock are entitled to a non-cumulative dividend of 8% of the original issue price when, as and if declared by the board of directors, only out of funds that are legally available.

Liquidation Preferences

Holders of the Series A and Series B convertible preferred stock are entitled to receive liquidation preferences equal to the greater of (a) original issue price plus all declared and unpaid dividends or (b) such amount per share as would have been payable had all shares of such series of preferred stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or deemed liquidation event. Only after payment of the full liquidation preference of Series A and Series B convertible preferred stock, the remaining assets of the Company legally available for distribution shall be distributed ratably to the holders of the common stock.

Conversion Rights

At the option of the holder, shares of Series A and Series B convertible preferred shares can be converted into fully paid and non-assessable shares of the Company’s common stock. The initial conversion ratio is one-for-one, subject to customary anti-dilution provisions.

Upon either (a) the closing of the sale of shares of common stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act resulting in at least $75,000,000 of gross proceeds to the Company (Qualified Initial Public Offering) or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the outstanding shares of Series A and Series B convertible preferred stock at the time of such vote or consent, voting together as a single class on an as-converted basis, all outstanding shares of Series A and Series B convertible preferred stock shall automatically be converted into shares of common stock, at the applicable ratio at the time of conversion.

Redemption

The Series A and Series B convertible preferred stock are not redeemable. However, the Series A and Series B convertible preferred stock include terms such that there are deemed liquidation events that can trigger redemption of the

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convertible preferred stock that are outside the control of the Company. Accordingly, the Series A and Series B convertible preferred stock are classified outside of permanent equity on the condensed consolidated balance sheets.

Shares Reserved for Future Issuance

As of March 31, 2021, the Company had reserved shares of its common stock for future issuance as follows:

    

Shares

Reserved

Series A convertible preferred stock outstanding

 

5,430,957

Series B convertible preferred stock outstanding

 

10,476,672

Common stock options outstanding

 

3,113,640

Available for future grants under the 2014 Equity Incentive Plan

 

117,602

Total shares of common stock reserved

 

19,138,871

7. Stock-Based Compensation

In 2014, the Company adopted the 2014 Equity Incentive Plan (the 2014 Plan). The 2014 Plan provides for the issuance of incentive stock options to employees of the Company and non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock awards to directors, employees and consultants of the Company. In March 2021, the Company’s board of directors increased the option pool by 234,158 shares of common stock. As of March 31, 2021, As of March 31, 2021, the 2014 Plan has a total reserve of 3,231,242 shares. As of March 31, 2021, there were 117,602 shares available for future grant under the 2014 Plan.

The options granted under the 2014 Plan will expire no more than ten years from the date of grant. The exercise price of each option is determined by the Company’s board of directors, although generally options have an exercise price equal to the estimated fair market value of the Company’s stock on the date of the option grant. In the case of incentive stock options, the exercise price is required to be no less than 100% of the estimated fair market value of the Company’s common stock at the time the option is granted. For holders of more than 10% of the Company’s total combined voting power of all classes of stock, incentive stock options may not be granted at less than 110% of the fair market value of the Company’s common stock at the date of grant and for a term not to exceed five years. Most option grants generally vest 25% on the first anniversary of the original vesting commencement date, with the balance vesting monthly over the remaining three years.

Under the 2014 Plan, certain employees may be granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. As of March 31, 2021, stock options to purchase 24,460 shares of common stock have been early exercised and were subject to vesting. Cash received in exchange for early exercises of stock options has been recorded as a liability for the early exercise of stock options and will be transferred into common stock and additional paid-in capital as the shares vest. As of March 31, 2021, such liability for early exercises of stock options was immaterial.

In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (the 2021 Plan) and the Company’s stockholders approved the 2021 Plan in April 2021. The 2021 Plan became effective immediately prior to the execution of the underwriting agreement in connection with the IPO. Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s affiliates. A total of 2,187,524 new shares of common stock were approved to be initially reserved for issuance under the 2021 Plan. In addition, the number of shares of common stock reserved for issuance under the 2021 Plan includes the shares reserved and available for issuance pursuant to the grant of new awards under the 2014 Plan as of the effectiveness of the 2021 Plan and will include any shares subject to stock awards granted under the 2014 Plan that, after the date the 2021 Plan became effective, are forfeited or otherwise become available under the 2014 Plan. The

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number of shares of common stock reserved for issuance under the 2021 Plan will also automatically increase on January 1 of each calendar year, beginning on January 1, 2022 and continuing through and including January 1, 2031, by 5% of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year; provided, however, that the Company’s board of directors may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of common stock.

In March 2021, the Company’s board of directors adopted the Company’s 2021 Employee Stock Purchase Plan (ESPP) and the Company’s stockholders approved the ESPP in April 2021. The ESPP became effective immediately prior to the execution of the underwriting agreement in connection with our IPO. A total of 243,058 shares of common stock were approved to be initially reserved for issuance under the ESPP.

A summary of the Company’s stock option activity and related information during the three months ended March 31, 2021 is as follows:

    

    

Weighted-

    

Weighted- Average

 

Options

Average Exercise

Remaining

 

Aggregate

Outstanding

Price

Contractual Term

 

Intrinsic Value

Outstanding at December 31, 2020

935,478

$

2.56

7.7

Granted

2,273,285

$

5.06

Exercised

(95,123)

$

1.97

$

418,000

Forfeited/cancelled

 

 

$

 

  

Outstanding at March 31, 2021

 

3,113,640

 

$

4.41

 

9.2

$

6,086,000

Vested at March 31, 2021

 

615,517

 

$

2.49

 

7.4

$

2,384,000

Exercisable at March 31, 2021

 

2,772,210

 

$

4.40

 

9.2

$

5,441,000

Intrinsic value as of March 31, 2021 was based on the estimated common stock fair value of $6.36 per share.

Options exercisable at March 31, 2021 include vested options and options eligible for early exercise. All outstanding options as of March 31, 2021 are expected to vest.

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:

    

Three Months Ended

 

March 31, 

 

    

2021

    

2020

 

Risk-free interest rate

 

0.66

%  

1.44

%

Expected volatility

 

71.2

%  

71.6

%

Expected term (in years)

 

5.9

 

6.0

Expected dividend yield

 

%  

%

The weighted average grant date fair value of options granted during the three months ended March 2021 and 2020 was $3.15 and $2.40, respectively.

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Fair value of common stock. For periods prior to the IPO, the fair value of the shares of common stock underlying the stock options has been determined by the Company’s board of directors, with input from management. Historically, since there has been no public market for the Company’s common stock, the Company’s board of directors determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant. 

Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

Expected volatility. The expected volatility assumption is based on the volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry.

Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Unrecognized compensation expense at March 31, 2021 for both employee and non-employee stock-based compensation expense was $7.2 million, which is expected to be recognized over a weighted-average vesting term of 3.3 years.

Non-cash stock-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended

March 31, 

2021

    

2020

General and administrative

$

364

$

48

Research and development

 

107

 

44

Total

$

471

$

92

In November 2020, the Company hired a new chief executive officer under which the chief executive officer is entitled to receive a special performance bonus in the amount of $7.5 million, payable in cash, common stock or a combination of cash and common stock, in the event that (i) the Company’s market value exceeds $750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $750 million. The Company has determined that the bonus award is subject to ASC Topic 718, Compensation – Stock Compensation and includes both market and performance conditions. Because the performance conditions are not considered to be probable until the completion of the Company’s IPO or change in control, no expense was recorded on the award for the three months ended March 31, 2021. In April 2021, the performance condition was achieved in connection with the IPO. Accordingly, the Company expects to start recognizing compensation expense related to the award granted to the chief executive officer beginning in April 2021.

8. License Agreement

In December 2017, the Company entered into a License Agreement with vTv Therapeutics LLC (vTv Therapeutics) (the vTv License Agreement), under which the Company obtained an exclusive, worldwide, sublicensable license under

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certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans. Under the terms of the vTv License Agreement, the Company paid vTv Therapeutics an initial upfront license fee payment of $3.0 million and issued to vTv Therapeutics 309,576 shares of its common stock. The vTv License Agreement was accounted for as an asset acquisition and the upfront cash payment of $3 million and the fair value of common stock of $0.7 million issued to vTv Therapeutics was recorded in research and development expenses, as there was no alternative use for the asset.

Upon the achievement of certain pre-specified development and regulatory milestones, the Company is also required to pay vTv Therapeutics milestone payments totaling up to $64.5 million. The Company is also required to pay vTv Therapeutics up to $30.0 million in total sales-based milestones upon achievement of certain sales thresholds of the licensed product. In addition, the Company is obligated to make royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions.

In accordance with the terms of the vTv License Agreement, the Company issued a total of an additional 266,867 shares of its common stock to vTv Therapeutics in 2018 and 2019. The Company accounted for the additional shares of common stock issued to vTv Therapeutics when the shares were obligated to be issued to vTv Therapeutics. The Company is no longer obligated to issue any further shares of common stock under the vTv License Agreement.

For the three months ended March 31, 2021 and 2020, the Company did not record any research and development expenses in connection with the vTv License Agreement.

9. Commitments and contingencies

Operating Leases

In June 2018, the Company leased certain office space for its U.S. headquarters under a non-cancelable operating lease with terms through July 2023, with an option to extend the terms for the entire premises for a period of five years. The rent expense in the United States for the three months ended March 31, 2021 and 2020 totaled $46,000 for both periods.

In December 2018, the Company leased certain office space for its UK subsidiary under a non-cancelable operating lease with lease terms through November 2021. The rent expense in the UK for the three months ended March 31, 2021 and 2020 totaled $7,000 for both periods.

Legal Proceedings

The Company is currently not a party to any legal proceedings, nor is the Company aware of any threatened or pending litigations. However, from time-to-time in the future, the Company could be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of business, which may have a material adverse effect on the Company’s consolidated results of operations or financial position.

401(k) Plan

The Company maintains a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations. Matching contributions to the 401(k) plan are made for certain eligible employees to meet non- discrimination provisions of the plan. During the three months ended March 31, 2021 and December 31, 2020, the expense recorded by the Company was immaterial.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our prospectus dated April 8, 2021 that forms a part of our Registration Statement on Form S-1 (File No. 333-254534), as filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), on April 9, 2021 (Prospectus). Unless otherwise indicated, all references in this Quarterly Report on Form 10-Q to “Reneo,” the “company,” “we,” “our,” “us” or similar terms refer to Reneo Pharmaceuticals, Inc. and its subsidiary.

Forward-Looking Statements

In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Overview

We are a clinical-stage pharmaceutical company focused on the development and commercialization of therapies for patients with rare genetic mitochondrial diseases, which are often associated with the inability of mitochondria to produce adenosine triphosphate (ATP). Our lead product candidate, REN001, is a potent and selective agonist of the peroxisome proliferator-activated receptor delta (PPARδ). REN001 has been shown to increase transcription of genes involved in mitochondrial function and increase fatty acid oxidation, and may increase production of new mitochondria.

The PPAR family of nuclear hormone receptors, PPARa, PPARg, and PPARδ, control the transcription of genes critical for regulating energy metabolism and homeostasis. PPARδ is highly expressed in muscle, kidney, brain, and liver tissue. Activation of PPARδ results in changes in the expression of genes involved with multiple aspects of energy metabolism including uptake of fatty acids, utilization of fatty acids as an energy source, and mitochondrial biogenesis.

Increases in PPARδ activity also correlate with a shift in muscle tissue towards oxidative, fat-consuming type I fibers that are associated with endurance as opposed to glycolytic, type II fibers. In preclinical and clinical studies, increased PPARδ activity through transgenic overexpression or pharmacological activation increases muscular strength and endurance across a variety of functional measures. REN001 was studied in healthy volunteers with one leg immobilized to produce muscle atrophy. Compared to placebo, administration of REN001 resulted in statistically significant increases in the expression of genes involved in mitochondrial oxidative phosphorylation, and statistically significant improvements in muscle strength.

As a PPARδ agonist, REN001 may benefit patients with genetic mitochondrial myopathies who experience weakness, fatigue, and/or deterioration in muscle due to impaired mitochondrial energy production. We are

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initially developing REN001 in three rare genetic diseases that typically present with myopathy and have high unmet medical needs: primary mitochondrial myopathies (PMM), long-chain fatty acid oxidation disorders (LC-FAOD), and McArdle disease. Patients with these diseases are unable to perform many everyday activities, and can experience cardiomyopathy and other organ dysfunction. Patients with PMM or LC-FAOD also typically have a reduced life expectancy.

We completed an open-label Phase 1b clinical trial in patients with PMM to assess the safety and tolerability of REN001, and to measure changes in functional tests such as walk distance and exercise capacity, as well as patient-reported symptoms that could serve as potential endpoints in future clinical studies. REN001 was well-tolerated in this trial. Compared to baseline, patients receiving REN001 once-daily for 12 weeks experienced an average increase in a 12-minute walk test (12MWT) of 104 meters, and an average increase of 1.7mL/kg/min in oxygen consumption (VO2), as well as a reduction in patient-reported fatigue and pain.

Based on these results, we initiated the STRIDE study, a global, randomized, double-blind, placebo-controlled Phase 2b clinical trial of REN001 in patients with PMM, and we plan to begin enrollment in mid-year 2021. We also plan to conduct an open-label, long-term safety trial outside the United States in a subset of patients from the STRIDE study. We anticipate results from these clinical trials will be available in 2023. Following our interactions with the U.S. Food and Drug Administration (FDA) and several European regulatory agencies, we believe that positive results from these trials could support the registration of REN001 for PMM in both the United States and in Europe.

We are also conducting two exploratory, open-label Phase 1b clinical trials of REN001 in patients with LC-FAOD and with McArdle disease. Both Phase 1b clinical trials are currently enrolling and we anticipate results from both studies in the first half of 2022.

We are also conducting an observational, international study of REN001 in patients with LC-FAOD to better understand disease characteristics of patients (FORWARD study) through exercise tests and symptom questionnaires. The FORWARD study will also include work for validation of a new Reneo-developed patient questionnaire focused on muscle symptoms in LC-FAOD, which we plan to use in future trials. We anticipate the results of this study in the second half of 2022.

Since our inception in 2014, our operations have focused on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical and clinical development of and manufacturing development for REN001. We do not have any product candidates approved for sale, have not generated any revenue from product sales, and do not expect to generate revenues from the commercial sale of our product candidate for at least several years, if ever. Since inception, we have incurred significant operating losses. For the three months ended March 31, 2021, our net loss was $7.2 million. Our net losses were $12.4 million and $19.5 million for the years ended December 31, 2019 and 2020, respectively. As of March 31, 2021, we had an accumulated deficit of $52.2 million, and cash and cash equivalents of $91.2 million. We have funded our operations primarily through the issuance and sale of equity securities. From our inception through March 31, 2021, we have raised an aggregate of $146.7 million in gross proceeds primarily from the sale of our convertible preferred stock and exercise of stock options, including approximately $47.4 million raised from the second closing of our Series B convertible preferred stock in March 2021. In April 2021, we raised net proceeds of approximately $84.8 million in connection with our initial public offering (IPO).

We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase as we conduct our ongoing and planned clinical trials and preclinical studies, engage in other research and development activities, seek regulatory approvals for any product candidates that successfully complete clinical trials, incur development milestone payments related to our research and development activities, prepare for commercialization, hire additional personnel, protect our intellectual property and incur additional expenses as a result of operating as a public company.

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Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities. As a result, we will need to raise additional capital. Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. Based upon our current operating plan, we believe that our existing cash and cash equivalents, together with the net proceeds from our IPO, will enable us to fund our operating expenses and capital expenditure requirements through at least the next 24 months.

We do not own or operate manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of REN001 for preclinical studies and clinical trials, as well as for commercial manufacturing if REN001 obtains marketing approval. We also rely, and expect to continue to rely, on third parties to manufacture, package, label, store, and distribute REN001, if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of REN001.

COVID-19

The COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely. The extent of the impact of the COVID-19 on our business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the pandemic and its impact on our clinical trial enrollment, trial sites, contract research organizations, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. For example, our Phase 1b clinical trial of REN001 in PMM patients was closed early as a result of COVID-19, and we may face future clinical trial disruptions. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. As a result of COVID-19, we have taken precautionary measures in order to minimize the risk of the virus to our employees and the communities in which we operate. Although the majority of our workforce now works remotely, there has been a minimal disruption in our ability to ensure the effective operation of our business. We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. At this point, the extent to which the COVID-19 pandemic may affect our business, operations and clinical development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain.

License Agreement

In December 2017, we entered into a License Agreement with vTv Therapeutics (the vTv License Agreement), under which we obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans. Under the terms of the vTv License Agreement, we paid vTv Therapeutics an initial upfront license fee payment of $3.0 million and issued to vTv Therapeutics shares of our common stock subject to antidilution provisions under the agreement. Upon the achievement of certain pre-specified development and regulatory milestones, we are also required to pay vTv Therapeutics up to an aggregate of $64.5 million. We are also required to pay vTv Therapeutics up to $30.0 million in total sales-based milestones upon achievement of certain sales thresholds of the licensed product. In addition, we are obligated to pay vTv Therapeutics tiered royalty payments at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions.

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Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

To date, our research and development expenses have related primarily to preclinical and clinical development of REN001. Research and development expenses include:

personnel expenses, including salaries, benefits, and stock-based compensation expense;
external expenses incurred under agreements with contract research organizations (CROs), investigative sites and consultants to conduct and support our preclinical studies and clinical trials;
laboratory supplies related to manufacturing our product candidate for clinical trials and preclinical studies, including fees paid to third-party manufacturers;
expenses related to regulatory activities, including filing fees paid to regulatory agencies;
facility costs including rent, depreciation, and maintenance expenses; and
fees for maintaining licenses under our third-party licensing agreements.

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Costs for certain activities, such as manufacturing and preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators. We expense amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired. The following table summarizes our research and development expenses for the three months ended March 31, 2021 and 2020:

    

THREE MONTHS ENDED

    

MARCH 31, 

    

2021

    

2020

    

(in thousands)

Nonclinical

$

563

$

874

Contract manufacturing cost

 

1,241

 

956

Clinical and regulatory

 

3,272

 

1,763

Research and development-other

 

396

 

(15)

Total

$

5,472

$

3,578

We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidate into and through clinical trials, continue to conduct preclinical studies and pursue regulatory approval of our product candidate. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidate may be affected by a variety of factors including: the safety and efficacy of our product candidate, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for our product candidate. As a result of the uncertainties discussed above, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of and obtain regulatory approval for our product candidate. Our research and development costs may vary significantly based on factors such as:

the scope, rate of progress, expense and results of clinical trials and preclinical studies;
per patient trial costs;
the number of trials required for approval;
the number of sites included in the trials;
the countries in which the trials are conducted;
the number of patients that participate in the trials;

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uncertainties in patient enrollment or drop out or discontinuation rates, particularly in light of the current COVID-19 pandemic environment;
potential additional safety monitoring requested by regulatory agencies;
the duration of patient participation in the trials and follow-up;
the safety and efficacy of our product candidate;
the cost and timing of manufacturing our product candidates; and
the extent to which we establish strategic collaborations or other arrangements.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits, and stock- based compensation expense, for personnel in executive, finance, accounting, compliance and human resource and other administrative functions. General and administrative expense also includes corporate facility costs not otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters, insurance costs and fees for accounting and consulting services.

We expect our general and administrative expenses to increase significantly for the foreseeable future to support continued research and development activities, including our ongoing and planned research and development of our product candidate for multiple indications. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Other Income

Other income consists of interest income on our cash, cash equivalents and short-term investments.

Results of Operations

Comparison of Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 (in thousands):

    

THREE MONTHS ENDED

    

 

MARCH 31, 

 

    

2021

    

2020

    

CHANGE

 

Operating expenses:

Research and development

$

5,472

$

3,578

$

1,894

General and administrative

 

1,742

 

924

 

818

Total operating expenses

 

7,214

 

4,502

 

2,712

Loss from operations

 

(7,214)

 

(4,502)

 

(2,712)

Other income

 

2

 

71

 

(69)

Net loss

$

(7,212)

$

(4,431)

$

(2,781)

Operating Expenses

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2021 were $5.5 million, compared to $3.6 million for the three months ended March 31, 2020. This increase of $1.9 million was primarily due to an increase of $1.5 million related to clinical trial costs associated with the launch of our STRIDE and FORWARD studies and $0.4

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million in employee and personnel related costs due to additional headcount required to support our clinical and CMC programs.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2021 were $1.7 million, compared to $0.9 million during the three months ended March 31, 2020. This increase of $0.8 million was primarily attributable to an increase of $0.8 million in employee and personnel related expenses, and an increase of $0.2 million of professional service expenses, offset by a reduction of $0.2 million of market research expenses.

Other Income

Other income for the three months ended March 31, 2021 was $2,000 compared to $71,000 during the three months ended March 31, 2020. This decrease of $69,000 was primarily attributable to lower interest income earned on deposits in money market accounts indexed to the federal funds rates, which declined significantly during the three months ended March 31, 2021.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant operating losses. To date, we have funded our operations primarily through the issuance and sale of equity securities. From our inception through March 31, 2021, we have raised an aggregate of $146.7 million in gross proceeds primarily from the sale of our convertible preferred stock and exercises of stock options. As of March 31, 2021, we had $91.2 million in cash and cash equivalents and an accumulated deficit of $52.2 million. We do not have any product candidates approved for sale and have not generated any revenue from product sales, and we do not expect to generate revenues from the commercial sale of our product candidate for at least the foreseeable future, if ever.

Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2021 and 2020:

THREE MONTHS ENDED

MARCH 31, 

2021

    

2020

(in thousands)

Net cash used in operating activities

$

(8,589)

$

(4,447)

Net cash (used in) provided by investing activities

 

(25)

 

5,199

Net cash provided by financing activities

 

46,222

 

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Net increase in cash and cash equivalents

$

37,608

$

778

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2021 was $8.6 million, consisting primarily of our net loss of $7.2 million and a $1.9 million net change in operating assets and liabilities, partially offset by a $0.5 million in non-cash charges primarily consisting of stock-based compensation expense.

Net cash used in operating activities for the three months ended March 31, 2020 was $4.4 million, consisting primarily of our net loss of $4.4 million and a $0.1 million net change in operating assets and liabilities, partially offset by a $0.1 million stock-based compensation expense.

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Investing Activities

Net cash used in investing activities for the three months ended March 31, 2021 was $25,000 consisting primarily of payments made for the acquisition of property and equipment.

Net cash provided by investing activities for the three months ended March 31, 2020 was $5.2 million, consisting primarily of maturities of available-for-sale short-term investments.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2021 was $46.2 million, consisting primarily of $47.2 million of proceeds from the issuance of shares of Series B convertible preferred stock, and $0.2 million of proceeds from the exercise of stock options, offset by $1.2 million of costs paid in connection with the IPO.

Net cash provided by financing activities for the three months ended March 31, 2020 was $26,000, consisting of proceeds from the exercise of stock options.

Funding Requirements

To date, we have not generated any revenue from product sales. We do not expect to generate revenue from product sales unless and until we obtain regulatory approval and commercialize REN001 or any future product candidates, and we do not know when, or if at all, that will occur. We will continue to require additional capital to develop REN001 and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our clinical development programs, and to a lesser extent, general and administrative expenses. We expect our expenses to continue to increase in connection with our ongoing activities as we continue to advance REN001 through clinical development and regulatory approval. Furthermore, we expect to incur additional costs associated with operating as a public company. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We will need to raise additional capital through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.

Our future capital requirements will depend on many factors, including:

the scope, progress, results and costs of clinical trials and preclinical studies for REN001;
the scope, prioritization and number of our research and clinical indications we pursue;
the costs and timing of manufacturing for our product candidates;
the costs, timing, and outcome of regulatory review of REN001;
the timing and amount of the milestone or other payments we must make to vTv Therapeutics and any future licensors;
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies;
the costs of securing manufacturing arrangements for commercial production;
our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; and

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the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market any product candidates.

In December 2020 and March 2021, we raised total gross proceeds of $94.8 million from the sale of Series B convertible preferred stock. As of March 31, 2021, we had $91.2 million in cash and cash equivalents. We believe, based upon our current operating plan, that our cash and cash equivalents as of March 31, 2021, together with the net proceeds from our IPO in April 2021, will be sufficient to fund our operations for at least the next 24 months.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive, and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidate, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of a product candidate that we do not expect to be commercially available for many years, if at all. Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

If we raise funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidate that we would otherwise prefer to develop and market ourselves.

Contractual Obligations & Commitments

During the three months ended March 31, 2021, there were no material changes to our contractual obligations as set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Prospectus.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. 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, expenses, and the disclosure of our contingent liabilities in our condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. 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 in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the Prospectus and the notes to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the

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three months ended March 31, 2021, there were no material changes to our critical accounting policies from those discussed in the Prospectus.

Recent Accounting Pronouncements

See Note 2. to our condensed consolidated financial statements for a description of recent accounting pronouncements applicable to our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have carried out an evaluation under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2021.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our principal executive officer and principal financial officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.

Changes in Internal Control over Financial Reporting 

During the quarter ended March 31, 2021, there have been no changes to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any material legal proceedings. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors, and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors

RISK FACTORS SUMMARY

We face many risks and uncertainties, as more fully described in this section under the heading “Risk Factors.” Some of these risks and uncertainties are summarized below. The summary below does not contain all of the information that may be important to you, and you should read this summary together with the more detailed discussion of these risks and uncertainties contained in “Risk Factors.”

We have incurred significant net losses since our inception and anticipate that we will continue to incur significant net losses for the foreseeable future.
We will need substantial additional financing to develop REN001 and any future product candidates and implement our operating plan. If we fail to obtain additional financing, we may be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We currently depend entirely on the success of REN001, which is our only product candidate. If we are unable to advance REN001 in clinical development, obtain regulatory approval, and ultimately commercialize REN001, or experience significant delays in doing so, our business will be materially harmed.
Our clinical trials may fail to adequately demonstrate the safety and efficacy of REN001, which could prevent or delay regulatory approval and commercialization.
Clinical drug development is a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results.
Any delays in the commencement or completion, or termination or suspension, of our clinical trials could result in increased costs to us, delay or limit our ability to generate revenue, and adversely affect our commercial prospects.
The regulatory approval process is lengthy, expensive and uncertain, and we may be unable to obtain regulatory approval for our product candidates under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our product candidates and adversely impact our ability to generate revenue, our business and our results of operations.
Our business has been and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could adversely affect our operations, as well as the business or operations of our manufacturers, CROs, or other third parties with whom we conduct business.
If the market opportunities for REN001 and any future product candidates are smaller than we believe they are, or we face substantial competition in our markets, our future revenue may be adversely affected, and our business may suffer.
We may not be successful in our efforts to expand our pipeline by identifying additional indications for which to investigate REN001 in the future. We may expend our limited resources to pursue a particular indication or formulation for REN001 and fail to capitalize on product candidates, indications or formulations that may be more profitable or for which there is a greater likelihood of success.
We currently have no marketing and sales organization. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell REN001 and any future product candidates, we may not be able to generate product revenues.

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We depend on a license agreement with vTv Therapeutics, and termination of this license could result in the loss of significant rights, which would harm our business.
We rely on third parties to conduct, supervise and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties, meet rigorously enforced regulatory requirements, or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize REN001.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection and/or other market exclusivity, our ability to prevent our competitors from commercializing similar or identical product candidates may be adversely affected.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

RISK FACTORS

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before deciding whether to purchase, hold or sell shares of our common stock. The occurrence of any of the risks described below could harm our business, financial condition, results of operations, growth prospects, and/or stock price or cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on Form 10-Q and those we may make from time to time. You should consider all of the risk factors described when evaluating our business. We have marked with an asterisk (*) those risk factors that reflect changes from the similarly titled risk factors included in the Prospectus.

Risks Related to Our Business and Industry

We have incurred significant net losses since our inception and anticipate that we will continue to incur significant net losses for the foreseeable future.*

We are a clinical-stage pharmaceutical company founded in 2014, and our operations to date have focused primarily on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical and clinical development of, and manufacturing development for, our only product candidate, REN001. Additionally, as an organization, we have not yet demonstrated an ability to successfully complete clinical development, obtain regulatory approvals, manufacture a commercial-scale product, or conduct sales and marketing activities necessary for successful commercialization. As we build our capabilities and expand our organization, we have not yet demonstrated an ability to overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical area. Consequently, any predictions about our future performance may not be as accurate as they would be if we had a history of successfully developing and commercializing pharmaceutical products.

Investment in pharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effectiveness in the targeted indication or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred significant net losses since our inception. If REN001 is not successfully developed and approved in the United States or Europe, we may never generate any revenue. For the three months ended March 31, 2021 and the year ended December 31, 2020, we reported a net loss of $7.2 million and $19.5 million, respectively. As of March 31, 2021, we had an accumulated deficit of $52.2 million.

We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our clinical development of, and seek regulatory approvals for, REN001 and any future product candidates. We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses

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and our ability to generate revenues. Our prior net losses and expected future net losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of increased expenses, or when, if at all, we will be able to achieve profitability.

We will need substantial additional financing to develop REN001 and any future product candidates and implement our operating plan. If we fail to obtain additional financing, we may be forced to delay, reduce or eliminate our product development programs or commercialization efforts.*

Our operations have consumed substantial amounts of cash since our inception. We expect to continue to spend substantial amounts to continue the clinical development of, and seek regulatory approval for, REN001 and any future product candidates. We will require significant additional amounts in order to prepare for commercialization, and, if approved, to launch and commercialize REN001.

 

As of March 31, 2021, we had cash and cash equivalents of $91.2 million. In April 2021, we consummated our IPO and issued 6,250,000 shares of common stock for net proceeds of approximately $84.8 million, after deducting underwriting discounts and commissions and offering related expenses. We believe, based on our current operating plan, that our cash and cash equivalents as of March 31, 2021 and such net proceeds will be sufficient to fund our operations for at least the next 24 months. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. Our future capital requirements will depend on many factors, including:

the scope, progress, results and costs of clinical trials and preclinical studies for REN001;
the scope, prioritization and number of our research and indications we pursue;
the costs and timing of manufacturing for our product candidate;
the costs, timing, and outcome of regulatory review of REN001;
the timing and amount of the milestone or other payments we must make to vTv Therapeutics and any future licensors;
the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies;
the costs of securing manufacturing arrangements for commercial production;
our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; and
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidate.

In any event, we will require additional capital for the further development and commercialization of REN001 and any future product candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Until such time as we can generate significant revenue from sales of our product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations, strategic alliances, licensing arrangements or a combination of one or more of these funding sources. Additional funds may not be available to us on acceptable terms or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of REN001 or other research and development initiatives. We also could be required to seek collaborators for REN001 and any future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable

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terms our rights to REN001 and any future product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.

We currently depend entirely on the success of REN001, which is our only product candidate. If we are unable to advance REN001 in clinical development, obtain regulatory approval, and ultimately commercialize REN001, or experience significant delays in doing so, our business will be materially harmed.

We currently only have one product candidate, REN001, and our business and future success depends entirely on our ability to develop, obtain regulatory approval for, and then successfully commercialize, REN001, which is currently in clinical development for patients with PMM, patients with LC-FAOD and patients with McArdle disease. This may make an investment in our company riskier than similar companies that have multiple product candidates in active development that may be able to better sustain failure of a lead product candidate.

 

The success of REN001 will depend on several factors, including the following:

successful enrollment in our ongoing and planned clinical trials and completion of such clinical trials with favorable results;
acceptance by the FDA and European Medicines Agency (EMA) of data from our global Phase 2b or future clinical trials in patients with PMM;
demonstrating safety and efficacy to the satisfaction of applicable regulatory authorities;
the outcome, timing, and cost of meeting regulatory requirements established by the FDA, EMA, and other comparable foreign regulatory authorities;
receipt of marketing approvals from applicable regulatory authorities, including one or more new drug applications (NDAs) from the FDA and marketing authorizations from the EMA, and maintaining such approvals;
establishing commercial manufacturing relationships and receiving/importing commercial supplies approved by the FDA and other regulatory authorities from any future third-party manufacturer;
establishing sales, marketing, and distribution capabilities and commercializing REN001, if approved, whether alone or in collaboration with others;
acceptance, if and when approved, by patients, the medical community and third-party payors;
obtaining and maintaining third-party coverage and adequate reimbursement;
establishing and maintaining patent and trade secret protection and regulatory exclusivity for REN001;
maintaining an acceptable safety profile of REN001 following approval; and
maintaining and growing an organization of people who can develop REN001.

If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to develop, obtain regulatory approvals or commercialize REN001.

Even if regulatory approvals are obtained, we may never be able to successfully commercialize REN001. In addition, we will need to transition at some point from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition. Accordingly, we may not be able to generate sufficient revenue through the sale of REN001 to continue our business.

Our clinical trials may fail to adequately demonstrate the safety and efficacy of REN001, which could prevent or delay regulatory approval and commercialization.*

Before obtaining regulatory approvals for the commercial sale of a product candidate, we must demonstrate through lengthy, complex, and expensive preclinical testing and clinical trials that a product candidate is both safe and effective for use in each target indication. Clinical trials often fail to demonstrate safety and efficacy of the product candidate studied for the target indication. Most product candidates that commence clinical trials are never approved by regulatory authorities for commercialization. Further, we have used patient reported outcomes in our clinical trials, including our Phase 1b clinical trial of REN001 of PMM, such as the Modified Fatigue Impact Scale, the Brief Pain Inventory assessment, and a 36 item short form survey (SF-36) that assesses the general health of patients. Such patient reported

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outcomes are based on subjective patient feedback and can be inherently difficult to evaluate. Such patient reported outcomes can be influenced by factors outside of our control and can vary widely from day to day for a particular patient, and from patient-to-patient and site-to-site within a clinical trial. It is possible that the FDA will not accept such patient reported outcomes, and any such non-acceptance may require changes to existing trial protocols or the conduct of additional clinical trials. Moreover, our Phase 2b clinical trial of REN001 in patients with PMM and our Phase 1b clinical trial in patients with LC-FAOD utilize a 12MWT as an assessment of functionality in patients with genetic mitochondrial diseases who commonly lack endurance rather than the more commonly used six minute walk test (6MWT). Although we believe the 12MWT is the appropriate assessment tool, we cannot guarantee you that the FDA or other regulators will not require clinical results from a 6MWT for approval. Additionally, any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of REN001 in other indications.

 

Preclinical and clinical drug development is a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future trial results.*

Preclinical and clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more preclinical or clinical trials can occur at any stage of testing. The results of preclinical studies and early clinical trials of REN001 may not be predictive of the results of later-stage clinical trials. In addition, product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Also, because there are generally no approved drugs for our clinical indications, there are few regulatory precedents by which we can be guided with respect to clinical endpoints.

As such, we cannot be certain that our ongoing and planned clinical trials will be successful. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or safety profiles, notwithstanding promising results in earlier trials. Moreover, preclinical and clinical data is often susceptible to varying interpretations and analyses. Our clinical trials have involved a limited number of patients and clinical trial sites. We may face significant setbacks as we expand the number of patients and clinical sites, potentially affecting the efficiency of trial execution and the consistency of trial data, which may delay or prevent regulatory approval of REN001. Any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of REN001 in those and other indications, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Further, if patients drop out of our clinical trials, miss scheduled doses or follow-up visits, or otherwise fail to follow clinical trial protocols, whether as a result of the COVID-19 pandemic, actions taken to slow the spread of COVID-19 or otherwise, the integrity of data from our clinical trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.*

We may not be able to initiate or continue our clinical trials for REN001 and any future product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA and comparable foreign regulatory authorities. Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, the design of the clinical trial, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

In particular, each clinical indication for which we are evaluating REN001 is a rare genetic disease with limited patient populations from which to draw participants in clinical trials. We will be required to identify and enroll a sufficient number of patients with the disease under investigation for our clinical trials of REN001. Potential patients may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for our clinical trials. Additionally, other pharmaceutical companies with more resources and greater experience in drug

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development and commercialization are targeting certain of the genetic mitochondrial diseases we are targeting and may do so with respect to additional indications we target in the future. Any recruiting of clinical trial patients by competitors from the patient populations we are targeting in our ongoing or future clinical trials may delay or make it more difficult to fully enroll our clinical trials. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. In addition, we rely on CROs and clinical trial sites to ensure proper and timely conduct of our clinical trials and, while we have agreements governing their services, we will have limited influence over their actual performance.

We are unable to predict with confidence the likelihood or duration of such patient enrollment delays and difficulties, whether related to COVID-19 or otherwise. If patient enrollment is delayed for an extended period of time, our clinical trials could be delayed or otherwise adversely affected.

 

Any delays in the commencement or completion, or termination or suspension, of our clinical trials could result in increased costs to us, delay or limit our ability to generate revenue, and adversely affect our commercial prospects.*

Before we can initiate clinical trials for REN001 or any future product candidates, we must submit the results of preclinical studies to the FDA or comparable foreign regulatory authorities, along with other information, including information about chemistry, manufacturing and controls, and our proposed clinical trial protocol, as part of an investigational new drug application (IND) or similar regulatory filing under which we must receive authorization to proceed with clinical development. While we have already submitted the INDs for our clinical trials of REN001 in PMM and LC-FAOD, if our clinical trial of REN001 in McArdle disease, which is currently being conducted outside of the United States, is instead conducted within the United States, we will need to submit an IND with the FDA prior to initiating such trial.

Before obtaining marketing approval from regulatory authorities for the sale of REN001 or any future product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of REN001 and any future product candidates in humans. Clinical testing is expensive, time-consuming, and uncertain as to outcome. In addition, we may rely in part on preclinical, clinical and quality data generated by CROs and other third parties for regulatory submissions for REN001 and any future product candidates. While we have or will have agreements governing these third parties’ services, we have limited influence over their actual performance. If these third parties do not make data available to us, or, if applicable, do not make regulatory submissions in a timely manner, in each case pursuant to our agreements with them, our development programs may be significantly delayed, and we may need to conduct additional clinical trials or collect additional data independently. In either case, our development costs would increase.

We do not know whether our current or any future clinical trials will begin on time, need to be redesigned, enroll an adequate number of patients, or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

obtaining regulatory authorizations to commence a clinical trial or reaching a consensus with regulatory authorities on clinical trial design or implementation;
any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;
obtaining approval from one or more institutional review boards (IRBs) or Ethics Committees (ECs);
IRBs or ECs refusing to approve, suspending or terminating the clinical trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the clinical trial;
changes to clinical trial protocols;
selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data;
sites deviating from clinical trial protocol or dropping out of a clinical trial;
the FDA or comparable foreign regulatory authorities’ failure to accept our proposed manufacturing processes and suppliers and/or requirement to provide additional information regarding our manufacturing processes before providing marketing authorization;
manufacturing sufficient quantities of REN001 or any future product candidates or obtaining sufficient quantities of combination therapies for use in clinical trials;

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subjects failing to enroll or remain in our trials at the rate we expect, or failing to return for post-treatment follow-up;
subjects choosing an alternative treatment for the indications for which we are developing REN001 and any future product candidates, or participating in competing clinical trials;
lack of adequate funding to continue the clinical trial;
subjects experiencing severe or unexpected drug-related adverse effects;
occurrence of serious adverse events (SAEs) in clinical trials of the same class of agents conducted by other companies;
a facility manufacturing REN001 or any of its components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of current good manufacturing practice (cGMP) regulations or other applicable requirements, or infections or cross-contaminations of REN001 in the manufacturing process;  
any changes to our manufacturing process, suppliers or formulation that may be necessary or desired;
third-party vendors not performing manufacturing and distribution services in a timely manner or to sufficient quality standards;
supply chain disruptions such as scarcity of raw materials used to manufacture REN001;
impact of possible trade disputes with countries where REN001 or its ingredients are manufactured;
third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practice (GCP) or other regulatory requirements;
third-party contractors not performing data collection or analysis in a timely or accurate manner;
third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; or
the impacts of the COVID-19 pandemic on our ongoing and planned clinical trials.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting, or completing our planned and ongoing clinical trials. For example, our Phase 1b clinical trial of REN001 in PMM patients was closed early as a result of the COVID-19 pandemic. We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or ECs of the institutions in which such trials are being conducted or by the FDA or comparable foreign regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Currently, the FDA and other foreign regulatory agencies have placed a class-wide requirement on all PPAR agonists asking sponsors to complete the two-year rat and mouse carcinogenicity studies before conducting studies longer than six-months in duration. As a result, it may take longer to enroll patients in the long-term safety trial, which could adversely affect the timing of our regulatory submissions for marketing approval. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing, or successful completion of a clinical trial.

Further, conducting clinical trials in foreign countries, which we are doing for REN001 and expect to do for any future product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

Moreover, principal investigators for our clinical trials may serve and have served as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may

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be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the trial. The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of REN001.

 

If we experience delays in the completion of, or termination of, any clinical trial of REN001 or any future product candidates, the commercial prospect of REN001 or any future product candidates will be harmed, and our ability to generate product revenue will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenue. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of REN001 or any future product candidates. Further, delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize REN001 and our competitors may be able to bring products to market before we do, and the commercial viability of REN001 could be significantly reduced. Any of these occurrences may harm our business, financial condition, results of operations and prospects significantly.

Use of REN001 or any future product candidates could be associated with side effects, adverse events or other properties that could delay or prevent regulatory approval or result in significant negative consequences following marketing approval, if any.*

As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events associated with the use of REN001 and any future product candidates. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by REN001 and any future product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. For example, we observed an incipient cataract in one patient in the McArdle Phase 1b study and if this adverse event is observed disproportionately in placebo-controlled studies, the FDA or comparable foreign agencies may determine that the risk-benefit profile is not favorable and may not approve REN001, and even if REN001 is approved, such findings may lead to a more limited label, including warnings and precautions, or a risk evaluation and mitigation strategy or other risk minimization tools available to FDA. If drug-related SAEs are observed, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval for REN001 for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition, results of operations and prospects significantly.

Additionally, if REN001 and any future product candidates receive marketing approval, and we or others later identify undesirable side effects caused by such product candidate, a number of potentially significant negative consequences could result, including:

we may be forced to suspend marketing of that product, or decide to remove the product form the marketplace;
regulatory authorities may withdraw approvals or change their approvals of such product;
regulatory authorities may require additional warnings on the label or limit access of that product to selective specialized centers with additional safety reporting and with requirements that patients be geographically close to these centers for all or part of their treatment;
we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
we may be required to change the way the product is administered;
we could be subject to fines, injunctions, or the imposition of criminal or civil penalties, or sued and held liable for harm caused to subjects or patients; and

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the product may become less competitive, and our reputation may suffer.

 

Any of these events could prevent us from achieving or maintaining market acceptance of REN001 and any future product candidates, if approved, and could significantly harm our business, results of operations, and prospects.

The regulatory approval process is lengthy, expensive and uncertain, and we may be unable to obtain regulatory approval for our product candidates under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our product candidates and adversely impact our ability to generate revenue, our business and our results of operations.

The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing, and distribution of REN001 is subject to extensive regulation by the FDA in the United States and by comparable foreign regulatory authorities in foreign markets. In the United States, we are not permitted to market REN001 and any future product candidates until we receive regulatory approval from the FDA. The process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity, and novelty of the product candidates involved, as well as the target indications and patient population. Approval policies or regulations may change, and the FDA has substantial discretion in the drug approval process, including the ability to delay, limit, or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. Neither we nor any future collaborator is permitted to market REN001 and any future product candidates in the United States until we receive approval of an NDA from the FDA. We have not previously submitted an NDA to the FDA, or similar drug approval filings to comparable foreign authorities.

Prior to obtaining approval to commercialize a product candidate in the United States or in foreign markets, we must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for REN001 are promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authorities, as the case may be, may also require us to conduct additional preclinical studies or clinical trials for REN001 and any future product candidates either prior to or post-approval, or may object to elements of our clinical development program.

REN001 and any future product candidates could fail to receive regulatory approval for many reasons, including the following:

serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by people using drugs similar to REN001 and any future product candidates;
the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;
the FDA or comparable foreign regulatory authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States;
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for any of its proposed indications;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
the data collected from clinical trials of REN001 and any future product candidates may not be sufficient to satisfy the FDA or comparable foreign regulatory authorities to support the submission of an NDA or other comparable submissions in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;  

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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

Any of the above events could prevent us from achieving market approval of REN001 or any future product candidates and could substantially increase the costs of commercializing REN001 or any future product candidates. The demand for REN001 or any future product candidates could also be negatively impacted by any adverse effects of a competitor’s product or treatment.

Of the large number of drugs in development, only a small percentage successfully complete the FDA or foreign regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market REN001 and any future product candidates, which would significantly harm our business, financial condition, results of operations and prospects.

Even if we eventually complete clinical trials and receive approval of an NDA or foreign marketing application for REN001 and any future product candidates, the FDA or comparable foreign regulatory authority may grant approval contingent on the performance of costly additional clinical trials, including Phase 4 clinical trials, and/or the implementation of a risk evaluation and mitigation strategy (REMS) which may be required to ensure safe use of the drug after approval. The FDA or the comparable foreign regulatory authority also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or comparable foreign regulatory authority may not approve the labeling that we believe is necessary or desirable for the successful commercialization of a product. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of that product candidate and would materially adversely impact our business and prospects.

Our business has been and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could adversely affect our operations, as well as the business or operations of our manufacturers, CROs, or other third parties with whom we conduct business.*

Our business has been and could continue to be adversely affected by the evolving COVID-19 pandemic, which was declared by the World Health Organization as a global pandemic. As COVID-19 continues to spread, we may experience ongoing disruptions that could severely impact our business and clinical trials, including:

delays or difficulties in enrolling patients in our clinical trials;
delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site; investigators and clinical site staff;
delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruption in global shipping that may affect the transport of clinical trial materials;
changes in local regulations as part of a response to the COVID-19 outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;
interruptions or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;  

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risk that participants enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;