Olema Pharmaceuticals Inc

Comparison of the three months ended March 31, 2024 and 2023

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

Research and development expenses

The following table summarizes our research and development expenses by functional area for the three months ended March 31, 2024 and 2023:

Research and development expenses for the three months ended March 31, 2024 were $29.9 million, compared to $22.8 million for the three months ended March 31, 2023. The increase of $7.1 million was primarily due to (i) a $5.0 million milestone payment owed to Aurigene in connection with the exclusive global license agreement entered into in June 2022 between the Company and Aurigene, or the Aurigene Agreement, (ii) increased spending on clinical operations and development-related activities as we continue to advance palazestrant into late-stage clinical trials, and (iii) an increase in non-cash stock-based compensation expense. The increase was offset by (i) decreased spending on clinical pharmacology studies and nonclinical research programs and (ii) $1.8 million one-time restructuring charge recorded in the first quarter of 2023.

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2024 were $4.5 million compared to $6.8 million for the three months ended March 31, 2023. The decrease of $2.3 million was primarily due to (i) decreased spending on corporate- and legal-related costs, and (ii) personnel-related expenses, including a $1.0 million one-time restructuring charge recorded in the first quarter of 2023.

Other income

Other income for the three months ended March 31, 2024 was $3.4 million, compared to $1.3 million for the three months ended March 31, 2023. The increase of $2.1 million was primarily due to an increase in interest income from our marketable securities..

Liquidity and capital resources

Sources of liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net losses were $31.0 million and $28.3 million for the three months ended March 31, 2024 and 2023, respectively. Through March 31, 2024, we had received aggregate gross proceeds of $535.8 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes, stock option exercises, and sale of stock through the Company’s 2020 Employee Stock Purchase Plan, or ESPP.

As of March 31, 2024, we had $249.0 million in cash, cash equivalents and marketable securities and accumulated deficit of $336.6 million. We had no debt outstanding as of March 31, 2024.

In September 2023, we entered into a stock purchase agreement for a private placement of 13,211,381 shares of our common stock, at a price of $9.84 per share, to selected institutional and accredited investors, or the Private Placement, resulting in gross proceeds of approximately $130.0 million. After deducting offering expenses related to the Private Placement of approximately $0.3 million, the net proceeds to us from the Private Placement were approximately $129.7 million.

On September 5, 2023, we entered into a loan and security agreement, or the Loan Agreement, with Silicon Valley Bank, a division of First Citizens Bank & Trust Company, or the Bank, which provides us with an aggregate principal amount of up to $50.0 million, or the Credit Facility, of which $25.0 million became available upon the closing of the Private Placement, and the remaining $25.0 million may be made available upon approval of the Bank in its discretion. The Credit Facility will mature on August 1, 2027. As of March 31, 2024, we had not drawn down from the Credit Facility, and had no other debt outstanding.

On January 5, 2024, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or TD Cowen, as sales agent, pursuant to which we may offer and sell, from time to time, shares of our common stock, having an aggregate offering price of up to $150.0 million, or the ATM Shares. The sales, if any, of the ATM Shares will be made by any method permitted that is deemed to be an “at-the-market”, or ATM, equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through the Nasdaq Global Select Market. We have agreed to pay TD Cowen a commission of up to 3.0% of the aggregate gross proceeds from any ATM Shares sold by TD Cowen. During the three months ended March 31, 2024, we issued 546,326 shares of our common stock under the ATM program for net proceeds of $7.9 million after deducting related issuance costs. As of March 31, 2024, approximately $141.8 million remained available for issuance under the Sales Agreement.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of palazestrant, OP-3136 and nonclinical studies. We expect that our research and development and general and administrative costs will increase in connection with conducting additional nonclinical studies and clinical trials for our current and future research programs and product candidates, contracting with CMOs to support nonclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

Our primary uses of cash are to fund our research and development activities, including with respect to palazestrant, OP-3136 and other nonclinical programs, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital and providing general and administrative support for these operations.

Other than as noted above, we currently have no financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years.

Future funding and material cash requirements

To date, we have not generated any revenue from product sales. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if at all, that will occur. We expect our expenses to increase in connection with our ongoing activities, particularly as we initiate and conduct clinical trials of, and seek marketing approval for, palazestrant or OP-3136. In addition, if we obtain marketing approval for our product candidates, we expect to incur significant commercialization expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we have incurred and expect to continue to incur additional costs associated with operating as a public company. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts.

We expect our cash, cash equivalents, and marketable securities as of March 31, 2024, as well as the available balance under the Credit Facility, will enable us to fund our current operating plan for at least the next 12 months from the filing date of these condensed consolidated financial statements.

Refer to Note 10 of our notes to the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q for further information regarding our material cash requirements; other than as set forth therein, there have been no material changes outside the ordinary course of business during the three months ended March 31, 2024 to our commitments and contingencies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our future capital requirements will depend on many factors, including:

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the scope, progress, results and costs of product discovery, nonclinical studies and clinical trials;

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the scope, prioritization and number of our research and development programs;

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the costs, timing and outcome of regulatory review of our product candidates;

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our ability to establish and maintain collaborations on favorable terms, if at all;

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the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we enter into;

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the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;

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

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the extent to which we acquire or in-license other product candidates and technologies;

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the costs of securing manufacturing arrangements for commercial production; and

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

Identifying potential product candidates and conducting nonclinical 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 candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of one or more product candidates that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise 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 candidates that we would otherwise prefer to develop and market ourselves.

Cash flows

The following table shows a summary of our cash flows for each of the periods presented:

Operating activities

Net cash used in operating activities during the three months ended March 31, 2024 consisted primarily of our net loss of $31.0 million and non-cash interest income on our marketable securities of $2.4 million, offset by a net increase in operating assets and liabilities of $4.8 million and non-cash charges of $5.0 million. The net loss consisted primarily of $29.9 million in research and development expenses and $4.5 million in general and administrative expenses. The non-cash charges consisted primarily of stock-based compensation expense of $4.9 million and depreciation and amortization expenses of $0.1 million, and non-cash lease expense of less than $0.1 million, net of cash payments of $0.3 million. The net increase in operating assets and liabilities was primarily due to (i) an increase of $5.0 million in accounts payable, which is primarily due to the timing of a milestone payment to Aurigene, and (ii) a decrease of $1.6 million in prepaid expenses and other current assets, which is primarily due to the reimbursable research and development costs received from a collaboration partner. The changes were partially offset by (i) an increase of $1.3 million in other assets and long-term deposits, and (ii) a decrease of $0.4 million in accrued and other current liabilities.

Net cash used in operating activities during the three months ended March 31, 2023 consisted primarily of our net loss of $28.3 million, offset by non-cash charges of $3.9 million and a net increase in net operating assets and liabilities of $4.0 million. The net loss consisted primarily of $22.8 million in research and development expenses and $6.8 million in general and administrative expenses. The non-cash charges consisted primarily of stock-based compensation of $4.6 million and depreciation and amortization expenses of $0.1 million, and non-cash lease expense of less than $0.1 million, net of cash payments of $0.3 million. These non-cash expenses were primarily offset by non-cash interest income on our marketable securities of $0.9 million. The net increase in operating assets and liabilities was primarily due to (i) a net increase of $2.7 million in other current liabilities, (ii) a net increase of $1.0 million in prepaid expenses and other current assets and (iii) a net increase of $0.3 million in accounts payable, which is primarily a result of timing of invoice payment.

Investing Activities

Net cash used in investing activities during the three months ended March 31, 2024 was predominantly due to purchases of marketable securities which were offset by maturities of marketable securities.

Net cash provided by investing activities during the three months ended March 31, 2023 was predominantly due to maturities of marketable securities which were offset by the purchases of marketable securities.

Financing activities

Net cash provided by financing activities during the three months ended March 31, 2024 consists of $7.9 million in net proceeds from the sale of ATM Shares and $0.9 million from the exercise of stock options.

Net cash provided by financing activities during the three months ended March 31, 2023 represents $0.2 million in net proceeds from the exercise of stock options.

Critical accounting policies and significant judgements 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, or U.S. GAAP. 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. 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.

During the three months ended March 31, 2024, there were no material changes to our critical accounting policies and estimates as reported in our Annual Report on Form 10-K.