Equillium Inc

Previous wording

We acquired the exclusive worldwide rights to EQ101 and a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates, including EQ302, through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022. EQ101 and EQ302 are synthetic peptides engineered to specifically inhibit key disease-driving, clinically validated cytokine targets aimed at addressing unmet needs in a number of immuno-inflammatory indications. In November 2022, we initiated a Phase 2 proof-of-concept clinical study of EQ101 administered intravenously, or IV, in subjects with moderate to severe alopecia areata, or AA, in Australia and New Zealand. Enrollment in that study has been completed, and we expect to announce topline data in the second quarter of 2024. We are currently conducting preclinical development of EQ302, including in vivo pharmacology and formulation development, to further characterize and optimize the product candidate. Pending positive findings, we expect to advance EQ302 into additional preclinical development to include GMP-manufacturing and toxicology studies capable of supporting a potential IND filing and advancement into a first-in-human clinical study.

Current wording

We acquired the exclusive worldwide rights to EQ101 and a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates, including EQ302, through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022. EQ101 and EQ302 are synthetic peptides engineered to specifically inhibit key disease-driving, clinically validated cytokine targets aimed at addressing unmet needs in a number of immuno-inflammatory indications. In November 2022, we initiated a Phase 2 proof-of-concept clinical study of EQ101 administered intravenously, or IV, in subjects with moderate to severe alopecia areata, or AA, in Australia and New Zealand. In June 2024, we announced positive topline data from that study. Based on those positive results and feedback from key opinion leaders in the treatment of AA, we believe further development of EQ101 in AA is warranted. We are proceeding with preparations to conduct a Phase 2b placebo-controlled, dose optimization study, which we expect to initiate before the end of 2025. We continue to make progress on a subcutaneous formulation of EQ101 which could potentially be introduced in the next study. We are currently conducting preclinical development of EQ302, including in vivo pharmacology and formulation development, to further characterize and optimize the product candidate. Pending positive findings, we expect to advance the preclinical development of EQ302 toward a potential regulatory filing to enable a first-in-human clinical study in the second half of 2025.

Previous wording

We recently completed a Phase 1 first-in-human clinical study of another multi-cytokine targeting peptide, EQ102, in healthy volunteers in Australia. EQ102 is a bi-specific inhibitor of IL-15 and IL-21, which was also acquired as part of the Bioniz acquisition. In that Phase 1 study, EQ102 was generally well tolerated and demonstrated pharmacodynamic activity, but the bioavailability of the initial formulation was lower than expected. Preclinical and translational data have demonstrated that EQ302 has increased potency compared to EQ102, is both stable and permeable in the gut, and can be further modified for optimal systemic or gut-restricted activity. In December 2023, we announced that given our recent progress with EQ302 and its superior product profile relative to EQ102, we have transitioned away from further developing EQ102 and are instead advancing EQ302 towards the clinic for the potential treatment of patients with gastrointestinal and skin diseases.

Current wording

In June 2024, we completed a Phase 1 first-in-human clinical study of another multi-cytokine targeting peptide, EQ102, in healthy volunteers in Australia. EQ102 is a bi-specific inhibitor of IL-15 and IL-21, which was also acquired as part of the Bioniz acquisition. In that Phase 1 study, EQ102 was generally well tolerated and demonstrated pharmacodynamic activity, but the bioavailability of the initial formulation was lower than expected. Preclinical and translational data have demonstrated that EQ302 has increased potency compared to EQ102, is both stable and permeable in the gut, and can be further modified for optimal systemic or gut-restricted activity. In December 2023, we announced that given our recent progress with EQ302 and its superior product profile relative to EQ102, we have transitioned away from further developing EQ102 and are instead advancing EQ302 towards the clinic for the potential treatment of patients with gastrointestinal diseases, including celiac disease, and skin diseases.

Previous wording

We acquired our rights to itolizumab (EQ001) pursuant to a collaboration and license agreement with Biocon SA (subsequently assigned to Biocon Limited, or together, Biocon) in May 2017, which has been subsequently amended, or Biocon License. In March 2022, we initiated EQUATOR, a global Phase 3 pivotal clinical study of itolizumab (EQ001) in 200 patients with acute graft-versus-host disease, or aGVHD. The decision to initiate the EQUATOR study was based on findings from our completed Phase 1b clinical study in aGVHD, called EQUATE, and feedback from both the U.S. Food and Drug Administration, or FDA, and leading physicians in the field of hematopoietic stem cell transplantation. We expect the interim review of EQUATOR data of the first approximately 100 subjects by the Data Safety Monitoring Committee will occur in the third quarter of 2024. We recently completed EQUALISE, a Phase 1b proof-of-concept clinical study of itolizumab (EQ001) in patients with systemic lupus erythematosus, or SLE, and lupus nephritis, or LN. In November 2023, we announced data from the Type B LN portion of the study presented at the annual meetings of the American College of Rheumatology and the American Society of Nephrology. That data represented all but the last patient in the follow-up period and demonstrated that itolizumab (EQ001) was well-tolerated and produced a clinically meaningful response in highly proteinuric subjects. In April 2024, we announced positive topline data from the Type B LN portion of EQUALISE and that the topline data had been delivered to Ono Pharmaceutical Co., Ltd., or Ono.

Current wording

We acquired our rights to itolizumab (EQ001) pursuant to a collaboration and license agreement with Biocon SA (subsequently assigned to Biocon Limited, or together, Biocon) in May 2017, which has been subsequently amended, or Biocon License. In March 2022, we initiated EQUATOR, a global Phase 3 pivotal clinical study of itolizumab (EQ001) in 200 patients with acute graft-versus-host disease, or aGVHD. The decision to initiate the EQUATOR study was based on findings from our completed Phase 1b clinical study in aGVHD, called EQUATE, and feedback from both the U.S. Food and Drug Administration, or FDA, and leading physicians in the field of hematopoietic stem cell transplantation. In August 2024, we announced a positive recommendation from the Independent Data Safety Monitoring Committee, or IDMC, to continue the EQUATOR study based on the IDMC’s review of the interim analysis of unblinded efficacy and safety data of the first approximately 100 subjects. On August 1, 2024, we provided the IDMC's recommendation from the interim analysis to Ono Pharmaceutical Co., Ltd., or Ono, triggering the 90-day period for Ono to decide whether to exercise its option to acquire itolizumab, which results in the expiration of Ono’s option period on October 30, 2024. We recently completed EQUALISE, a Phase 1b proof-of-concept clinical study of itolizumab (EQ001) in patients with systemic lupus erythematosus, or SLE, and lupus nephritis, or LN. In November 2023, we announced data from the Type B LN portion of the study presented at the annual meetings of the American College of Rheumatology and the American Society of Nephrology. That data represented all but the last patient in the follow-up period and demonstrated that itolizumab (EQ001) was well-tolerated and produced a clinically meaningful response in highly proteinuric subjects. In April 2024, we announced positive topline data from the Type B LN portion of EQUALISE and that the topline data had been delivered to Ono.

Previous wording

If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $32.2 million based on the currency exchange rate quoted by MUFG Bank, Ltd on May 8, 2024. We expect Ono to make its option exercise decision in the second half of 2024. We are also eligible to receive up to $101.4 million upon the achievement of certain development, regulatory and commercialization milestones.

Current wording

If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $35.0 million based on the currency exchange rate quoted by MUFG Bank, Ltd on August 5, 2024. We expect Ono to make its option exercise decision in October 2024. We are also eligible to receive up to $101.4 million upon the achievement of certain clinical, regulatory and commercialization milestones, as well as continued reimbursement of itolizumab-related expenses and a markup on full time equivalent, or FTE, costs.

Previous wording

Pursuant to the Asset Purchase Agreement, we are responsible for conducting all research and development of itolizumab (EQ001), which is being funded by Ono on a quarterly basis from July 1, 2022 through the option period. Unless terminated early, the option period will expire three months following the delivery of topline data from the EQUALISE clinical study in LN and the results of the interim analysis from the EQUATOR Phase 3 clinical study in aGVHD. In April 2024, we delivered topline data from the EQUALISE clinical study in LN to Ono.

Current wording

Pursuant to the Asset Purchase Agreement, we are responsible for conducting all research and development of itolizumab (EQ001), which is being funded by Ono on a quarterly basis from July 1, 2022 through the option period. Unless terminated early, the option period will expire 90 days following the delivery of topline data from the EQUALISE clinical study in LN and the results of the interim analysis from the Phase 3 EQUATOR clinical study in aGVHD. In April 2024, we delivered topline data from the EQUALISE clinical study in LN to Ono, and on August 1, 2024 we delivered the results of the interim analysis from the Phase 3 EQUATOR clinical study in aGVHD to Ono, which results in the expiration of Ono's option period on October 30, 2024.

Previous wording

Bioniz, the Asset Purchase Agreement with Ono and other transactions not completed, initiating a stock repurchase program, and the general and administrative activities associated with operating a public company. Furthermore, in connection with the acquisition of Bioniz, we expanded our pipeline from one product candidate to multiple product candidates, all at various stages of development. This expansion may accelerate the rate at which our operating losses increase as we incur costs to further the development and seek regulatory approval for these product candidates. We have generated revenue from the Asset Purchase Agreement related to the one-time, upfront payment from Ono in exchange for the Option as well as from the itolizumab (EQ001) development funding from Ono. We have not generated any revenue from product sales, milestone payments or royalties. Since inception, we have primarily financed our operations through debt and equity financings and revenue generated from the Asset Purchase Agreement.

Current wording

Since our inception, substantially all of our efforts have been focused on organizing and staffing our company, business planning, raising capital, in-licensing rights to itolizumab (EQ001), conducting non-clinical research, including the initial preclinical development of EQ302, filing three Investigational New Drug applications, or INDs, conducting clinical development of EQ101, EQ102 and itolizumab (EQ001), conducting chemistry, manufacturing and controls, or CMC, activities in preparation for a potential biologics license application, or BLA, filing for itolizumab (EQ001), conducting formulation development work of our product candidates, conducting business development activities such as the acquisition of Bioniz, the Asset Purchase Agreement with Ono and other transactions not completed, initiating a stock repurchase program, and the general and administrative activities associated with operating a public company. Furthermore, in connection with the acquisition of Bioniz, we expanded our pipeline from one product candidate to multiple product candidates, all at various stages of development. This expansion may accelerate the rate at which our operating losses increase as we incur costs to further the development and seek regulatory approval for these product candidates. We have generated revenue from the Asset Purchase Agreement related to the one-time, upfront payment from Ono in exchange for the Option as well as from the itolizumab (EQ001) development funding from Ono. We have not generated any revenue from product sales, milestone payments or royalties. Since inception, we have primarily financed our operations through debt and equity financings and revenue generated from the Asset Purchase Agreement.

Previous wording

We have incurred losses since our inception. For the three months ended March 31, 2024 and 2023, our net losses were $2.7 million and $3.9 million, respectively. As of March 31, 2024, we had an accumulated deficit of $188.5 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development activities, non-clinical and clinical activities, acquired in-process research and development, and general and administrative costs associated with our operations.

Current wording

We have incurred losses since our inception. For the six months ended June 30, 2024 and 2023, our net losses were $2.3 million and $7.3 million, respectively. As of June 30, 2024, we had an accumulated deficit of $188.0 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development activities, non-clinical and clinical activities, acquired in-process research and development, and general and administrative costs associated with our operations.

Previous wording

We expect to continue to incur significant expenses and increasing losses into the foreseeable future. We anticipate our expenses will increase substantially as we advance our research and development activities, including the ongoing and future clinical development of EQ101, EQ302 and itolizumab (EQ001), potentially expand the indications in which we conduct clinical development of our product candidates, potentially acquire and/or develop new product candidates, including preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform, seek regulatory approval for and potentially commercialize any approved product candidates, hire additional personnel, protect our intellectual property and incur general corporate costs. We expect that our existing cash, cash equivalents and short-term investments as of March 31, 2024, will enable us to fund our operations into the second half of 2025, assuming no further repurchases under our stock repurchase program.

Current wording

We expect to continue to incur significant expenses and increasing losses into the foreseeable future. We anticipate our expenses will increase substantially as we advance our research and development activities, including the ongoing and future clinical development of EQ101, EQ302 and itolizumab (EQ001), potentially expand the indications in which we conduct clinical development of our product candidates, potentially acquire and/or develop new product candidates, including preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform, seek regulatory approval for and potentially commercialize any approved product candidates, hire additional personnel, protect our intellectual property and incur general corporate costs.

Previous wording

To date, we have not generated any revenues from therapeutic product sales, developmental milestones or royalties. For the three months ended March 31, 2024 and 2023, our revenues were derived from development funding from Ono and recognition of deferred revenue associated with an upfront payment under the Asset Purchase Agreement. In the future, we may generate revenue from collaboration or license agreements we may enter into with respect to our product candidates, including further revenue such as development funding and potential option exercise and milestone payments from the Asset Purchase Agreement, as well as product sales from any approved product, which approval is unlikely to happen within the next 12 months, if ever. Our ability to generate product revenues will depend on the successful development and eventual commercialization of EQ101, EQ302, itolizumab (EQ001) if Ono does not exercise its option, and any future product candidates. If we fail to complete the development of EQ101, EQ302, itolizumab (EQ001) or any future product candidates in a timely manner, or to obtain regulatory approval for our product candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected.

Current wording

To date, we have not generated any revenues from therapeutic product sales, developmental milestones or royalties. For the six months ended June 30, 2024 and 2023, our revenues were derived from development funding from Ono and recognition of deferred revenue associated with an upfront payment under the Asset Purchase Agreement. In the future, we may generate revenue from collaboration or license agreements we may enter into with respect to our product candidates, including further revenue such as development funding and potential option exercise and milestone payments from the Asset Purchase Agreement, as well as product sales from any approved product, which approval is unlikely to happen within the next 12 months, if ever. Our ability to generate product revenues will depend on the successful development and eventual commercialization of EQ101, EQ302, itolizumab (EQ001) if Ono does not exercise its option, and any future product candidates. If we fail to complete the development of EQ101, EQ302, itolizumab (EQ001) or any future product candidates in a timely manner, or to obtain regulatory approval for our product candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected.

Previous wording

If Ono exercises the Option, we will receive JPY 5.0 billion, or approximately $32.2 million based on the currency exchange rate quoted by MUFG Bank, Ltd. on May 8, 2024. We are also eligible to receive up to $101.4 million upon achievement of certain development, regulatory and commercialization milestones.

Current wording

If Ono exercises the Option, we will receive JPY 5.0 billion, or approximately $35.0 million based on the currency exchange rate quoted by MUFG Bank, Ltd. on August 5, 2024. We are also eligible to receive up to $101.4 million upon achievement of certain clinical, regulatory and commercialization milestones, as well as continued reimbursement of itolizumab-related expenses and a markup on FTE costs.

Previous wording

We are responsible for conducting all research and development of itolizumab, which is being funded by Ono on a quarterly basis from July 1, 2022, through the option period. Unless terminated early, the option period will expire three months following the delivery of topline data from the EQUALISE clinical study in LN and the results of the interim analysis from the EQUATOR Phase 3 clinical study in aGVHD. In April 2024, we delivered topline data from the EQUALISE clinical study in LN to Ono.

Current wording

We are responsible for conducting all research and development of itolizumab, which is being funded by Ono on a quarterly basis from July 1, 2022, through the option period. Unless terminated early, the option period will expire 90 days following the delivery of topline data from the EQUALISE clinical study in LN and the results of the interim analysis from the Phase 3 EQUATOR clinical study in aGVHD. In April 2024, we delivered topline data from the EQUALISE clinical study in LN to Ono, and on August 1, 2024 we delivered the results of the interim analysis from the Phase 3 EQUATOR clinical study in aGVHD to Ono, which results in the expiration of Ono's option period on October 30, 2024.

Previous wording

During the three months ended March 31, 2024, we recognized $10.7 million of revenue under our Asset Purchase Agreement with Ono consisting of $8.0 million of development funding and $2.7 million related to the amortization of the upfront payment. During the three months ended March 31, 2023, we recognized $8.9 million of revenue under our Asset Purchase Agreement with Ono consisting of $6.7 million of development funding and $2.2 million related to the amortization of the upfront payment.

Current wording

During the three and six months ended June 30, 2024, we recognized $13.9 million and $24.5 million of revenue under our Asset Purchase Agreement with Ono, respectively. During the three and six months ended June 30, 2023, we recognized $9.1 million and $18.0 million of revenue under our Asset Purchase Agreement with Ono, respectively.

Previous wording

As of March 31, 2024, aggregate deferred revenue related to the Asset Purchase Agreement was $13.4 million.

Current wording

As of June 30, 2024, aggregate deferred revenue related to the Asset Purchase Agreement was $8.4 million.

Previous wording

Equillium Australia Pty Ltd, or Equillium Australia, a wholly-owned subsidiary of Equillium, Inc., is eligible under the Australian Research and Development Tax Incentive Program, or the Tax Incentive, to obtain a cash refund from the Australian Taxation Office, or ATO, for eligible research and development expenditures. The cash refund is received by Equillium Australia, upon filing of a claim in connection with Equillium Australia’s annual income tax return. The Tax Incentive is a self-assess program whereby Equillium Australia must assess its eligibility each year to determine (i) if the entity is eligible, (ii) if the specific research and development activities are eligible and (iii) if the individual research and development expenditures have nexus to such research and development activities. Equillium Australia evaluates its eligibility under the Tax Incentive as of each balance sheet date based on the most current and relevant data available. Equillium Australia is able to continue to claim the Tax Incentive for as long as it remains eligible and continues to incur eligible research and development expenditures. The estimated Tax Incentive refund amounts are recognized as a reduction to research and development expense when there is reasonable assurance that the Tax Incentive refund amounts will be received, the relevant expenditure has been incurred, and the amount can be reliably measured.

Current wording

Equillium Australia Pty Ltd, or Equillium Australia, a wholly-owned subsidiary of Equillium, Inc., is eligible under the Australian Research and Development Tax Incentive Program, or the Tax Incentive, to obtain a cash refund from the Australian Taxation Office, or ATO, for eligible research and development expenditures. The cash refund is received by Equillium Australia, upon filing of a claim in connection with Equillium Australia’s annual income tax return. The Tax Incentive is a self-assessed program whereby Equillium Australia must assess its eligibility each year to determine (i) if the entity is eligible, (ii) if the specific research and development activities are eligible and (iii) if the individual research and development expenditures have nexus to such research and development activities. Equillium Australia evaluates its eligibility under the Tax Incentive as of each balance sheet date based on the most current and relevant data available. Equillium Australia is able to continue to claim the Tax Incentive for as long as it remains eligible and continues to incur eligible research and development expenditures. The estimated Tax Incentive refund amounts are recognized as a reduction to research and development expense when there is reasonable assurance that the Tax Incentive refund amounts will be received, the relevant expenditure has been incurred, and the amount can be reliably measured.

Previous wording

Other expense, net consists primarily of net foreign currency transaction gains and losses related to our Australian subsidiary.

Current wording

Other income (expense), net consists primarily of net foreign currency transaction gains and losses related to our Australian subsidiary.

Previous wording

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

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

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

Current wording

The following table sets forth our results of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

During the three months ended March 31, 2024 and 2023, we recognized revenue of $10.7 million and $8.9 million, respectively, under our Asset Purchase Agreement with Ono. For the three months ended March 31, 2024, development funding represented $8.0 million and amortization of the upfront payment represented $2.7 million. For the three months ended March 31, 2023, development funding represented $6.7 million and amortization of the upfront payment represented $2.2 million.

Current wording

During the three and six months ended June 30, 2024, we recognized revenue of $13.9 million and $24.5 million, respectively, under our Asset Purchase Agreement with Ono. For the three months ended June 30, 2024, development funding represented $9.2 million and amortization of the upfront payment represented $4.7 million. For the six months ended June 30, 2024, development funding represented $17.2 million and amortization of the upfront payment represented $7.3 million, of which $1.3 million represented an increase to revenue resulting from a change in the estimate of the duration of the option period under our Asset Purchase Agreement with Ono. During the three and six months ended June 30, 2023, we recognized revenue of $9.1 million and $18.0 million, respectively, under our Asset Purchase Agreement with Ono. For the three months ended June 30, 2023, development funding represented $6.8 million and amortization of the upfront payment represented $2.3 million. For the six months ended June 30, 2023, development funding represented $13.5 million and amortization of the upfront payment represented $4.5 million.

Previous wording

$1.0 million increase in expenses associated with CMC activities primarily performed by Biocon necessary to support a potential BLA filing related to our EQUATOR clinical study;

Current wording

$0.9 million increase in expenses associated with CMC activities primarily performed by Biocon necessary to support a potential BLA filing related to our EQUATOR clinical study;

Previous wording

$0.5 million increase in employee compensation and benefits, primarily related to increased headcount; and

Current wording

$0.1 million increase in employee compensation and benefits, primarily related to increased headcount; and

Previous wording

$0.6 million increase in drug substance purchases for the potential advancement of EQ101 clinical development;

Current wording

$0.6 million increase in drug substance expenses for potential advancement of EQ101 clinical development;

Previous wording

$0.2 million increase in consulting expenses; offset by

Current wording

$0.5 million increase in consulting expenses; offset by

Previous wording

$1.4 million decrease in clinical study expenses primarily driven by our EQ102 clinical study and to a lesser extent by our EQUALISE clinical study, partially offset by higher costs for our EQ101 and EQUATOR clinical studies;

Current wording

$1.6 million decrease in clinical study expenses primarily driven by our EQ102 clinical study and to a lesser extent by our EQUALISE study, partially offset by higher costs for our EQUATOR and EQ101 clinical studies;

Previous wording

$0.3 million decrease in research and development expenses associated with the recording of a Tax Incentive benefit from the ATO as a reduction to research and development expenses associated with our EQ101 and EQ102 clinical studies in Australia; and

Current wording

$0.2 million decrease in research and development expenses associated with the recording of a greater Tax Incentive benefit from the ATO as a reduction to research and development expenses associated with our EQ101 and EQ102 clinical studies in Australia; and

Previous wording

$0.2 million decrease in non-clinical research expenses.

Current wording

$0.1 million decrease in non-clinical research expenses related to itolizumab (EQ001).

Previous wording

General and administrative expenses were $3.7 million for each of the three-month periods ended March 31, 2024 and 2023. General and administrative expenses for the three months ended March 31, 2024 remained relatively constant compared to the same period in 2023.

Current wording

General and administrative expenses were $3.1 million and $6.9 million for the three and six months ended June 30, 2024, respectively, compared to $3.1 million and $6.8 million for the three and six months ended June 30, 2023, respectively. General and administrative expenses for the three and six month periods ended June 30, 2024 remained relatively constant to the same periods in 2023.

Previous wording

There was no interest expense for the three months ended March 31, 2024. Interest expense was $0.2 million for the three months ended March 31, 2023. Interest expense consisted of interest on our prior term notes payable, which were paid off in May 2023.

Current wording

There was no interest expense for each of the three and six months ended June 30, 2024. Interest expense was $0.3 million and $0.5 million for the three and six months ended June 30, 2023, respectively. Interest expense consists of interest on our prior term notes payable, which were paid off in May 2023.

Previous wording

Interest income was $0.4 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively. The decrease in interest income was primarily due to lower average cash, cash equivalents and short-term investment balances during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Interest income was $0.4 million and $0.8 million for the three and six months ended June 30, 2024, respectively, compared to $0.6 million and $1.3 million for the three and six months ended June 30, 2023. The decrease was primarily due to lower average cash, cash equivalents and short-term investment balances in 2024 compared to 2023.

Previous wording

There was no income tax expense for the three months ended March 31, 2024. Income tax expense was $0.1 million for the three months ended March 31, 2023. Our 2023 income tax expense was primarily attributable to domestic cash tax expense resulting from differences between book and tax treatment of certain items. We do not record a deferred tax provision as there is a full valuation allowance offsetting our deferred tax assets.

Current wording

There was no income tax expense for each of the three and six months ended June 30, 2024. Income tax expense was $8,000 and $0.1 million for the three and six months ended June 30, 2023, respectively. Our 2023 income tax expense was primarily attributable to domestic cash tax expense resulting from differences between book and tax treatment of certain items. We do not record a deferred tax provision as there is a full valuation allowance offsetting our deferred tax assets.

Previous wording

From inception through March 31, 2024, we have financed our operations primarily through the sale of equity and debt securities and income generated from our Asset Purchase Agreement with Ono as described in more detail in the Sources of Liquidity section below. As of March 31, 2024, we had an accumulated deficit of $188.5 million and anticipate that we will continue to incur net losses for the foreseeable future. As of March 31, 2024, we had $11.6 million in cash and cash equivalents and $20.7 million in short-term investments.

Current wording

From inception through June 30, 2024, we have financed our operations primarily through the sale of equity and debt securities and income generated from our Asset Purchase Agreement with Ono as described in more detail in the Sources of Liquidity section below. As of June 30, 2024, we had an accumulated deficit of $188.0 million and anticipate that we will continue to incur net losses for the foreseeable future. As of June 30, 2024, we had $11.1 million in cash and cash equivalents and $22.2 million in short-term investments.

Previous wording

If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $32.2 million based on the currency exchange rate quoted by MUFG Bank Ltd. on May 8, 2024.

Current wording

If Ono exercises the Option, Ono will pay us a one-time, payment of an amount equal to JPY 5.0 billion, or approximately $35.0 million based on the currency exchange rate quoted by MUFG Bank Ltd. on August 5, 2024.

Previous wording

We are also eligible to receive up to $101.4 million upon the achievement of certain development, regulatory and commercialization milestones. As of March 31, 2024, we have not received the option exercise payment or any milestone payments.

Current wording

We are also eligible to receive up to $101.4 million upon the achievement of certain clinical, regulatory and commercialization milestones, as well as continued reimbursement of itolizumab-related expenses and a markup on FTE costs. As of June 30, 2024, we have not received the option exercise payment or any milestone payments.

Previous wording

We are responsible for conducting all research and development of itolizumab, which is being funded by Ono on a quarterly basis from July 1, 2022 through the option period. The option period will expire three months following the delivery of topline data from the EQUALISE clinical study in LN and the results of the interim analysis from the EQUATOR Phase 3 clinical study in aGVHD. In April 2024, we delivered topline data from the EQUALISE clinical study in LN to Ono.

Current wording

We are responsible for conducting all research and development of itolizumab, which is being funded by Ono on a quarterly basis from July 1, 2022 through the option period. The option period will expire 90 days following the delivery of topline data from the EQUALISE clinical study in LN and the results of the interim analysis from the Phase 3 EQUATOR clinical study in aGVHD. In April 2024, we delivered topline data from the EQUALISE clinical study in LN to Ono and on August 1, 2024 we delivered the results of the interim analysis from the Phase 3 EQUATOR clinical study in aGVHD to Ono, which results in the expiration of the option period on October 30, 2024. We expect Ono to make its option exercise decision in October 2024.

Previous wording

As of March 31, 2024, we have received $45.0 million in development funding from Ono.

Current wording

As of June 30, 2024, we have received $53.1 million in development funding from Ono.

Previous wording

We expect our expenses to increase substantially in connection with our ongoing and future activities, particularly as we advance and expand our clinical development of EQ101 and itolizumab (EQ001) if Ono does not exercise its option, including potential new indications, and potentially advance preclinical research of EQ302 and other novel preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform. We expect that our primary uses of capital will be for clinical development services, non-clinical research, CMC activities, formulation and device development, product supply, potential acquisition of new products, potential repurchases of shares of our common stock under our stock repurchase program, legal and other regulatory compliance expenses, employee compensation and related expenses, insurance premiums, working capital and other general overhead costs.

Current wording

We expect our expenses to increase substantially in connection with our ongoing and future activities, particularly as we advance and expand our clinical development of EQ101 and itolizumab (EQ001) if Ono does not exercise its option, including potential new indications, and potentially advance preclinical research of EQ302 and other novel preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform. We expect that our primary uses of capital will be for clinical development, non-clinical research, CMC activities, formulation and device development, product supply, potential acquisition of new products, potential repurchases of shares of our common stock under our stock repurchase program, legal and other regulatory compliance expenses, employee compensation and related expenses, insurance premiums, working capital and other general overhead costs.

Previous wording

We expect that our existing cash, cash equivalents and short-term investments as of March 31, 2024 will enable us to fund our currently planned operations into the second half of 2025, assuming no further repurchases under our stock repurchase program. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Furthermore, our operating plans may change, and we may need additional funds sooner than planned. Additionally, the process of testing product candidates in clinical studies is costly, and the timing of progress in these studies is uncertain. Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EQ101, EQ302 and itolizumab (EQ001) or any of our other product candidates or whether, or when, we may achieve profitability.

Current wording

We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Furthermore, our operating plans may change, and we may need additional funds sooner than planned. Additionally, the process of testing product candidates in clinical studies is costly, and the timing of progress in these studies is uncertain. Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EQ101, EQ302 and itolizumab (EQ001) or any of our other product candidates or whether, or when, we may achieve profitability.

Previous wording

Until such time as we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements, such as our Asset Purchase Agreement with Ono. The sale of additional equity or convertible debt could result in additional dilution to our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we raise additional funds through collaboration or license agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock. 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 other operations. Any of these actions could have a material effect on our business, financial condition and results of operations. We have experienced net losses and negative cash flows from operating activities since our inception and expect to continue to incur net losses into the foreseeable future. We had an accumulated deficit of $188.5 million as of March 31, 2024. We expect operating losses and negative cash flows to continue for at least the next several years as we incur costs related to the development of EQ101, EQ302 and itolizumab (EQ001) if Ono does not exercise its option, and any of our other product candidates.

Current wording

Until such time as we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements, such as our Asset Purchase Agreement with Ono. The sale of additional equity or convertible debt could result in additional dilution to our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, bank failures, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we raise additional funds through collaboration or license agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock. 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 other operations. Any of these actions could have a material effect on our business, financial condition and results of operations. We have experienced net losses and negative cash flows from operating activities since our inception and expect to continue to incur net losses into the foreseeable future. We had an accumulated deficit of $188.0 million as of June 30, 2024. We expect operating losses and negative cash flows to continue for at least the next several years as we incur costs related to the development of EQ101, EQ302 and itolizumab (EQ001) if Ono does not exercise its option, and any of our other product candidates.

Previous wording

Our expected material cash requirements are comprised of contractually obligated expenditures, including amounts due under our operating leases. For additional information relating to our leases, see Note 7 of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. Our expected material cash requirements do not include potential contingent payments upon the achievement by us of regulatory and commercial milestones that we may be required to make under the terms of the merger agreement pursuant to which we acquired Bioniz, nor do they include potential contingent payments upon the achievement by us of regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we have entered into or may enter into with various entities pursuant to which we have in-licensed certain intellectual property, including the Biocon License. For further details on the potential contingent payments related to our acquisition of Bioniz and related to the Biocon License, see Notes 5 and 8 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Current wording

Our expected material cash requirements are comprised of contractually obligated expenditures, including amounts due under our operating leases. For additional information relating to our leases, see Note 7 of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. Our expected material cash requirements do not include potential contingent payments upon the achievement by us of regulatory and commercial milestones that we may be required to make under the terms of the merger agreement pursuant to which we acquired Bioniz, nor do they include potential contingent payments upon the achievement by us of regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we have entered into or may enter into with various entities pursuant to which we have in-licensed certain intellectual property, including the Biocon License. For further details on the potential contingent payments related to our acquisition of Bioniz and related to the Biocon License, see Notes 5 and 8 of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Previous wording

During the three months ended March 31, 2024, cash used in operating activities was $8.8 million compared to $8.0 million during the three months ended March 31, 2023. Cash used in operating activities during the first quarter of 2024 primarily related to our net loss of $2.7 million, adjusted for non-cash items of $1.1 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in deferred revenue and other operating assets and liabilities of $7.2 million. Cash used in operating activities during the first quarter of 2023 primarily related to our net loss of $3.9 million, adjusted for non-cash items of $1.0 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in deferred revenue and other operating assets and liabilities of $5.0 million.

Current wording

During the six months ended June 30, 2024, cash used in operating activities was $8.1 million compared to $14.2 million during the six months ended June 30, 2023. Cash used in operating activities during the six months ended June 30, 2024 primarily related to our net loss of $2.3 million, adjusted for non-cash items of $1.6 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in deferred revenue and other operating assets and liabilities of $7.4 million. Cash used in operating activities during the six months ended June 30, 2023 primarily related to our net loss of $7.3 million, adjusted for non-cash items of $1.9 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in deferred revenue and other operating assets and liabilities of $8.8 million.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 and 2023 were outflows of $2.8 million and $25.2 million, respectively, and reflects the purchases of short-term investments, property and equipment, offset by the sales and maturities of short-term investments.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 and 2023 were outflows of $4.2 million and $10.2 million, respectively, and primarily reflect the purchases of short-term investments offset by the sales and maturities of short-term investments.