Oric Pharmaceuticals Inc

1. Description of the Business

ORIC Pharmaceuticals, Inc. (ORIC or the Company) is a clinical-stage biopharmaceutical company dedicated to improving patients’ lives by Overcoming Resistance In Cancer. The Company was incorporated in Delaware in August 2014 and has offices in South San Francisco and San Diego, California. The Company’s principal operations are in the United States and the Company operates inone segment.

Since inception, the Company has devoted its primary efforts to raising capital, internal research and development activities and business development efforts, and has incurred significant operating losses and negative cash flows from operations. In August 2020, the Company licensed from Mirati Therapeutics, Inc. (Mirati) development and commercialization rights to an allosteric inhibitor program directed towards the polycomb repressive complex 2 (PRC2) and in October 2020, the Company licensed from Voronoi Inc. (Voronoi) development and commercialization rights to a brain penetrant, orally bioavailable, irreversible inhibitor designed to selectively target epidermal growth factor receptor (EGFR) and human epidermal growth factor receptor 2 (HER2) with high potency against exon 20 insertion mutations.

As of June 30, 2024, the Company had an accumulated deficit of $491.9 million. Through June 30, 2024, all of the Company’s financial support has been provided by proceeds from the issuance of common stock and convertible preferred stock.

As the Company continues its expansion, it may seek additional financing and/or strategic investments, however, there can be no assurance that any additional financing or strategic investments will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it will most likely be required to reduce its plans and/or certain discretionary spending, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. The accompanying financial statements do not include any adjustments that might be necessary if it were unable to continue as a going concern. Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date of the issuance of these financial statements.

At-The-Market Sales Agreement and Offering

The Company previously entered into an “at the market” (ATM) sales agreement with Jefferies LLC as the Company’s sales agent, to sell shares of the Company’s common stock. On March 11, 2024, pursuant to the terms of the ATM sales agreement, the Company filed a Form S-3ASR and prospectus supplement, to allow the Company to sell from time to time up to $200 million of shares of the Company’s common stock in negotiated transactions or transactions deemed to be an ATM offering.

Private Placements

On January 20, 2024, the Company entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 12,500,000 shares of common stock at a price of $10.00 per share, resulting in gross proceeds of $125.0 million. The purchase price per share represents a premium to ORIC's 5-day trailing average stock price at the time of sale. After deducting expenses related to the private placement of $0.2 million, the net proceeds to the Company from the private placement were $124.8 million. The private placement closed on January 23, 2024. On January 26, 2024, the Company filed a Form S-3 registering the shares sold in the private placement. The Form S-3 was declared effective by the SEC on February 2, 2024.

On June 24, 2023, the Company entered into a securities purchase agreement with a select group of institutional and accredited healthcare specialist investors for the private placement of 9,285,710 shares of common stock at a price of $7.00 per share and pre-funded warrants to purchase 2,857,142 shares of common stock at a purchase price of $6.9999 per pre-funded warrant, resulting in gross proceeds of $85.0 million. The purchase price per share represents a premium to the market price at the time of sale. After deducting expenses related to the private placement of $0.2 million, the net proceeds to the Company from the private placement were $84.8 million. The private placement closed on June 27, 2023. On December 15, 2023, the Company filed a Form S-3 registering the shares sold and the shares underlying the pre-funded warrants sold in the private placement. The Form S-3 was declared effective by the SEC on December 28, 2023. On July 8, 2024, all pre-funded warrants were exercised at an exercise price of $0.0001 per share of common stock.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions of the Securities and Exchange Commission (SEC) on Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP, have been omitted. The accompanying unaudited financial statements include all known adjustments necessary for a fair presentation of the results as required by GAAP. These adjustments consist primarily of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Operating results for the interim period are not necessarily indicative of future results.

The accompanying unaudited financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K filed with the SEC. Furthermore, the Company’s significant accounting policies are disclosed in the audited financial statements for the periods ended December 31, 2023 and 2022, included in the Company’s Annual Report on Form 10-K. Since the date of those financial statements, there have been no changes to its significant accounting policies.

Recently Issued Accounting Pronouncements

There are no recently issued accounting pronouncements that would materially impact the Company’s financial statements and related disclosures.

3. License Agreements and Clinical Development Collaboration

Bayer and Johnson & Johnson collaboration

On May 14, 2024, the Company entered into a clinical trial collaboration and supply agreement with Bayer Consumer Care AG (Bayer), to evaluate ORIC-944 in combination with Nubeqa® (darolutamide), Bayer’s androgen receptor (AR) inhibitor. On July 10, 2024, the Company entered into a clinical trial collaboration and supply agreement with Janssen Research & Development, LLC, a Johnson & Johnson company (Johnson & Johnson), to evaluate ORIC 944 in combination with Erleada® (apalutamide), Johnson & Johnson’s AR inhibitor. The Company will continue to conduct and sponsor the ongoing Phase 1b trial, and Bayer and Johnson & Johnson will provide darolutamide and apalutamide, respectively, for the study. The Company will maintain full economic ownership and control of ORIC-944.

Pfizer collaboration

On December 21, 2022, the Company entered into a clinical development collaboration (the Pfizer Collaboration) for a potential Phase 2 study of ORIC-533 in multiple myeloma with Pfizer. Through the Pfizer Collaboration, the Company plans to potentially advance ORIC-533 into a Phase 2 combination study with elranatamab, Pfizer’s investigational B-cell maturation antigen (BCMA) CD3-targeted bispecific antibody in development for the treatment of multiple myeloma. The Company will maintain full economic ownership and control of ORIC-533.

Concurrent with the Pfizer Collaboration, the Company sold 5,376,344 shares of common stock at a price of $4.65 per share to Pfizer for proceeds of $25.0 million. The common shares were sold to Pfizer in a registered direct offering conducted without an underwriter or placement agent. The transaction closed on December 23, 2022.

Voronoi License Agreement

On October 19, 2020, the Company entered into a license and collaboration agreement (Voronoi License Agreement) with Voronoi. The Voronoi License Agreement gives the Company access to Voronoi’s preclinical stage EGFR and HER2 exon 20 insertion mutation program, including a lead product candidate now designated as ORIC-114. Under the Voronoi License Agreement, Voronoi granted the Company an exclusive, sublicensable license under Voronoi’s rights to certain patent applications directed to certain small molecule compounds that bind to EGFR and HER2 with one or more exon 20 insertion mutations and certain related know-how, in each case, to develop and commercialize certain licensed compounds and licensed products incorporating any such compound in the ORIC Territory, defined as worldwide other than in the People’s Republic of China, Hong Kong, Macau and Taiwan. Under the Voronoi License Agreement, Voronoi had the right to perform certain mutually agreed upon development activities. Except for Voronoi's right to participate in such development activities, the Company is wholly responsible for development and commercialization of licensed products in the ORIC Territory. In addition, the Company is obligated to use commercially reasonable efforts to develop and commercialize at leastone licensed product in certain major markets in the ORIC Territory.

The Company’s financial obligations under the Voronoi License Agreement included an upfront payment of $5.0 million in cash and the issuance to Voronoi of 283,259 shares of the Company’s common stock, valued at approximately $6.8 million, issued pursuant to a stock issuance agreement entered into between the parties on October 19, 2020. The number of shares issued pursuant to the stock issuance agreement was based on a price of $28.24 per share, representing a premium of 25%to the 30-day trailing volume weighted average trading price of the Company’s common stock. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended (Securities Act), for transactions by an issuer not involving any public offering.

Under the Voronoi License Agreement, Voronoi was responsible for certain research and development costs up to a predetermined threshold. Upon achievement of the predetermined threshold in the second quarter of 2022, Voronoi chose to opt out of participation in and funding of future development activities. The Company is also obligated to make milestone payments to Voronoi upon the achievement of certain events. Upon the achievement of certain development and regulatory milestones with respect to the first licensed product, the Company is obligated to pay Voronoi up to a maximum of $111.0 million. Upon the achievement of certain commercial milestones with respect to the first licensed product, the Company is obligated to pay Voronoi up to a maximum of $225.0 million. If the Company pursues a second licensed product, the Company could pay Voronoi up to an additional $272.0 million in success-based milestones. In addition, the Company is obligated to pay royalties on net sales of licensed products in the ORIC Territory. In the third quarter of 2022, the Company made a development milestone payment to Voronoi in the amount of $5.0 million, which was recorded in acquired in-process research and development expense.

Unless earlier terminated, the Voronoi License Agreement will continue in effect until the expiration of all royalty payment obligations. Following the expiration of the Voronoi License Agreement, the Company will retain its licenses under the intellectual property Voronoi licensed to it on a royalty-free basis. The Company and Voronoi may each terminate the Voronoi License Agreement if the other party materially breaches the terms of such agreement, subject to specified notice and cure provisions, or enters into bankruptcy or insolvency proceedings. Voronoi may also terminate the agreement if the Company discontinues development of licensed products for a specified period of time. The Company also has the right to terminate the Voronoi License Agreement without cause by providing prior notice to Voronoi.

If Voronoi terminates the Voronoi License Agreement for cause, or if the Company terminates the Voronoi License Agreement without cause, then the Company is obligated to grant a nonexclusive license to Voronoi under certain of the Company’s patents and know-how and to assign to Voronoi certain of its regulatory filings for licensed compounds and licensed products.

Mirati License Agreement

On August 3, 2020, the Company entered into a license agreement (Mirati License Agreement) with Mirati. Under the Mirati License Agreement, Mirati granted the Company a worldwide, exclusive, sublicensable, royalty-free license under Mirati’s rights to certain patents and patent applications directed to certain small molecule compounds that bind to and inhibit PRC2 and certain related know-how, in each case, to develop and commercialize certain licensed compounds and licensed products incorporating any such compounds. Under the Mirati License Agreement, the Company is wholly responsible for development and commercialization of licensed products. In addition, the Company is obligated to use commercially reasonable efforts to develop and commercialize at leastone licensed product in certain major markets.

The Company’s financial obligation under the Mirati License Agreement was an upfront payment of 588,235 shares of ORIC common stock, valued at approximately $13.0 million based upon the closing price of the Company’s common stock on the acquisition date. The number of shares issued was based on a price of $34.00 per share, representing a premium of 10% to the 60-day trailing volume-weighted average trading price of the Company’s common stock. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act for transactions by an issuer not involving any public offering. During theeighteen-month period following the date of the agreement, Mirati was subject to certain transfer restrictions, and the parties agreed to negotiate and enter into a registration rights agreement, with respect to the shares. The Company is not obligated to pay Mirati milestones or royalties.

Unless earlier terminated, the Mirati License Agreement will continue in effect on a country-by-country and licensed product-by-licensed product basis until the later of (a) the expiration of the last valid claim of a licensed patent covering such licensed product in such country or (b)ten years after the first commercial sale of such licensed product in such country. Following the expiration of the Mirati License Agreement, the Company will retain its licenses under the intellectual property Mirati licensed to it on a royalty-free basis. ORIC and Mirati may each terminate the Mirati License Agreement if the other party materially breaches the terms of such agreement, subject to specified notice and cure provisions, or enters into bankruptcy or insolvency proceedings. Mirati may terminate the agreement if the Company challenges any of the patent rights licensed to the Company by Mirati or it discontinues development of licensed products for a specified period of time. The Company also has the right to terminate the Mirati License Agreement without cause by providing prior notice to Mirati.

On October 8, 2023, Bristol Myers Squibb (BMS) and Mirati announced that they entered into a definitive merger agreement under which BMS through a subsidiary will acquire all of the outstanding shares of Mirati common stock. The Mirati License Agreement continued in effect upon consummation of the transaction, which closed on January 23, 2024.

4. Property and Equipment, net

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

5. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

6. Investments

The Company's available-for-sale investments consisted of the following (in thousands):

The Company has determined that there were no material declines in fair value of its investments due to credit-related factors as of June 30, 2024 and December 31, 2023. Credit loss is limited due to the nature of the investments.

7. Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an 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 such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s interest receivable, included in prepaid expenses and other current assets, accounts payable and accrued liabilities are generally considered to be representative of their fair value because of their short-term nature. The Company’s investments, which may include money market funds and available-for-sale investments consisting of U.S. treasury securities, certificates of deposit and high-quality, marketable debt instruments of corporations and government sponsored enterprises, are measured at fair value in accordance with the fair value hierarchy.

Following are the major categories of assets measured at fair value on a recurring basis (in thousands):

(1)Included in cash and cash equivalents in accompanying balance sheets.

No transfers between levels occurred during either of the reporting periods presented.

8. Stockholders’ Equity and Stock-Based Compensation

As of June 30, 2024, there were 2,401,028 shares available for future issuance under the 2020 Equity Incentive Plan and 633,571 shares available for future issuance under the 2022 Inducement Equity Incentive Plan. The 2020 Equity Incentive Plan provides for the grants of stock options and other equity-based awards to employees, non-employee directors and consultants of the Company. The 2022 Inducement Equity Incentive Plan provides for the grants of equity-based awards to individuals not previously employees or non-employee directors of the Company.

The table below summarizes the total stock-based compensation expense included in the Company’s statements of operations and comprehensive loss for the periods presented (in thousands):

Stock Options

On June 21, 2022, the Company filed with the SEC a Tender Offer Statement on Schedule TO defining the terms and conditions of a one-time voluntary stock option exchange of certain eligible options for its employees (the Option Exchange). On July 20, 2022, the completion date of the Option Exchange, stock options covering an aggregate of 4,406,732 shares of common stock were tendered by eligible employees, and the Company granted new options at an exercise price of $4.36, the Company’s closing stock price on July 20, 2022, covering an aggregate of 4,406,732 shares of common stock under the 2020 Equity Incentive Plan in exchange for the tendered options. As a result of the Option Exchange, the Company will recognize incremental stock-based compensation expense of $3.7 million over the requisite service period of the new stock options, which is three or four years. The Company will recognize the sum of the incremental stock-based compensation expense and the remaining unrecognized compensation expense for the original awards on the modification date, over the requisite service period of the new stock options.

The following table summarizes the stock option activity for thesix months ended June 30, 2024:

The fair value of stock option awards to employees, executives, directors, and other service providers was estimated at the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions:

The Company recognized stock-based compensation expense related to the vesting of stock options of $4.1 million and $3.2 million during the three months ended June 30, 2024 and 2023, respectively, and $8.2 million and $6.3 million during the six months ended June 30, 2024 and 2023, respectively. Total unrecognized compensation expense related to outstanding unvested stock-option awards as of June 30, 2024, was $37.7 million, which is expected to be recognized over a weighted-average remaining service period of 2.6 years.

Restricted Stock Units

The following table summarizes the restricted stock unit activity for thesix months ended June 30, 2024:

The Company recognized stock-based compensation expense related to the vesting of restricted stock units of $0.7 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively, and $1.3 million and $0.6 million during the six months ended June 30, 2024 and 2023, respectively. Total unrecognized compensation expense related to restricted stock units as of June 30, 2024, was $4.4 million, which is expected to be recognized over a weighted-average remaining service period of 2.0 years.

Employee Stock Purchase Plan

The Company recognized stock-based compensation expense related to the Employee Stock Purchase Plan (ESPP) of $0.2 million and $0.3 million during the three months ended June 30, 2024 and 2023, respectively, and $0.5 million during both the six months ended June 30, 2024 and 2023.

Pre-funded Warrants

In June 2023, the Company completed a private placement, in which it sold 9,285,710 shares of common stock together with pre-funded warrants to purchase 2,857,142 shares of common stock with an exercise price of $0.0001 per share. The Company performed an assessment upon issuance of the pre-funded warrants to determine proper classification in the financial statements based on the specific terms of the pre-funded warrants. The Company determined the pre-funded warrants met all the criteria for equity classification and recorded them in additional paid-in capital. All pre-funded warrants remained outstanding as of June 30, 2024.

On July 8, 2024, the Company issued 2,857,104 shares of common stock to warrant holders upon their exercise of outstanding pre-funded warrants, pursuant to a net exercise mechanism under the pre-funded warrants. Each pre-funded warrant had an exercise price of $0.0001 per share. The issuances of the shares were exempt from registration under the Securities Act pursuant to Section 3(a)(9) thereof as an exchange with an existing security holder whereno commission or other remuneration is paid or given for soliciting such exchange. The resale of the shares of common stock issued upon the exercise of pre-funded warrants were previously registered with the Company’s registration statement on Form S-3 filed on December 15, 2023, which was declared effective by the SEC on December 28, 2023.

Net Loss per Share

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive: