Mereo BioPharma Group plc

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except per share amounts)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Natureof business

Mereo BioPharma Group plc (the “Company” or “Mereo”) is a United Kingdom (“U.K.”) based biopharmaceutical company focused on the development of innovative therapeutics for rare diseases. The Company has developed a portfolio of late-stage clinical product candidates, and its two rare disease product candidates are setrusumab for the treatment of osteogenesis imperfecta (“OI”) and alvelestat primarily for the treatment of severe alpha-1 antitrypsin deficiency-associated lung disease (“AATD-LD”).

The Company is a public limited company incorporated and domiciled in the U.K., and registered in England, with shares publicly traded on the Nasdaq Capital Market via American Depositary Shares (“ADSs”) under the ticker symbol “MREO”. The Company’s registered office is located at Fourth Floor, 1 Cavendish Place, London, W1G 0QF, United Kingdom.

2. Basis of presentation and summary of significant accounting policies

Basis of presentation

The condensed consolidated financial statements of the Company and its subsidiaries and other financial information included in this Quarterly Report are unaudited, have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated on consolidation.

The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2024 (the “2023 Annual Report”). The condensed consolidated balance sheet as of December 31, 2023 was derived from audited consolidated financial statements included in the Company’s Annual Report but does not include all disclosures required by U.S. GAAP. The Company’s significant accounting policies are described in Note 2 to those consolidated financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. However, these interim financial statements include all adjustments which are, in the opinion of management, necessary to fairly state the Company's financial position as of June 30, 2024, the results of operations for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023. The interim results are not necessarily indicative of results to be expected for the full year.

Going concern

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of delays in initiating or continuing research programs and clinical trials, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, if approved, dependence on key personnel and collaboration partners, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including pre-clinical and clinical testing and regulatory approval prior to commercialization. Even if the Company’s research and development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company has historically been loss making, anticipates that it will continue to incur losses for the foreseeable future, and had an accumulated deficit of $440.8 million as of June 30, 2024. The Company has funded these losses through a combination of public equity financings, private equity and debt financings and various license and collaboration agreements, and it expects it will continue to do so until such time as it can generate significant revenue from product sales, or other commercial revenues, if ever, or through licensing and/or collaboration agreements for its rare disease or oncology product candidates. Although the Company recently raised net proceeds of $47.0 million before issuance costs through an underwritten registered direct offering of its ADSs, there is no assurance that it will continue to be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

As of June 30, 2024, the Company had cash and cash equivalents of $87.4 million. The Company expects that its cash and cash equivalents as of June 30, 2024 will be sufficient to fund its operations and capital expenditure requirements for at least twelve months from the date of filing of this Quarterly Report on Form 10-Q.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Significant estimates and assumptions reflected in the Company's unaudited condensed financial statements include, but are not limited to, revenue recognition on contracts with customers and convertible loan notes. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

3. Recent accounting pronouncements

There have been no recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance other than those previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 27, 2024, that are of significance or potential significance to the Company. The Company is continuing to evaluate the impact of the recently issued pronouncements that are effective in future periods that were discussed in its Annual Report on Form 10-K.

4. Fair value measurement

The Company’s financial instruments consist of cash and cash equivalents, accounts payable, certain accrued expenses, contingent consideration, warrant liability and convertible loan notes. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value due to the short-term nature of those financial instruments.

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy:

There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2024.

Warrant liabilities

At June 30, 2024 and December 31, 2023, warrant liabilities solely related to those warrants outstanding to the former lenders of the Company as described in Note 11.

Contingent Value Rights Agreement Liability ("CVR liability")

In 2019, the Company acquired OncoMed and subsequently renamed it Mereo BioPharma 5, Inc. The Company made a provision for the estimated fair value of amounts payable to the former shareholders of Mereo BioPharma 5, Inc. under a Contingent Value Rights Agreement (“CVR”), established at the time of the acquisition of Mereo BioPharma 5, Inc. which was accounted for as a contingent consideration liability. The CVR expired on April 23, 2024 with no further amounts payable, therefore there wereno CVR obligations as of June 30, 2024. As of December 31, 2023, the Company estimated the fair value of the liability for its obligations under the CVR to be $nil.

5. Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:

In June 2024, ADSs were sold on behalf of certain employees upon vesting of PSUs to cover ensuing income tax and social security obligations. Proceeds of $1.6 million were owed to the Company by its broker at June 30, 2024 and received shortly thereafter. The Company used these funds to settle its liability (see Note 8) to remit these amounts to the relevant taxing authorities on the employees' behalf.

6. Property and equipment, net

Property and equipment, net consists of the following:

Depreciation expense was less than $0.1 million for both the three and six months ended June 30, 2024 and 2023.

7. Leases

In August 2015, the Company entered into a lease agreement under which it leased office space located on the fourth floor of One Cavendish Place, London, with a lease term ending in August 2025. In June 2021, the Company entered into a new lease agreement to lease additional office space located on the fifth floor of that building for a lease period ending in June 2026. At the same time, the Company entered into a revisionary lease to extend the term for the original fourth floor lease to be coterminous with the fifth floor, ending in June 2026.

The total lease expense included in the statements of operations and comprehensive loss was $0.2 million and $0.3 million in the three and six months ended June 30, 2024, respectively and $0.2 million and $0.3 million in the three and six months ended June 30, 2023, respectively. There were no material variable lease costs.

The following table summarizes the maturities of the Company’s operating lease liabilities as of June 30, 2024:

8. Other current liabilities

Other current liabilities consist of the following:

9. Accrued expenses

Accrued expenses consist of the following:

10. Convertible loan notes

Novartis Loan Note

On February 10, 2020, the Company entered into a convertible equity financing with Novartis Pharma (AG) (“Novartis”) under which Novartis purchased a £3.8 million ($5.2 million) convertible loan note (the “Novartis Loan Note”). The Novartis Loan Note is convertible at the discretion of the holder, at a fixed price of £0.265 per ordinary share and originally bore interest at 6% per annum with a maturity date of February 10, 2023. In connection with the Novartis Loan Note, the Company also issued 1,449,614 warrants which are exercisable until February 2025 at an exercise price of £0.265 per ordinary share. These warrants were recognized separately as equity instruments.

Effective February 10, 2023, the maturity date of the Novartis Loan Note was extended to February 10, 2025 and the interest rate amended to 9%. Interest accrued to the amendment date of $0.9 million was paid in cash, and additional warrants to purchase 2,000,000 ordinary shares were issued. These warrants were also recognized separately as equity instruments.

The amendments to the Novartis Loan Note were an extinguishment of the original instrument and the issuance of a new one. Accordingly, on the extinguishment date, the carrying value of $5.5 million was derecognized. At the same time, a new liability of $3.4 million was recognized, which represents the portion of the consideration of the new arrangement allocated to the liability component of the new Novartis Loan Note on the basis of its relative fair value, net of fees. The remaining amount was allocated between the $0.9 million of interest paid in cash and the residual $1.2 million which was recorded in additional paid-in capital to reflect the relative fair value of the warrants and the conversion option embedded in the new Novartis Loan Note. No extinguishment gain or loss was recognized. The Company recognized interest expense of $0.3 million and $0.6 million in relation to the Novartis Loan Note in the unaudited condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2024, respectively and $0.2 million and $0.5 million in the three and six months ended June 30, 2023 respectively. The effective interest rate applied to the liability portion of the Novartis Loan Note in the three and six months ended June 30, 2024 was 27.8% (2023:27.8% after the amendments and 37.4% before).

As of June 30, 2024 and December 31, 2023, the net carrying amount of the liability component of the convertible debt instrument was $4.9 million and $4.4 million, respectively and the fair value was $3.3 million and $3.1 million, respectively.

Private Placement Loan Notes

The Private Placement Loan Notes were issued in 2020 as part of a $70.0 million private placement transaction which also included the issuance of ordinary shares and warrants. The Private Placement Loan Notes were originally convertible at a fixed price of £0.174 per ordinary share, bore interest at a rate of 6% per annum and had a maturity date of June 3, 2023.

In May 2023, the maturity date of the Private Placement Loan Notes was extended to August 3, 2023, with all other terms remaining unchanged. This extension was a modification and the carrying value of the liability component was adjusted to the present value of the modified cash flows discounted at the original effective interest rate, net of identifiable transaction costs. The carrying value was also reduced by $0.6 million with a corresponding adjustment to additional paid-in capital to reflect the increase in the fair value of the embedded conversion option.

In 2023, the Company received conversion notices and subsequently issued and allotted 17,774,895 ordinary shares in the three months ended June 30, 2023 and 9,645,200 ordinary shares in the three months ended September 30, 2023, both at a price of £0.174 per share on non-cash conversion of Private Placement Loan Notes with an aggregate principal amount of $4.6 million. In 2023, the Company also paid $3.2 million to fully settle the outstanding principal and accrued interest balance.

The Company recognized $0.7 million and $1.1 million of interest expense in the three and six months ended June 30, 2023 respectively. The effective interest rate applied to the liability portion of the Private Placement Loan Notes in 2023 after the amendments was 27.1% while the effective interest rate applied in 2023 before the amendments was 25.1%.

11. Warrant liability

Warrant liability – private placement

As a part of a private placement transaction on June 3, 2020, the participating investors received conditional warrants entitling them to subscribe for an aggregate of 161,048,366 ordinary shares in the Company at an exercise price of £0.348 per warrant and were exercisable until June 2023 when they expired. The warrants were classified as liabilities as the Company did not have an unconditional right to avoid redeeming the instruments for cash.

Warrant liability – bank loan

As of June 30, 2024, the former lenders of the Company have warrants outstanding to purchase a total of 1,243,908 ordinary shares at an exercise price of £2.95 per share, exercisable until August 2027 and a total of 1,243,908 ordinary shares at an exercise price of $0.4144 per share, exercisable on dates between August 2027 and October 2028. There were no warrants exercised during either the three and six months ended June 30, 2024 or 2023.

Total outstanding warrants

As of June 30, 2024 and December 31, 2023, a total of 2,487,816 warrants over the same number of ordinary shares are outstanding. These warrants outstanding are equivalent to 0.3% of the issued ordinary share capital of the Company as of June 30, 2024 and 0.4% as of December 31, 2023.

The following table lists the weighted average inputs to the models used to calculate the fair value of warrants:

12. Shareholders’ Equity

Common Shares

During the three months ended March 31, 2024, the exercise of employee share options and the vesting of restricted stock units ("RSUs") were satisfied by delivering shares from the Employee Benefit Trust until all of the shares in the Employee Benefit Trust were used and it was terminated. Subsequently,132,345 ordinary shares were issued to satisfy employee share option exercises.

During the three months ended June 30, 2024,4,815,340 ordinary shares were issued due to the exercise of employee share options and the vesting of PSUs.

Additionally, on June 17, 2024, the Company issued 12,531,300 ADSs representing 62,656,500 ordinary shares through an underwritten registered direct offering priced at $3.99 per ADS. The Company raised aggregate gross proceeds of $50.0 million, or $47.0 million after underwriting discounts of $3.0 million. The Company also incurred other issuance costs of $1.0 million related to the offering.

13. Revenue and cost of revenue

There wasno revenue earned, or cost of revenue recognized in the three and six months ended June 30, 2024.

In the three and six months ended June 2023, the Company recognized milestone proceeds of $9.0 millionas revenue under the license and collaboration agreement with Ultragenyx for setrusumab following achievement of a development milestone. As a consequenceof this milestone received, and in accordance with the terms of the 2015 asset purchase agreement with Novartis which requires payment of a percentage of the proceeds received, subject to certain deductions, the Company also recognized cost of revenue of $3.4 million for the three months ended June 30, 2023 and $3.1 million for the six months ended June 30, 2023.

14. Share based compensation

The Company currently grants equity awards under the Mereo 2019 Equity Incentive Plan (the“2019 EIP”) and the 2019 Non-Employee Equity Incentive Plan (the “2019 NED EIP”). There are also still outstanding awards under two previous plans, the 2015 Plan and the Mereo Share Option Plan (together the“Previous Share Option Plans”), however no awards have been granted under these plans since 2016 and no further grants are envisioned.

The total number of ADSs available for issue under the 2019 EIP and 2019 NED EIP was 9.0 million as of June 30, 2024.

The expense for share-based compensation arises solely in respect of awards made under these two active plans as follows:

As of June 30, 2024, the total unrecognized compensation cost related to outstanding share awards was $7.3 million, which the Company expects to recognize over a weighted-average period of 1.7 years.

2019 EIP

The Company has awarded the following instruments under the 2019 EIP:

Market Value Options (“Options”)

A summary of the Company’s Option activity and related information under the 2019 EIP for the six months ended June 30, 2024 is as follows; all outstanding Options are expected to vest:

At December 31, 2023,6,169,952 Options with a weighted average grant date fair value of $1.13 were unvested. The weighted average per share fair value of options vesting during the six months ended June 30, 2024 and 2023 was $1.14 and $1.51 respectively.

The weighted average contractual life of Options outstanding at June 30, 2024 and December 31, 2023 was 8.1 years and 8.0 years respectively. For vested Options at June 30, 2024 and December 31, 2023 it was 7.2 years and 6.6 years respectively.

Where presented, the aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market price of the Company’s ADSs for the Options that were in-the-money.

The fair value of each Option is estimated on the date of grant using the Black-Scholes option pricing model based on the following weighted average assumptions:

The expected volatility assumption is calculated by reference to the historical volatility of an appropriate peer group of companies for a period equal to the expected term of the Option. The grant date fair value is recognized over the requisite service period using the accelerated graded-vesting attribution method.

Restricted Stock Units (“RSUs”)

RSUs were first awarded in 2023 and each RSU entitles the holder to a conditional right to receive an ADS at no cost upon the completion of the applicable vesting period. RSUs granted under the EIP vest over three years with one-third of the awards vesting on the first anniversary of the grant date and the remainder vesting in four equal six-monthly installments thereafter. Upon vesting of the RSUs, the Company issues the requisite ADSs, a portion of which are sold to satisfy the resulting withholding tax obligations, and the remaining ADSs are delivered to the holder. RSUs have a maximum contractual life of 3.0 years.

A summary of the Company’s RSU activity and related information under the 2019 EIP is as follows. As of June 30, 2024 all outstanding RSUs are expected to vest:

At June 30, 2024, the weighted average remaining period of RSUs outstanding was 2.8 years.

Where presented, the aggregate intrinsic value is calculated as the quoted market price of the Company’s ADSs. The fair value of each RSU was calculated by reference to the value of the shares awarded. The grant date fair value is recognized over the vesting period using the accelerated graded-vesting attribution method.

Performance Based Restricted Stock Units (“PSUs”)

PSUs were first awarded in 2023 and each PSU entitles the holder to a conditional right to receive an ADS at no cost upon satisfaction of four escalating ADS price performance targets over a two year performance period following the date of grant. A summary of the Company’s PSU activity and related information under the 2019 EIP for the six months ended June 30, 2024 is as follows:

At June 30, 2024, the weighted average contractual life of PSUs outstanding was 0.6 years.

The grant date fair value is recognized over the expected life using the straight-line attribution method.

2019 NED EIP

The Company has awarded the following instruments under the 2019 NED EIP:

Options

Options permit the recipient to purchase ADSs at an exercise price equal to the market price of the underlying ADSs on the date of grant. Options issued under the 2019 NED EIP have a contractual term of 10 years and vest in equal monthly installments over one year. There are no performance conditions. A summary of the Company’s Option activity and related information under the 2019 NED EIP for the six months ended June 30, 2024 is as follows; all outstanding Options are expected to vest:

At December 31, 2023,73,336 Options with a weighted average grant date fair value of $0.84 were unnvested. The weighted average per share fair value of options vesting during the six months ended June 30, 2024 and 2023 was $2.08 and $0.90 respectively.

The weighted average contractual life of Options outstanding at June 30, 2024 and December 31, 2023 was 7.9 years and 8.0 years respectively. For vested Options at June 30, 2024 and December 31, 2023 it was 7.7 years and 7.9 years respectively.

Where presented, the aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market price of the Company’s ADSs for the Options that were in-the-money.

The fair value of each Option is estimated on the date of grant using the Black-Scholes option pricing model based on the following weighted average assumptions:

The expected volatility assumption is calculated by reference to the historical volatility of an appropriate peer group of companies for a period equal to the expected term of the Option. The grant date fair value is recognized over the vesting period using the accelerated graded-vesting attribution method.

Deferred Restricted Stock Units (“DRSUs”)

Non-executive directors may voluntarily elect to convert their annual cash fees for services on the board of directors and DRSUs were granted to NEDs who made such elections. The number of DRSUs granted is determined by dividing the amount of the annual cash compensation by the average closing trading price of the Company's ADSs over the most recent 30 trading days as of the date of grant. Each DRSU entitles the holder to receive an ADS at no cost upon the completion of the vesting period. DRSUs granted under the 2019 NED EIP vest in substantially equal monthly installments over the plan year. Payment of DRSUs in ADSs will generally be 180 days following separation of service but have no specified contractual term.

A summary of the Company’s DRSU activity and related information under the 2019 NED EIP for the six months ended June 30, 2024 is as follows; all outstanding DRSUs are expected to vest:

Where presented, the aggregate intrinsic value is calculated as the quoted market price of the Company’s ADSs. The fair value of each DRSU was calculated by reference to the value of the shares awarded. The grant date fair value is recognized over the vesting period using the accelerated graded-vesting attribution method.

Previous Share Option Plans

Mereo previously granted options to employees under two separate plans, the Mereo BioPharma Group Limited Share Option Plan (the “2015 Plan”) and the Mereo Share Option Plan (the “Share Option Plan”). No awards have been granted under either of these plans since 2017 and following the introduction of the 2019 EIP and the 2019 NED EIP, no further awards are envisioned.

All awards made under these plans became fully vested, with all compensation cost fully recognized, before December 31, 2021. A summary of the awards still outstanding under these plans is as follows:

The weighted average contractual life of Options outstanding and vested at June 30, 2024 and December 31, 2023 was 1.3 years and 1.8 years respectively.

15. Loss per share

Basic loss per share is calculated by dividing the loss attributable for the year to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted loss per share is based on dividing the loss attributable for the year, adjusted for the effect of dilutive ordinary shares, by ordinary share equivalents, which includes the weighted average number of ordinary shares outstanding and the effect of dilutive ordinary share equivalents.

The Company’s potentially dilutive securities have been excluded from the computation of diluted net loss per share as the effect for the three and six months ended June 30, 2024 and 2023 would be to reduce the net loss per share. Therefore, the weighted average number of ordinary shares outstanding used to calculate both basic and diluted net loss per share is the same.

The Company excluded the following potentially dilutive ordinary shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

16. Commitments and contingencies

Indemnification agreements

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. In accordance with the Articles of Association in force on June 30, 2024, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date, and the Company has director and officer insurance that may enable it to recover a portion of any amounts paid for future potential claims.

Novartis Asset Purchase agreements

The Company issued to Novartis loan notes and agreed to make future payments to Novartis comprising amounts equal to ascending specified percentages of tiered annual worldwide net sales (beginning at high single digits and reaching into double digits at higher sales) of products that include the assets acquired. The levels of ascending percentages of tiered annual worldwide net sales are stipulated under the respective Purchase Agreements.

The Company further agreed that in the event it transfers, licenses, assigns or leases all or substantially all of its assets, it will pay Novartis a percentage of the proceeds of such transaction. The payment of a percentage of proceeds is not payable with respect to any transaction involving equity interests of the Company, a merger or consolidation of the Company, or a sale of any assets of the Company.

License agreements

In October 2017, the Company entered into an exclusive license and option agreement (“the License Agreement”), to obtain from AstraZeneca an exclusive worldwide, sub-licensable license under AstraZeneca’s intellectual property rights relating to alvelestat, with an option to acquire such intellectual property rights following commencement of a pivotal trial and payment of related milestone payments (“the Option”), together with the acquisition of certain related assets. Upon entering into the License Agreement, the Company made a payment of $3.0 million and issued 490,798 ordinary shares to AstraZeneca, for an aggregate upfront payment equal to $5.0 million. In connection with certain development and regulatory milestones, the Company has agreed to make payments of up to $115.5 million in the aggregate and issue additional ordinary shares to AstraZeneca for licensed products containing alvelestat. In addition, the Company has agreed to make payments to AstraZeneca based on specified commercial milestones of the product. The Company has also agreed to pay a specified percentage of sub-licensing revenue to AstraZeneca and to make royalty payments to AstraZeneca equal to ascending specified percentages of tiered annual worldwide net sales by the Company of licensed products (subject to certain reductions), ranging from the high single digits to low double digits. Royalties will be payable on a licensed-product-by-licensed-product and country-by-country basis until the later of ten years after the first commercial sale of such licensed product in such country and expiration of the last patent covering such licensed product in such country that would be sufficient to prevent generic entry. The Company has agreed to use commercially reasonable efforts to develop and commercialize at least one licensed product.

The License Agreement will expire on the expiration of the last-to-expire royalty term with respect to all licensed products. Upon the expiration of the royalty term for a licensed product in a particular country, the licenses to the Company for such product in such country will become fully paid and irrevocable. Prior to exercise of the Option, if at all, the Company may terminate the License Agreement upon prior written notice. Either party may terminate the agreement upon prior written notice for the other party’s material breach that remains uncured for a specified period of time or insolvency.

Research and development activities

The Company enters into contracts in the normal course of business with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”) and other third parties to assist in the performance of research and development activities and other services and products for operating purposes. The contracts with CROs generally provide for termination on notice, and therefore, are cancellable contracts and not included herein. The Company has manufacturing commitments with CMOs of$2.4 million as of June 30, 2024.

Legal proceedings

From time to time, the Company may be a party to litigation or subject to claims incident to the ordinary course of business. The Company was not a party to any material litigation and did not have any material contingency reserves established for any liabilities as of June 30, 2024 and December 31, 2023.

17. Related party disclosures

In the three and six months ended June 30, 2024 and 2023, there wereno reportable related party transactions.