PMV Pharmaceuticals Inc

1. Formation and Business of the Company

Organization and Liquidity

PMV Pharmaceuticals, Inc. (the “Company” or “We”) was incorporated in the state of Delaware in March 2013. Since inception, the Company has devoted substantially all of its time and efforts to performing research and development activities and raising capital. We are a precision oncology company pioneering the discovery and development of small molecule, tumor-agnostic therapies targeting p53. The Company’s headquarters are located at 400 Alexander Park Drive, Suite 301, Princeton, New Jersey.

The Company is subject to risks and uncertainties common to clinical stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company has incurred net losses and negative cash flows from operations since its inception. During the three and nine months ended September 30, 2024, the Company incurred a net loss of $19,226 and $35,709, respectively. For the nine months ended September 30, 2024, the Company used $34,621 of cash for operations. At September 30, 2024, the Company had an accumulated deficit of $345,712. Cash, cash equivalents, and marketable securities were $197,937 as of September 30, 2024. Management expects to incur substantial additional operating losses for the next several years and may need to obtain additional debt or equity financings in order to complete development of its products, obtain regulatory approvals, launch and commercialize its products and continue research and development programs. The Company believes it has adequate cash, cash equivalents, and marketable securities to operate for the next 12 months from the date of issuance of these condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited condensed consolidated financial statements for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on February 29, 2024. Since the date of those condensed consolidated financial statements, there have been no changes to its significant accounting policies.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the interim period reporting requirements of Form 10-Q and Article 10 of Regulation S-X. The condensed consolidated balance sheet as of September 30, 2024, the condensed consolidated statements of operations and comprehensive loss, condensed consolidated statements of stockholders’ equity and condensed consolidated statements of statements of cash flows for the three and nine months ended September 30, 2024 and 2023 are unaudited, but, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The results for any interim period are not necessarily indicative of results for the year ending December 31, 2024, or for any other subsequent interim period. The condensed consolidated balance sheet as of December 31, 2023, has been derived from our audited condensed consolidated financial statements.

The accompanying condensed consolidated financial statements include our accounts and the accounts of our wholly owned subsidiary, PMV Pharma Australia Pvt Ltd. All significant intercompany transactions and balances have been eliminated upon consolidation. These condensed consolidated financial statements are presented in United States (“U.S.”) Dollars, which is also the functional currency of the Company.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, research and development costs, accrued research and development costs and related prepaid expenses. Actual results could differ materially from those estimates.

Cash, Cash Equivalents, and Marketable Securities

Management considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

The Company’s marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Marketable debt securities with maturities of 12 months or less are classified as short-term and marketable debt securities with maturities greater than 12 months are classified as long-term. The Company’s marketable debt securities are carried at fair value, with unrealized gains and losses, net of taxes, reported as a component of accumulated other comprehensive loss in stockholders’ equity. Premiums and discounts on marketable debt securities are amortized into earnings over the life of the security and recorded on the interest income, net line of the income statement. For the nine months ended September 30, 2024 and 2023, the Company recorded $4,239 and $3,511 of accretion, respectively.

Restricted cash as of September 30, 2024 and December 31, 2023 included a $822 deposit at the Company’s commercial bank underlying a stand-by letter of credit issued in favor of a landlord (See Note 6) and is classified in current assets.

Comprehensive Loss and Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation gains and losses.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the circumstances present. The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its operating right-of-use (“ROU”) assets and operating lease liabilities at the lease commencement date, and thereafter if modified. The lease term includes any renewal options that the Company is reasonably certain to exercise. The Company’s policy is to not record leases with a lease term of 12 months or less on its balance sheets. The Company’s only existing leases are for office and laboratory space.

The ROU asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term.

Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the statements of operations.

Payments due under each lease agreement include fixed and variable payments. Variable payments relate to the Company’s share of the lessor’s operating costs associated with the underlying asset and are recognized when the event on which those payments are assessed occurs. Variable payments have been excluded from the lease liability and associated right-of-use asset. Neither of the Company’s leases contain residual value guarantees.

The interest rate implicit in lease agreements is typically not readily determinable, and as such, the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash, cash equivalents, and marketable securities. Cash and cash equivalents were held at primarily two financial institutions. At times, such deposits may be in excess of insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company’s marketable securities are carried at fair value and include any unrealized gains and losses. Any investments with unrealized losses are considered to be temporarily impaired.

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, uncertainty of market acceptance of the product, competition from substitute products and larger companies, protection of proprietary technology, any future strategic relationships and dependence on key individuals.

Products developed by the Company require clearances from the U.S. Food and Drug Administration or other international regulatory agencies prior to commercial sales. There can be no assurance the Company’s product candidates will receive the necessary clearances. If the Company is denied clearance, clearance is delayed or it is unable to maintain clearance, it could have a materially adverse impact on the Company.

3. Fair Value Measurements

The Company’s financial assets consist of money market funds, U.S. government debt securities and corporate debt securities. The following tables show the Company’s cash equivalents and available-for-sale securities’ carrying amounts and fair values as of September 30, 2024, and December 31, 2023:

Cash Equivalents — As of September 30, 2024, the Company had aggregate cash and cash equivalents of $48,810, including cash equivalents of $48,709, consisting of money market funds. As of December 31, 2023, the Company had aggregate cash and cash equivalents of $37,706, including cash equivalents of $37,694, consisting of money market funds. Money market funds are classified within level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

Marketable Securities — Marketable securities of $149,127 as of September 30, 2024, consisted of corporate debt securities of $36,399 and government debt securities of $112,728. There were $134,031 current marketable securities and $15,096 noncurrent marketable securities as of September 30, 2024. Marketable securities of $190,856 as of December 31, 2023, consisted of corporate debt securities of $70,043 and government debt securities of $120,813. There were $165,351 current marketable securities and $25,505 noncurrent marketable securities as of December 31, 2023.

As of September 30, 2024, and December 31, 2023, aggregated gross unrealized losses of available-for-sale investments were not material, and accordingly, no allowance for credit losses was recorded.

4. Property and Equipment, Net

Depreciation expense for the three months ended September 30, 2024 and 2023 was $371 and $358, respectively. Depreciation expense for the nine months ended September 30, 2024 and 2023 was $1,105 and $898, respectively.

5. Accrued Expenses

Accrued expenses consist of the following:

6. Commitments and Contingencies

Operating Leases

In August 2018, the Company executedtwo noncancelable operating leases. One lease for approximately 6,000 square feet for vivarium, laboratory and general office space in South Brunswick, New Jersey. The lease was set to expire in July 2022. In January 2022, the Company signed a lease extension for up toone additional year through July 2023, with the option toterminate upon 120 days of written notice, with an increase in base rent as per the lease extension. The lease was terminated as of June 2023. The second lease is for office space in Lexington, Massachusetts, that terminated in August 2023.

In January 2021, the Company signed a lease for 50,581 square feet of office and laboratory space at One Research Way in Princeton, New Jersey. That lease term extends through 2032, has afive-year extension option, and replaced the Company’s two existing facilities as the Company’s headquarters in March 2023. Payment under this lease will total $19,889 through May 2032. The Company received a lease incentive of $4,046 from the lessor for a buildout of laboratory, vivarium, and office space. Management estimated the timing and amounts of reimbursements and included them as a reduction of lease payments when initially measuring the lease liability and right-of-use asset upon commencement. Since the inception date of the lease, $4,046 reimbursements were received. For the nine months ended September 30, 2024, $242 of reimbursements were received.

In August 2024, the Company entered into a Lease Termination Agreement with BMR-One Research Way LLC, a Delaware limited liability company (the “Landlord”), in connection with the termination of the lease for 50,581 square feet of office and laboratory space at One Research Way in Princeton, New Jersey (the “Termination Agreement”). Pursuant to the Termination Agreement, the Company and the Landlord agreed to terminate the lease at One Research Way in Princeton, New Jersey, contingent on the sale of the property by the Landlord to a prospective new buyer (the “Contingency”). The Contingency was met on the date of sale on October 1, 2024, and the lease was terminated on such date.

Pursuant to the Termination Agreement, and subject to the Contingency, the Company agreed to surrender the property and paid a total termination fee of approximately $1,420, consisting of (i) a cash payment in the amount of approximately $798 and (ii) a release of a security deposit from the Company’s existing letter of credit in the amount of approximately $622.

In September 2024, the Company signed a sublease agreement for 3,205 square feet of office and laboratory space at 311 Pennington Rocky Hill Road in Hopewell, New Jersey. The Company will utilize the premises as laboratory space for operational research and development activities. The sublease term extends through 2029 and provides the Company with theoption to extend the term for an additional three year period. Payment under this sublease will total $768 through December 2029.

The components of lease cost for thethree and nine months ended September 30, 2024 and 2023, are as follows:

Amounts reported in the balance sheet for leases where the Company is the lessee as of September 30, 2024, and December 31, 2023, are as follows:

Other information related to leases for thenine months ended September 30, 2024 and 2023, respectively, as follows:

Future minimum lease payments, net of reimbursements, remaining as of September 30, 2024, under operating leases by fiscal year were as follows:

Rent expense recorded during the three months ended September 30, 2024 and 2023 was $367 and $366, respectively. Rent expense recorded during the nine months ended September 30, 2024 and 2023 was $1,076 and $1,559 respectively.

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when future expenditures are probable and such expenditures can be reasonably estimated.

7. Stockholders’ Equity

The Company is authorized to issue up to 1,000,000,000 shares of common stock with a par value of $0.00001 per share and 5,000,000 shares of preferred stock with a par value of $0.00001 per share. At September 30, 2024 and December 31, 2023, there were 51,749,504 and 51,445,862 shares of common stock issued and outstanding, respectively.

Common stockholders are entitled to receive dividends if and when declared by the board of directors subject to the rights of any preferred stockholders. As of September 30, 2024, no dividends on common stock had been declared by the Company.

ATM Program

On October 4, 2021, the Company entered into an at-the-market offering program (the “ATM Program”) pursuant to which, the Company may offer and sell shares of its common stock having aggregate gross sales proceeds of up to $150.0 million from time to time. During the three and nine months ended September 30, 2024, the Company didnot sell any shares of its common stock under the ATM Program. As of September 30, 2024, the Company has approximately $113.8 million remaining in gross proceeds available for future issuances of common stock under the ATM Program.

8. Stock Plan

2020 Equity Incentive Plan

The 2020 Equity Incentive Plan (the “2020 Plan”) was approved by the board of directors on September 24, 2020. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, directors, and consultants. The number of shares of common stock initially reserved for issuance under the 2020 Plan was 4,406,374, which shall be increased, upon approval by the board of directors, on January 1, 2021 and each January 1 thereafter, in an amount equal to the least of (i)4,406,374 shares of common stock, (ii) five percent (5%) of the outstanding common stock on the immediately preceding December 31, or (iii) such number of common stock determined by the board of directors no later than the immediately preceding December 31. For 2024, the board’s compensation committee, as the 2020 Plan administrator, exercised its discretion under clause (ii) to increase the number of shares of common stock reserved for issuance under the 2020 Plan by 2,572,174 shares, effective as of January 1, 2024. As of September 30, 2024, there were 5,329,431 shares available for issuance under the 2020 Plan.

On September 9, 2022, the Company granted 374,899 Restricted Stock Units (“RSUs”) to employees pursuant to an employee retention program approved by the board’s compensation committee. The RSUs have graded vesting on an annual basis fortwo years of continuous service, as per the 2020 Plan. As of September 30, 2024, the RSUs were fully vested and common stock was issued upon the settlement of the RSUs.

On January 18, 2024, the Company granted 952,665 RSUs to employees VP-level or higher, pursuant to an employee retention program approved by the compensation committee of the Company’s board of directors. The RSUs are scheduled to vest on June 30, 2025, based on approximatelyone and a half years of continuous service, as per the 2020 Plan.

2020 Employee Stock Purchase Plan

The 2020 Employee Stock Purchase Plan (the “2020 ESPP”) was approved by the board of directors on September 24, 2020. A total of 400,752 shares of common stock were initially reserved for issuance under this plan, which shall be increased, upon approval by the board of directors, on January 1, 2021 and each January 1 thereafter, to the lesser of (i)801,504 shares of common stock, (ii)1% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the board of directors or any of its committees no later than the last day of the immediately preceding fiscal year. For 2024, the 2020 ESPP reserved shares were increased under clause (ii) by 514,434 shares, effective as of January 1, 2024. As of September 30, 2024,275,497 shares are issued or outstanding, and there were 1,136,410 shares available for issuance, under the 2020 ESPP.

Stock Options

On July 16, 2024, the Company filed with the Securities and Exchange Commission a Tender Offer Statement on Schedule TO defining the terms and conditions of a one-time voluntary stock option exchange to its employees of certain options to purchase up to an aggregate of 2,820,491 shares of the Company’s common stock (the “Option Exchange”). On August 13, 2024, the completion date of the Option Exchange, stock options covering an aggregate of 2,786,691 shares of common stock were tendered by eligible employees, and the Company granted new options at an exercise price of $1.48, the Company’s closing stock price on August 13, 2024, covering an aggregate of 2,786,691 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 $1,370 over the requisite service period of the new stock options, which isthree orfour 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 option activity for the nine-month period ended September 30, 2024:

At September 30, 2024, the total compensation cost related to nonvested awards not yet recognized was $14,534. The weighted-average period over which the nonvested awards is expected to be recognized was 3.4 years.

The Company estimated the fair value of the options using the Black-Scholes options valuation model. The fair value of the options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value was estimated using the following assumptions:

The weighted average assumptions used to estimate the fair value of stock purchase rights under the ESPP are as follows:

Risk Free Interest Rate: The risk-free rate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding with the expected term of the option.

Expected Term: The Company uses the simplified method to calculate expected term described in the SEC’s Staff Accounting Bulletin No. 107, which takes into account vesting term and expiration date of the options.

Dividend Yield: The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, used an expected dividend yield ofzero in the valuation model.

Volatility: Volatility is based on the historical volatility of the Company’s publicly traded shares for the expected term.

Restricted Stock Units

The following table presents RSU activity under the 2020 Plan as of September 30, 2024:

As of September 30, 2024, there was $845 of unrecognized compensation cost related to RSUs that are expected to vest. These costs are expected to be recognized over a weighted average remaining vesting period of 0.8 years.

Stock-based compensation expense recorded under ASC 718 related to stock options granted and common stock issued under the 2020 ESPP were allocated to research and development and general and administrative expense as follows:

Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows:

9. Income Taxes

The Company’s effective tax rates were 0.4% and 0% for thethree months ended September 30, 2024 and 2023, respectively. The income tax provision and effective tax rate are driven primarily by the proceeds from the sale of the Company’s New Jersey tax net operating loss carryforwards and R&D tax credits.

During the three and nine months ended September 30, 2024 and 2023, the Company recorded a full valuation allowance on federal and state net deferred tax assets since management does not forecast the Company to be in a taxable position in the near future.

The State of New Jersey’s Technology Business Tax Certificate Program allows certain high technology and biotechnology companies to sell unused net operating loss (“NOL”) carryforwards and research and development (“R&D”) tax credits to other New Jersey-based corporate taxpayers. As of September 30, 2024, the Company received $16,176 of cash for the NOL and R&D tax credit sales related to the tax years ended December 31, 2015 to 2022. The sale of the NOLs and R&D tax credits has been recorded as an income tax benefit within the condensed consolidated statement of operations.

10. Net Loss per Share

The Company excluded all outstanding stock options and restricted stock units at each period end from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect. The following common stock equivalents were excluded from the calculation of diluted net loss per share:

11. Related Parties

The Company has consulting agreements with three members of its board of directors; one of which waived his consulting fees starting as of September 2021. Total consulting fees paid during the three months ended September 30, 2024 and 2023 were $50 and $25, respectively. Total consulting fees paid during thenine months ended September 30, 2024 and 2023 were $137 and $67, respectively. There wereno amounts owed under the consulting agreements as of September 30, 2024.

12. Restr ucturing

On January 18, 2024, the Company announced a restructuring plan involving the reduction of its workforce by approximately 30% of the Company’s employees. All of the costs under the restructuring plan were incurred during the nine months ended September 30, 2024. The Company undertook these steps in order to streamline operations, reduce costs and preserve capital as it advances into late-stage development for its lead product candidate, PC14586.

As a result of the reduction in force, the Company incurred an aggregate non-recurring charge of $597, consisting primarily of employee severance and benefit costs associated with the restructuring. The Company has recorded these charges in research and development expenses in the accompanying condensed consolidated statement of operations based on responsibilities of the impacted employees.

The Company accounts for employee termination benefits that represent a one-time benefit in accordance with ASC Topic 420, Exit or Disposal Cost Obligations. It records such costs into expense over the employee’s future service period, if any.

The following sets forth information regarding the balances and activity associated with the Company’s accrued employee severance and benefits costs (in thousands):

13. Subsequent Event

On August 5, 2024, the Company entered into the Termination Agreement. Pursuant to the Termination Agreement, the Company and the Landlord agreed to terminate the Lease subject to the Contingency. The Contingency was met on the date of sale on October 1, 2024, and the lease at One Research Way was terminated on such date.

Pursuant to the Termination Agreement, and subject to the Contingency, the Company agreed to surrender the property and pay a total termination fee of approximately $1,420 consisting of (i) a cash payment in the amount of approximately $798 and (ii) a release of a security deposit from the Company’s existing letter of credit in the amount of approximately $622. On October 1, 2024, the Company wrote off the $7,864 net ROU asset, the $12,714 lease liability, and the $9,454 of leasehold improvements associated with the lease at One Research Way in Princeton, New Jersey. This, along with associated broker fees, will result in a net loss on the lease termination of $6,768 in the condensed consolidated statements of operations for the year ended December 31, 2024.

On September 3, 2024, the Company entered into a new sublease agreement with Hengrui (USA) LTD., for approximately 14,201 square feet of office space located at 400 Alexander Park Drive, Suite 301, in Princeton, New Jersey for the Company’s new headquarters. The term of the lease is approximately 2 years, commencing on October 1, 2024 and expiring on February 28, 2027.