OnKure Therapeutics Inc

1. Organization and Business

On October 4, 2024 (the Closing Date), Reneo Pharmaceuticals, Inc., a Delaware corporation and our predecessor company (Reneo), consummated the previously announced merger pursuant to the terms of the Agreement and Plan of Merger, dated as of May 10, 2024 (the Merger Agreement), by and among Reneo, Radiate Merger Sub I, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Reneo (Merger Sub I), Radiate Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Reneo (Merger Sub II), and OnKure, Inc., a Delaware corporation (Legacy OnKure). Pursuant to the Merger Agreement, on the Closing Date, (i) Reneo effected a reverse stock split of Reneo’s issued common stock at a ratio of 1:10 (the Reverse Stock Split), (ii) Reneo changed its name to “OnKure Therapeutics, Inc.”, (iii) Reneo reclassified all of its common stock as Class A Common Stock, and (iv) Merger Sub I merged with and into Legacy OnKure (the Merger), with Legacy OnKure as the surviving company in the Merger and, after giving effect to such Merger, Legacy OnKure became a wholly-owned subsidiary of OnKure Therapeutics, Inc. (together, the Combined Company). Pursuant to the terms of the Merger Agreement, OnKure determined that the Merger would qualify for the intended tax treatment even if only the merger with Merger Sub I was consummated, and therefore the parties determined not to consummate the second merger with Merger Sub II contemplated by the Merger Agreement.

Concurrently with the closing of the Merger, Reneo completed a private placement with certain investors (the PIPE Investors) to purchase 2,839,005 shares of Class A Common Stock at a price per share of approximately $22.895 per share for an aggregate purchase price of approximately $65.0 million, including the conversion of outstanding convertible notes and accrued but unpaid interest thereon held by certain Legacy OnKure investors (the Concurrent PIPE Investments). As of September 30, 2024, the Company recorded $2 million in liabilities as a result of cash received from investors prior to closing of the PIPE. In connection with the Concurrent PIPE Investments, Reneo entered into a registration rights agreement with the PIPE Investors, pursuant to which Reneo agreed to use commercially reasonable efforts to prepare and file a registration statement with the SEC within 45 calendar days after the Closing Date, registering the resale of the shares of Class A Common Stock issued pursuant to the Concurrent PIPE Investments. Immediately after the effective time of the Merger, following the consummation of the Concurrent PIPE Investments, Legacy OnKure stockholders owned approximately 53.6%, pre-Merger Reneo stockholders owned approximately 25.1%, and the PIPE Investors owned approximately 21.3% of the Combined Company’s outstanding common stock.

OnKure Therapeutics, Inc. (OnKure or the Company) is a clinical-stage biopharmaceutical company focused on the discovery and development of precision medicines designed to target biologically validated drivers of cancers underserved by available therapies. Using a structure- and computational chemistry-driven drug design platform, the Company is committed to improving clinical outcomes for patients by building a robust pipeline of small molecule drugs designed to selectively target specific mutations thought to be key drivers of cancer. The Company’s lead product candidate, OKI-219, is a highly selective inhibitor of 3 kinase alpha (PI3Kα), a key mediator in cancer growth signaling, harboring the H1047R mutation (PI3KαH1047R) that has a much smaller impact on non-mutated (or wild-type) PI3Kα (PI3KαWT). OKI-219 is currently in a first-in-human Phase 1 monotherapy dose-escalation trial in H1074R-mutated advanced solid tumors including breast cancer. Early clinical data are anticipated in the fourth quarter of 2024. In addition to OKI-219, the Company is also pursuing programs designed to selectively target the other specific mutations of PI3Kα.

The unaudited interim financial statements included in this Quarterly Report on Form 10-Q are representative of Reneo’s operations prior to the closing of the Merger, the adoption of OnKure’s business plan and the commencement of conducting OnKure’s business. Unless the context otherwise requires, references to the “Company” or “OnKure” refer to OnKure Therapeutics, Inc. and its subsidiaries after completion of the Merger. In addition, references to “Reneo” refer to the Company prior to the completion of the Merger.

Liquidity

From its inception in 2014, Reneo incurred significant losses and negative cash flows from operations and expects to continue to incur net losses into the foreseeable future and may never become profitable. As of September 30, 2024, Reneo had cash, cash equivalents and short-term investments of$76.7 million.

Following the completion of the Merger, as described in more detail in Note 10, management believes the Company’s cash, cash equivalents and short-term investments will be sufficientto fund OnKure’s current operating plan for at least the next 12 months from the date of issuance of these unaudited condensed financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Reneo has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted, although Reneo believes that the disclosures made are adequate to make the information not misleading. Reneo recommends that the unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in Reneo’s Annual Report on Form 10-K for the year ended December 31, 2023.

In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements, have been included in the accompanying unaudited financial statements. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.

The accompanying unaudited consolidated financial statements include the accounts of Reneo and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Concurrently with the closing of the Merger on October 4, 2024, as described in more detail in Note 10, Subsequent Events, Reneo effected the Reverse Stock Split. All share and per share amounts, excluding the number of authorized shares and par value, (which were unchanged as a result of the Reverse Stock Split), contained in these financial statements and accompanying notes, and this Quarterly Report on Form 10-Q give retroactive effect to the Reverse Stock Split.

Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements for the nine months ended September 30, 2024 are consistent with those discussed in Note 2 to the consolidated financial statements in Reneo’s Annual Report on Form 10-K for the year ended December 31, 2023.

New Accounting Pronouncements

There were various accounting standards and interpretations issued recently, none of which are expected to have a material impact on Reneo’s financial position, operations or cash flows.

3. Net Loss Per Share

Reneo computes basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive. For purposes of this calculation, common stock shares to be issued upon exercise of all outstanding stock options and vesting of restricted stock units were excluded from the diluted net loss per share calculation for the three and nine months ended September 30, 2024 and 2023 because such shares are anti-dilutive.

Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following:

4. Fair Value Measurements

ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and Reneo’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of Reneo. Unobservable inputs are inputs that reflect Reneo’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC Topic 820 identifies fair value as the 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 a basis for considering market participant assumptions in fair value measurements, ASC Topic 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

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Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

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Level 2 – Inputs, other than quoted prices in active markets, which are observable for the asset or liability, either directly or indirectly.

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Level 3 – Unobservable inputs in which there is little or no market data, which requires Reneo to develop its own assumptions.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Reneo’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. Reneo’s financial assets are subject to fair value measurements on a recurring basis.

Reneo categorizes its money market funds as Level 1, using the quoted prices in active markets. Commercial paper and U.S. treasury securities are categorized as Level 2, using significant other observable inputs. The fair value of Reneo’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets.

In connection with Reneo’s chief executive officer’s (CEO) employment agreement, he was entitled to receive a special performance bonus in the amount of $7.5 million (Performance Award), payable in cash, common stock or a combination of cash and common stock, at the election of Reneo, based on achievement of certain conditions as described in more detail in Note 8. Reneo estimated the fair value of the Performance Award using a Monte Carlo simulation, which incorporates the stock price at the date of the valuation and utilizes Level 3 inputs such as volatility, probabilities of success, and other inputs that are not observable in active markets. The Performance Award is required to be measured at fair value on a recurring basis each reporting period, with changes in the fair value recognized in general and administrative expense in the consolidated statements of operations and comprehensive loss over the derived service period of the award.

No assets or liabilities were transferred into or out of their classifications during thenine months ended September 30, 2024.

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at September 30, 2024 consisted of the following (in thousands):

The recurring fair value measurement of Reneo’s assets and liabilities measured at fair value at December 31, 2023 consisted of the following (in thousands):

The following table sets forth a summary of changes in the fair value measurements of the Performance Award liability (in thousands):

5. Marketable Debt Securities

Reneo’sinvestments in debt securities are carried at fair value and classified as current assets available-for-sale and represent the investment of funds available for current operations. Accretion of bond discount and interest income on marketable securities is included in other income as a separate component of other income (expense) on the statement of operations and comprehensive loss. Unrealized gains and losses on available-for-sale debt securities are included in other comprehensive income or loss, and charged to income or expense in the period when realized. The following tables summarize the gross unrealized gains and losses of Reneo’s available-for-sale securities (in thousands):

As of September 30, 2024, Reneo considered the unrealized losses in its investment portfolio to be temporary in nature and not due to credit losses. Reneo has the intent and ability to hold such investments until their recovery at fair value. Reneo didnot have any realized gains or losses in its available for sale securities during thethree and nine months ended September 30, 2024 and 2023.

6. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

7. Leases

Prior to the closing of the Merger on October 4, 2024, Reneo’s headquarters was located in Irvine, California, where it leases office space under a lease agreement that expires in November 2026. Reneo leases additional office space located in Sandwich, United Kingdom under a lease agreement that expires in October 2027, with an option to early terminate in October 2025 with no termination fee. In January 2024, Reneo exercised its early termination option and made the final termination lease payment of $0.2 million in July 2024.

Other information related to Reneo’s operating leases as of the balance sheet dates presented are as follows:

Maturities of lease liabilities by fiscal year for Reneo’s operating leases are as follows (in thousands):

8. Stock-Based Compensation

In March 2021, Reneo’s Board of Directors adopted Reneo’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to Reneo’s 2014 Equity Incentive Plan (2014 Plan). As of the effective date of the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan. Under the 2021 Plan, Reneo may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other awards to individuals who are employees, officers, directors or consultants of Reneo and its affiliates.

Under the 2014 Plan, certain employees were granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. Reneo has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. As of September 30, 2024, there wereno unvested shares of common stock outstanding that were issued pursuant to the early exercise of stock options.

Shares Reserved for Future Issuance

As of September 30, 2024, Reneo had reserved shares of its common stock for future issuance as follows:

Upon the close of the Merger, all shares available for issuance under the 2021 Plan and 2021 ESPP were cancelled. See Note 10, Subsequent Events, for discussion of the new equity plans adopted as part of the Merger.

Stock Options

A summary of Reneo’s stock option activity and related information for thenine months ended September 30, 2024 is as follows:

Options exercisable at September 30, 2024 include vested options and options eligible for early exercise. All outstanding options as of September 30, 2024 are expected to vest.

Unrecognized stock-based compensation expense as of September 30, 2024 was$2.8 million, which is expected to be recognized over a weighted-average vesting term of 1.7 years. See Note 10, Subsequent Events, for information regarding compensation expense recognized on the closing date of the Merger related to acceleration of unvested shares.

Reneo estimates stock awards fair value on the date of grant using the Black-Scholes valuation, with the vesting being subject to service requirements. Reneo accounts for forfeitures when they occur. Reneo didnot grant any stock options during thenine months ended September 30, 2024.

Restricted Stock Units (RSUs)

RSUs consist of time-based units (TSUs), performance-based units (PSUs) and market-based units (MSUs). The following table summarizes RSU activities during thenine months ended September 30, 2024:

Time-Based Units

TSUs typically vest over four years, with 25% vesting on theone-year anniversary of the employee’s hire date and the remainder vesting monthly or quarterly over the following three years subject to the employee’s continued employment with Reneo through the vesting dates. The fair value of the awards was based on the value of Reneo’s common stock at the grant date of the award and expense is recognized on a straight-line basis. Reneo had 4,209 unvested shares underlying TSUs as of September 30, 2024. The stock-based compensation expense related to such TSUs for the three and nine months ended September 30, 2024 and 2023 was immaterial. Unrecognized stock-based compensation expense as of September 30, 2024 was $0.3 million, which is expected to berecognized over a weighted-average vesting term of 2.9 years. See Note 10, Subsequent Events, for information regarding compensation expense recognized on the closing date of the Merger related to acceleration of unvested shares.

Performance-Based Units

The vesting of the PSUs is based on Reneo achieving certain regulatory milestones and is subject to the employee’s continued employment with Reneo through the achievement date. The fair value of the awards was based on the value of Reneo’s common stock at the grant date of the award and expense recognition is based on the probability of achieving the performance conditions. Stock-based compensation expense is adjusted in future periods for subsequent changes in the expected outcome of the performance conditions. Reneo had 13,450 unvested shares underlying PSUs as of September 30, 2024. Reneo concluded that achievement of the performance conditions was not probable as of September 30, 2024 and 2023, and thereforeno stock-based compensation expense was recognized for thethree and nine months ended September 30, 2024 and 2023 in connection with the PSUs. As of September 30, 2024, there was$1.0 million of unrecognized stock-based compensation expense related to PSUs that were deemed not probable of vesting.

Market-Based Units

The vesting of the MSUs is based on Reneo’s closing stock price trading above $20 per share for 30 consecutive trading days subject to the employee’s continued employment with Reneo through the date of achievement. The share price of Reneo’s common stock on the date of issuance of the MSUs was $2.78 per share (without giving effect to the Reverse Stock Split). The fair value was based on Monte Carlo simulation model on the grant date. Stock-based compensation expense is recognized over the derived service period of approximately 3 years. Reneo had 12,000 unvested shares underlying MSUs as of September 30, 2024. Stock-based compensation expense related to the MSUs during the three and nine months ended September 30, 2024 and 2023 was immaterial. As of September 30, 2024, unrecognized stock-based compensation expense related to the MSUs was immaterial.

Performance Award

In connection with the CEO’s employment agreement, he was entitled to receive a Performance Award in the amount of $7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of Reneo, in the event that (i) Reneo’s market value exceeds $750.0 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to Reneo’s stockholders in connection with a change in control as defined in Reneo’s severance benefit plan, as determined in good faith by its Board of Directors, exceeds $750.0 million. Reneo has determined that the Performance Award is subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions. Since Reneo’s initial public offering (IPO), neither of the events have been satisfied. Reneo estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as stock-based compensation expense over the derived service period. As of September 30, 2024, Reneo has reduced the liability associated with the Performance Awards tozero as the conditions were not probable of being achieved on or before the completion of the Merger.

2021 Employee Stock Purchase Plan

In March 2021, Reneo’s Board of Directors adopted Reneo’s 2021 Employee Stock Purchase Plan (ESPP), which became effective immediately prior to the execution of the underwriting agreement in connection with Reneo’s IPO. As of September 30, 2024, 28,846 shares have been issued under the ESPP.

In September 2021, the compensation committee of Reneo’s Board of Directors (Compensation Committee) adopted Reneo’s 2021 UK Sharesave Sub-plan (SAYE). An allocation of 2,587 sharesof common stock from the

ESPP reserve pool was approved and reserved for issuance under the SAYE. The Compensation Committee terminated the SAYE in January 2024 and the reserved shares were returned to the ESPP reserve pool. No shares were issued under the SAYE prior to its termination.

Reneo didnot recognize stock-based compensation expense related to the ESPP and the SAYE for the three and nine months ended September 30, 2024. The stock-based compensation expense related to the ESPP and the SAYE for the three and nine months ended September 30, 2023, was immaterial.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense, including expense associated with options, TSUs, MSUs and award modifications for unvested options, reflected in the consolidated statements of operations and comprehensive loss (in thousands):

9. License Agreement

In December 2017, Reneo entered into a License Agreement (the vTv License Agreement) with vTv Therapeutics LLC (vTv Therapeutics), under which Reneo obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including mavodelpar, for any therapeutic, prophylactic or diagnostic application in humans. Since Reneo has suspended all development activity related to mavodelpar, it is not currently performing any development efforts under the vTv License Agreement.

Under the terms of the vTv License Agreement, Reneo has paid vTv Therapeutics an initial upfront license fee of $3.0 million and $2.0 million of milestone payments and issued an aggregate of 576,443 shares of its common stock to vTv Therapeutics. On October 30, 2023, Reneo repurchased from vTv Therapeutics all 576,443 shares of its common stock previously issued to vTv Therapeutics under the vTv License Agreement for an aggregate purchase price of approximately $4.4 million in a private, non-underwritten transaction.

On October 22, 2024, the Company provided vTv Therapeutics notice of its intention to terminate the vTv License Agreement effective 90 days from the date of notice. Following termination of the vTv License Agreement, the Company intends to cease maintenance and prosecution of all mavodelpar intellectual property.

10. Subsequent Events

On October 4, 2024, Reneo consummated the previously announced Merger pursuant to the terms Merger Agreement. Pursuant to the Merger Agreement, on the Closing Date, (i) Reneo effected a the Reverse Stock Split of Reneo’s issued common stock at a ratio of 1:10, (ii) Reneo changed its name to “OnKure Therapeutics, Inc.”, (iii) Reneo reclassified all of its common stock as Class A Common Stock. Concurrently with the closing of the Merger, Reneo completed a private placement with the PIPE Investors to purchase 2,839,005 shares of Class A Common Stock at a price per share of approximately $22.895 per share for an aggregate purchase price of approximately $65.0 million, as described in more detail in Note 1, Organization and Business.

Upon the closing of the Merger, (i) an aggregate of 6,470,281 shares of Class A Common Stock and 686,527 shares of Class B Common Stock of the Combined Company were issued in exchange for the shares of Legacy OnKure capital stock outstanding as of immediately prior to the Effective Time and (ii) outstanding shares of Reneo common stock were reclassified into an aggregate of 3,343,525 shares of Class A Common Stock. Immediately after the Merger, there were approximately 12,652,811 shares of Class A Common Stock outstanding,

686,527 sharesof Class B Common Stock outstanding, and 905,204 shares of Class A Common Stock subject to outstanding options and RSUs under the Combined Company’s equity incentive plans.

In addition, the Company adopted the 2024 Equity Incentive Plan (the 2024 Plan) and 2024 Employee Stock Purchase Plan (the 2024 ESPP Plan). Under the 2024 Plan a total of 2,480,000 shares of Class A Common Stock were initially reserved for issuance. In addition, shares reserved for issuance under the 2024 Plan will include shares of Class A Common Stock equity awards granted under the Reneo 2021 Plan and any shares of Class A Common Stock equity awards that were assumed in the Merger. Under the 2024 ESPP Plan, an aggregate of 137,500 shares of Class A Common Stock are currently reserved and available for issuance.

In October in connection with the Merger, the Company paid approximately $4.3 million in severance and retention bonuses to its former Reneo employees in accordance with their Separation and Retention Agreements. Additionally, Reneo recognized stock-based compensation of $3.0 related to vesting acceleration of approximately 92,480 shares and 24,700 shares of unvested options and restricted stock, respectively, immediately prior to the Merger.