Contineum Therapeutics Inc

Previous wording

This Quarterly Report on Form 10-Q may contain“forward-looking statements”* within the meaning of Section* 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”). Such forward-looking statements, which represent our intent, belief, or current expectations, involve risks and uncertainties. We use words such as“may,”* “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements may include, but are not limited to, statements concerning projections about our accounting and finances, plans and objectives for the future, future operating and economic performance and other statements regarding future performance.* Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. As a result of many factors, including without limitation those set forth under“Risk Factors”* under Item* 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Current wording

This Quarterly Report on Form 10-Q may contain“forward-looking statements”* within the meaning of Section* 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”). Such forward-looking statements, which represent our intent, belief, or current expectations, involve risks and uncertainties. We use words such as“may,”* “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements may include, but are not limited to, statements concerning projections about our accounting and finances, our clinical trial and product development plans and timelines, the indications, anticipated benefits of, and market opportunities for our drug candidates, our operating runway, our business strategies and plans, and other statements regarding future performance.* Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. As a result of many factors, including without limitation those set forth under“Risk Factors”* under Item* 1A of Part II below, and elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

Previous wording

Our wholly-owned lead asset, PIPE-791, is a novel, brain penetrant, small molecule inhibitor of lysophosphatidic acid 1 receptor (“LPA1R”) in development for idiopathic pulmonary fibrosis (“IPF”) and Progressive multiple sclerosis (“Progressive MS”). LPA1R antagonism is a clinically validated mechanism, and we believe that our preclinical studies and Phase 1 healthy volunteer data support the continued development of PIPE-791 for both IPF and Progressive MS. Specifically, based on its high bioavailability, low plasma protein binding, and long receptor residence time in our preclinical studies compared to the preclinical data of other LPA1R antagonists that we know are currently in development, we also believe PIPE-791 has the potential to be a differentiated LPA1R therapy. We completed a Phase 1 clinical trial of PIPE-791 in healthy volunteers in support of clinical development in both IPF and Progressive MS. We plan to submit a clinical trial application (“CTA”) to the Medicines and Healthcare products Regulatory Agency (“MHRA”) to commence a Phase 1b open-label trial of PIPE-791 to measure the relationship of pharmacokinetics (“PK”) to lung and brain receptor occupancy by positron emission tomography (“PET”) imaging in 2024. This Phase 1b trial will inform dose selection for our planned future Phase 2 trials of PIPE-791 in IPF and Progressive MS.

Current wording

Our wholly-owned lead asset, PIPE-791, is a novel, brain penetrant, small molecule inhibitor of lysophosphatidic acid 1 receptor (“LPA1R”) in development for idiopathic pulmonary fibrosis (“IPF”) and Progressive multiple sclerosis (“Progressive MS”). LPA1R antagonism is a clinically validated mechanism, and we believe that our preclinical studies and Phase 1 healthy volunteer data support the continued development of PIPE-791 for both IPF and Progressive MS. Specifically, based on its high bioavailability, low plasma protein binding, and long receptor residence time in our preclinical studies compared to the preclinical data of other LPA1R antagonists that we know are currently in development, we also believe PIPE-791 has the potential to be a differentiated LPA1R therapy. We completed a Phase 1 clinical trial of PIPE-791 in healthy volunteers in support of clinical development in both IPF and Progressive MS. We plan to submit a clinical trial application to the Medicines and Healthcare products Regulatory Agency to commence a Phase 1b open-label trial of PIPE-791 to measure the relationship of pharmacokinetics to lung and brain receptor occupancy by positron emission tomography imaging in 2024. This Phase 1b trial will inform dose selection for our planned future Phase 2 trials of PIPE-791 in IPF and Progressive MS.

Previous wording

Our second drug candidate, PIPE-307, is a novel, small molecule selective inhibitor of the muscarinic type 1 M1 receptor (“M1R”), in development for depression and relapse-remitting multiple sclerosis (“RRMS”). M1R antagonism has been clinically validated in third-party trials in both depression and RRMS by scopolamine and clemastine, respectively. We have completed two Phase 1 trials of PIPE-307 in healthy volunteers and have initiated a Phase 2 trial of PIPE-307 for the potential treatment of RRMS. To our knowledge, PIPE-307 is the most clinically advanced selective M1R antagonist in development. We are developing PIPE-307 in collaboration with Johnson & Johnson.

Current wording

Our second drug candidate, PIPE-307, is a novel, small molecule selective inhibitor of the muscarinic type 1 M1 receptor (“M1R”), in development for depression and relapse-remitting multiple sclerosis (“RRMS”). M1R antagonism has been clinically validated in third-party trials in both depression and RRMS by scopolamine and clemastine, respectively. We have completed two Phase 1 trials of PIPE-307 in healthy volunteers and have initiated a Phase 2 trial of PIPE-307 for the potential treatment of RRMS. To our knowledge, PIPE-307 is the most clinically advanced selective M1R antagonist in development. We are developing PIPE-307 in collaboration with Johnson & Johnson ("J&J").

Previous wording

In February 2023, we entered into the J&J License Agreement with J&J, pursuant to which we granted J&J an exclusive, worldwide license to develop, manufacture and commercialize PIPE-307 in all indications.

Current wording

In February 2023, we entered into the license agreement with J&J (the "J&J License Agreement"), pursuant to which we granted J&J an exclusive, worldwide license to develop, manufacture and commercialize PIPE-307 in all indications.

Previous wording

Research and development costs consist primarily of costs incurred for the unallocated internal research and development costs:

Current wording

Research and development expenses consist primarily of costs incurred for our internal research and development activities.

Previous wording

We track outsourced development costs, consultant costs and other external research and development costs such as third-party contract costs relating to manufacturing, clinical trial activities, translational medicine and toxicology activities to specific programs. We allocate employee related costs including salaries and related benefits based upon the level of effort for each specific project. Certain employee activities that cannot be allocated to any one specific project or management related activities are considered indirect costs. The following tables summarize our research and development expenses for the periods ended March 31, 2024 and 2023. The direct external development program expenses reflect external costs attributable to our clinical development and preclinical programs and personnel costs that can be directly attributed to a development program. The unallocated internal research and development costs include unallocated personnel costs, facility costs, stock-based compensation, laboratory consumables and discovery and research related activities.

Current wording

We track outsourced development costs, consultant costs and other external research and development costs such as third-party contract costs relating to manufacturing, clinical trial activities, translational medicine and toxicology activities to specific programs. We allocate employee related costs, including salaries and related benefits based upon the level of effort for each specific project. Certain employee activities that cannot be allocated to any one specific project or management related activities are considered indirect costs. The following tables summarize our research and development expenses for the three and six months ended June 30, 2024 and 2023. The direct external development program expenses reflect external costs attributable to our clinical development and preclinical programs and personnel costs that can be directly attributed to a development program. The unallocated internal research and development costs include unallocated personnel costs, facility costs, stock-based compensation, laboratory consumables and discovery and research related activities.

Previous wording

We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development activities, the growth of our business operations and headcount and to reflect increased operating expenses as we begin operating as a public company. These increased costs will likely include increased expenses related to audit, legal, regulatory services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs.

Current wording

We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development activities, the growth of our business operations and headcount and to reflect increased operating expenses as we continue operating as a public company. These increased costs will likely include increased expenses related to audit, legal, regulatory services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs.

Previous wording

Interest expense consists of (i) interest on our outstanding Loan Agreement with First Citizens, and (ii) amortization of our debt discount associated with our loan and security agreement recorded in connection with the fair value of the warrant issued to First Citizens, the debt issuance costs incurred and the obligation to make a final payment fee. We repaid all of the outstanding principal on the First Citizens loan as of June 2023.

Current wording

Interest expense consists of (i) interest on our outstanding loan and security agreement (the "Loan Agreement") with First Citizens Bank ("First Citizens"), and (ii) amortization of our debt discount associated with the Loan Agreement recorded in connection with the fair value of the warrant issued to First Citizens, the debt issuance costs incurred and the obligation to make a final payment fee. We repaid all of the outstanding principal on the Loan Agreement as of June 2023.

Previous wording

General and administrative expenses. General and administrative expenses were $2.2 million and $1.5 million for three months ended March 31, 2024 and 2023, respectively. The increase of $0.7 million was primarily due to a $0.5 million increase in consulting expenses primarily related to an audit completed in accordance with public company audit requirements and $0.1 million increase in personnel-related expenses.

Current wording

General and administrative expenses. General and administrative expenses were $3.0 million and $1.6 million for the three months ended June 30, 2024 and 2023, respectively. The increase of $1.4 million was primarily due to a $0.6 million increase in consulting and legal expenses, a $0.6 million increase in stock-based compensation, and a $0.1 million increase in personnel-related expenses.

Previous wording

Interest income. Interest income was $1.6 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively. The increase was due to an increase in funds invested in marketable securities starting in the second quarter of 2023 consisting of net proceeds of $60.1 million from the extension of our Series C convertible preferred stock financing and the receipt of $50.0 million upfront payment pursuant to the J&J License Agreement. We also had an increase in the yields earned on our marketable securities from the three months ended March 31, 2023 to the three months ended March 31, 2024.

Current wording

Interest income. Interest income was $2.0 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively. The increase was due to an increase in funds invested in marketable securities and an increase in the yields earned on our marketable securities from the three months ended June 30, 2023 to the three months ended June 30, 2024.

Previous wording

Research and development expenses. Research and development expenses were $7.8 million and $3.6 million for the three months ended March 31, 2024 and 2023, respectively. The increase of $4.2 million was primarily due to a $2.0 million increase in contract research organization costs primarily related to our on-going Phase 2 clinical trial for PIPE-307 for the potential treatment of RRMS and our completed Phase 1 healthy volunteer clinical trial for PIPE-791, a $0.9 million increase in expenses for toxicology studies primarily for PIPE-791 and a $0.6 million increase in personnel-related expenses.

Current wording

Research and development expenses. Research and development expenses were $15.7 million and $13.1 million for the six months ended June 30, 2024 and 2023, respectively. The increase of $2.6 million was primarily due to a $3.0 million increase in contract research organization costs primarily related to our on-going Phase 2 clinical trial for PIPE-307 for the potential treatment of RRMS and our completed Phase 1 healthy volunteer clinical trial for PIPE-791, a $1.9 million increase in expenses for toxicology studies primarily for PIPE-791, a $1.1 million increase in personnel-related expense, and a $0.5 million increase in stock-based compensation. Partially offsetting these increases was the following: $2.9 million of contractual milestone payments paid to our consultants during the six months ended June 30, 2023 upon the receipt of the upfront payment from the J&J License Agreement and a $1.7 million decrease in manufacturing expenses for PIPE-791.

Previous wording

We have incurred net losses and negative cash flows from operations in nearly every reporting period since our inception and anticipate that we will continue to incur net losses for the foreseeable future. We expect to incur substantial expenditures as we advance our drug candidates through clinical development, undergo the regulatory approval process, engage in other research and development activities to expand our pipeline of drug candidates, expand our operations and headcount, maintain and expand our intellectual property portfolio and, if we obtain approval for one or more of our drug candidates, launch commercial activities. Specifically, in the near term we expect to incur substantial expenses relating to completing our clinical trials and our other product development activities.

Current wording

We have incurred net losses and negative cash flows from operations in nearly every reporting period since our inception and anticipate that we will continue to incur net losses for the foreseeable future. We expect to incur substantial expenditures as we advance our drug candidates through clinical development, undergo the regulatory approval process, engage in other research and development activities to expand our pipeline of drug candidates, expand our operations and headcount, maintain and expand our intellectual property portfolio and, if we obtain approval for one or more of our drug candidates, launch commercial activities. We also expect to incur additional costs associated with our operating as a public company, including significant legal, accounting, investor relations, director and officer insurance, and other expenses that we did not incur as a private company.

Previous wording

Through March 31, 2024, we have funded our operations primarily through the issuance of convertible promissory notes, the private placements of our convertible preferred stock, the J&J License Agreement, and our term loan facility with First Citizens. Through March 31, 2024, we have raised gross proceeds of approximately $194.0 million from the issuance of our convertible preferred stock and promissory notes and have received an upfront payment from the J&J License Agreement of $50.0 million. Our cash equivalents are held in money market funds and marketable securities. At March 31, 2024, we had an accumulated deficit of $83.6 million. In April 2024, we raised an additional $108.0 million in net proceeds from the initial public offering of our shares of Class A common stock (“IPO”). We expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations, director and officer insurance and other expenses that we did not incur as a private company.

Current wording

Through June 30, 2024, we have funded our operations primarily through the issuance of convertible promissory notes, the private placements of our convertible preferred stock, the J&J License Agreement, our Loan Agreement with First Citizens, and net proceeds from our initial public offering ("IPO"). Through June 30, 2024, we have raised gross proceeds of approximately $194.0 million from the issuance of our convertible preferred stock and promissory notes and have received an upfront payment from the J&J License Agreement of $50.0 million. Upon the closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into Class A common stock or Class B common stock, as applicable. In April 2024, we raised approximately $107.9 million in net proceeds from the IPO of our shares of Class A common stock. As of June 30, 2024, we had an accumulated deficit of $92.6 million.

Previous wording

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $117.9 million. Management believes our existing cash, cash equivalents and marketable securities and proceeds received from our IPO will be sufficient to support our operations for at least 12 months from the date of this Quarterly Report on Form 10-Q.

Current wording

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $218.7 million. Management believes our existing cash, cash equivalents, and marketable securities will be sufficient to support our operations for at least 12 months from the date of this Quarterly Report on Form 10-Q.

Previous wording

The following table sets forth a summary of our cash flows for the period indicated (in thousands):

Current wording

The following table sets forth a summary of our cash flows for the periods indicated (in thousands):

Previous wording

Net cash used in operating activities was $8.0 million and $5.2 million for the three months ended March 31, 2024 and 2023, respectively. The net cash used in operating activities for the three months ended March 31, 2024 was primarily due to our net loss of $8.4 million, partially offset by $0.1 million of non-cash charges such as stock-based compensation, depreciation and amortization, amortization of premiums/discounts on marketable securities and amortization of right-of-use assets and a $0.3 million change in operating assets and liabilities.

Current wording

Net cash used in operating activities was $16.5 million for the six months ended June 30, 2024, which primarily related to our net loss of $17.4 million and $0.1 million change in operating assets and liabilities, partially offset by $0.8 million of non-cash charges such as stock-based compensation, depreciation and amortization, accretion of premiums/discounts on investments, and non-cash operating lease expense. Net cash provided by operating activities was $35.4 million for the six months ended June 30, 2023, which primarily related to our net income of $36.7 million from the J&J Licensing Agreement, $0.9 million of non-cash charges such as accretion of debt discount and debt issuance costs, stock-based compensation, depreciation and amortization, accretion of premiums/discounts on investments, and non-cash operating lease expense, and $0.6 million change in operating assets and liabilities.

Previous wording

Net cash provided by investing activities was $8.7 million for the three months ended March 31, 2024, which primarily consisted of $39.5 million of sales and maturities of marketable securities, partially offset by $30.7 million of purchases of marketable securities and $0.1 million of purchases of property and equipment. Net cash provided by investing activities was $9.4 million for the three months ended March 31, 2023, which primarily consisted of $18.6 million of proceeds from sales and maturities of marketable securities, partially offset by $9.2 million of purchases of marketable securities.

Current wording

Net cash used in investing activities was $30.2 million for the six months ended June 30, 2024, which primarily related to $99.6 million of purchases of marketable securities and $0.3 million of purchases of property and equipment, partially offset by $69.7 million of sales and maturities of marketable securities. Net cash used in investing activities was $35.1 million for the six months ended June 30, 2023, which primarily related to $67.8 million of purchases of marketable securities and $0.1 million of purchases of property and equipment, partially offset by $32.8 million of sales and maturities of marketable securities.

Previous wording

We expect our operating expenses to significantly increase as we continue to develop and seek regulatory approvals for our drug candidates, engage in other research and development activities to expand our pipeline of drug candidates, expand our operations and headcount, maintain and expand our intellectual property portfolio, and, if we obtain approval for one or more of our drug candidates, launch commercial activities. Management believes our existing cash, cash equivalents and marketable securities and proceeds received from the IPO will be sufficient to support our operations for at least 12 months from the date of this Quarterly Report on Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and our actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing our drug candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Current wording

We expect our operating expenses to significantly increase as we continue to develop and seek regulatory approvals for our drug candidates, engage in other research and development activities to expand our pipeline of drug candidates, expand our operations and headcount, maintain and expand our intellectual property portfolio, and, if we obtain approval for one or more of our drug candidates, launch commercial activities. Management believes our existing cash, cash equivalents, and marketable securities will be sufficient to support our operations for at least 12 months from the date of this Quarterly Report on Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and our actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing our drug candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Previous wording

Our contractual obligations and commitments relate to our operating leases that relate primarily to our leases of office and laboratory space in San Diego, California. Our total contractual commitments for our lease agreements amount to approximately $7.8 million as of March 31, 2024.

Current wording

Our contractual obligations and commitments relate to our operating leases that relate primarily to our leases of office and laboratory space in San Diego, California. Our total contractual commitments for our lease agreements amount to approximately $7.6 million as of June 30, 2024.

Previous wording

There have been no material changes to our critical accounting estimates from those described under our “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” included in our Prospectus, except that from the effectiveness date of our registration statement on Form S-1 (File No. 333-278003), our common stock is publicly traded and we therefore no longer require common stock valuations.

Current wording

There have been no material changes to our critical accounting estimates from those described under our “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgements and Estimates” included in our Prospectus, except that from the effectiveness date of our registration statement on Form S-1 (File No. 333-278003), our common stock is publicly traded and we therefore no longer require common stock valuations.

Previous wording

We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We will remain an emerging growth company until the earlier of (i) December 31, 2029, the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (ii) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our voting and non-voting common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th and (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Current wording

We are an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We will remain an emerging growth company until the earlier of (i) December 31, 2029, the last day of the fiscal year following the fifth anniversary of the completion of the Company's IPO, (ii) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our voting and non-voting common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.