Acumen Pharmaceuticals Inc

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Acumen Pharmaceuticals, Inc. (“Acumen” or the “Company”) was incorporated in 1996 in the state of Delaware. Acumen is a clinical-stage biopharmaceutical company developing a novel disease-modifying approach to target what the Company believes to be a key underlying cause of Alzheimer’s disease (“AD”). Alzheimer’s disease is a progressive neurodegenerative disease of the brain that leads to loss of memory and cognitive functions and ultimately results in death. The Company’s scientific founders pioneered research on soluble amyloid-beta oligomers (“AßOs”), which are globular assemblies of the amyloid-beta (“Aß”) peptide that are distinct from Aß monomers and amyloid plaques. Based on decades of research and supporting evidence, AßOs have gained increasing scientific acceptance as a primary toxin involved in the initiation and propagation of AD pathology. The Company is currently focused on advancing a targeted immunotherapy drug candidate, sabirnetug, in the Phase 2 portion of a Phase 2/3 clinical trial called “ALTITUDE-AD” following Phase 1 results in “early AD” patients (patients with mild cognitive impairment or mild dementia due to Alzheimer’s pathology) that were first reported in July 2023. Sabirnetug is a recombinant humanized immunoglobulin gamma 2 (“IgG2”) monoclonal antibody (“mAb”) that was designed to selectively target AßOs, has demonstrated functional and protective effects in in vitro assays, and has previously demonstrated in vivo safety and pharmacologic activity in multiple animal species, including transgenic mouse models for AD. The Company intends to amend the ALTITUDE-AD clinical protocol in 2024 to change the current Phase 2/3 study to a Phase 2 standalone study.

The Company is subject to the uncertainty of whether its intellectual property will develop into successful commercial products.

Liquidity and Capital Resources

The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2024 and December 31, 2023, the Company had an accumulated deficit of $237.7 million and $222.8 million, respectively, and working capital of $247.4 million and $233.6 million, respectively. Management believes that the Company has sufficient cash to continue operating activities for beyond 12 months from issuance of these condensed financial statements.

Future capital requirements will depend upon many factors, including the timing and extent of spending on research and development and market acceptance of the Company’s products, if approved for commercial sale. The Company expects that it will need to obtain additional financing to complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. Until such time, if ever, as the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that any such financing will be available on terms acceptable to the Company, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate its product discovery and development activities or future commercialization efforts.

The Company completed a Phase 1 clinical trial of sabirnetug in the second quarter of 2023, which the Company named “INTERCEPT-AD.” This trial enrolled 65 patients with “early AD” and 62 participants received at least one dose of study drug. INTERCEPT-AD was a U.S.-based, multi-center, randomized, double-blind, placebo-controlled clinical trial with overlapping single ascending dose and multiple ascending dose cohorts evaluating patients with early AD. In July 2023, the Company announced topline results from INTERCEPT-AD, which demonstrated that sabirnetug met the primary and secondary objectives of this study in 62 participants with early AD. The Company announced the dosing of the first patient in the ALTITUDE-AD study in May 2024.

NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position and results of its operations and its cash flows for the periods presented. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.

A description of the Company’s significant accounting policies is included in the Company’s Annual Report. Other than as described below, there have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report.

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 and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, as well as the reported amounts of expenses during the reporting periods. These estimates and assumptions are based on the Company’s historical experience, and on various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. The more significant estimates and assumptions by management include, among others: the valuation allowance of deferred tax assets resulting from net operating losses, the valuation of stock options and the valuation of embedded derivatives within the Company’s long-term debt.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. All of the Company’s cash equivalents have liquid markets and high credit ratings. The Company had $46.4 million and $66.2 million in cash equivalents as of March 31, 2024 and December 31, 2023, respectively.

Restricted cash primarily consists of deposited cash collateral for the Company’s credit card program.

The following table provides a reconciliation of cash, cash equivalents and restricted cash from the balance sheets to the statements of cash flows (in thousands):

NOTE 3. MARKETABLE SECURITIES

The Company’s marketable securities consisted of the following (in thousands):

The following tables summarize the amount of unrealized losses, defined as the amount by which the amortized cost exceeds fair value, and the related fair value of available-for-sale marketable securities with unrealized losses, which have been segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months (in thousands):

As of March 31, 2024, the Company’s available-for-sale securities classified as short-term mature inone year or less and the Company’s available-for-sale securities classified as long-term mature within less thantwo years. As noted in the table above, although some of the Company’s available-for-sale marketable securities as of March 31, 2024 have been in an unrealized loss position for more than 12 months, the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity. No credit losses were recognized on the Company’s available-for-sale securities during the three months ended March 31, 2024 and 2023. The Company recorded an immaterial realized gain during the three months ended March 31, 2024 and no realized gains or losses during the three months ended March 31, 2023.

NOTE 4. FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

The carrying values reported in the Company’s condensed balance sheets for cash (excluding cash equivalents, which are recorded at fair value on a recurring basis), restricted cash, accounts payable, accrued clinical trial expenses and accrued expenses and other current liabilities are reasonable estimates of their fair values due to the short-term nature of these items.

The carrying amount of the Company’s long-term debt approximates fair value due to its variable market interest rate and management’s opinion that current rates and terms that would be available to the Company with the same maturity and security structure would be essentially equivalent to that of the Company’s long-term debt. Certain features of the Company’s term loan facility (the “Term Loan”) were determined to be an embedded derivative requiring separate measurement from the loan host instrument. For additional information regarding the Term Loan, see Note 6. Debt.

The fair value of the Company’s money market funds is determined using quoted market prices in active markets for identical assets.

The fair value for the available-for-sale marketable securities is determined based on valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

The following table presents changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2024 (in thousands):

As of March 31, 2024 and December 31, 2023, the fair value of the embedded derivatives in the Term Loan has been estimated using the Monte Carlo model. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in measuring the embedded derivatives in the Term Loan as of March 31, 2024 and December 31, 2023 is as follows:

NOTE 5. SUPPLEMENTAL FINANCIAL INFORMATION

Prepaid expenses and other current assets consisted of the following (in thousands):

Other assets consisted of the following (in thousands):

Accrued expenses and other current liabilities consisted of the following (in thousands):

NOTE 6. DEBT

On November 10, 2023, the Company entered into a Loan and Security Agreement with K2 HealthVentures LLC (the “Loan Agreement”). The Loan Agreement provided the Company with a term loan facility (the “Term Loan”), in the aggregate principal amount of $50 million, of which the Company borrowed $30 million in the first tranche upon closing. The remaining $20 million is available for borrowing upon the Company’s request based on review of certain information and discretionary approval from the lenders. The Loan Agreement bears interest per annum at the greater of (i)9.65% or (ii) the sum of the prime rate last quoted in The Wall Street Journal plus 1.15% for such interest period and the principal amount of the Term Loan outstanding under the Loan Agreement. The Term Loan matures on November 1, 2027, and can be extended to November 1, 2028, if the Company achieves certain financing milestones. The Loan Agreement provides for a final payment fee of an additional $1.6 million (the “Final Payment”) due upon repayment of the Term Loan.

The principal and interest of the Term Loan are to be repaid in equal monthly installments beginning on July 1, 2026 through the maturity of the Loan Agreement. The Loan Agreement allows prepayment of the entire Term Loan or a portion of the Term Loan of more than $5 million, provided that any partial prepayment will leave outstanding borrowings of at least $15 million.

The lenders can elect to convert up to $2.5 million of the Term Loan (the “Conversion Amount”) into the Company’s common stock at a conversion price of $2.53 (the “Conversion Option”). If the lenders elect to convert the Conversion Amount upon the Next Qualified Financing, as defined in the Loan Agreement whereby the Company receives aggregate gross proceeds of at least $20 million, the conversion price will equal the lowest effective cash price per share of securities issued in such Qualified Financing (the “Share-Settled Redemption”). The Conversion Option and Share-Settled Redemption within the Loan Agreement are required to be bifurcated as a single compound embedded derivative (the “Embedded Derivatives”) at fair value, with subsequent changes in fair value recognized in the statements of operations and comprehensive loss.

In accordance with the Loan Agreement, the Company issued an equity-classified warrant to purchase 730,769 shares of common stock (the “Loan Warrant”), with an initial allocated fair value of $1.1 million. See additional discussion in Note 8. Stockholders’ Equity.

The initial recognition of the direct fees of $0.5 million, the Final Payment of $1.6 million, the initial fair value of the Embedded Derivatives of $1.2 million and the fair value of the Loan Warrant of $1.1 million for the Loan Agreement resulted in a discount of $4.4 million, which is being amortized to interest expense over the term of the Loan Agreement using the effective interest method.

Outstanding debt consisted of the following (in thousands):

The following table provides the components of interest expense (in thousands):

For the three months ended March 31, 2024, the effective interest rate for the Term Loan was 13.4%.

As of March 31, 2024, the aggregate principal payments due for the Term Loan by year are as follows (in thousands):

The obligations of the Company under the Loan Agreement are secured by substantially all of the assets of the Company, excluding the Company’s intellectual property.

NOTE 7. LEASES

Office Lease

On September 11, 2023, the Company entered into a lease for office space in Newton, Massachusetts, with a lease term of approximately 38 months beginning October 20, 2023, and which expires on December 31, 2026.

During 2022, the Company entered intotwo leases for office space in the same building in Charlottesville, Virginia that both expired in December 2023. Upon the lease expiration, in accordance with the lease terms, the Company began leasing the office space on a month-to-month basis and included these costs in short-term lease rent expense for the three months ended March 31, 2024.

Computer Equipment Lease

The Company has a finance lease, which was effective in October 2023, for certain computer equipment for its ALTITUDE-AD clinical trial. The equipment will be returned to the vendor at the completion of the vendor’s services under the agreement. Upon lease commencement, the Company recorded non-cash expense in research and development expense in the statement of operations and comprehensive loss for the right-of-use assets related to the computer equipment lease as the equipment is being used for research and development and does not have an alternative future use to the Company. In January 2024, the Company paid $0.8 million for the leased equipment and related interest, and has no further payments due for the computer equipment under the finance lease.

The following table summarizes quantitative information about the Company’s leases (in thousands):

Supplemental information related to leases was as follows (dollar amounts in thousands):

As of March 31, 2024, the present value of maturities of the Company’s operating lease liabilities were as follows (in thousands):

NOTE 8. STOCKHOLDERS’ EQUITY

Authorized Shares

As of March 31, 2024, the total number of shares of capital stock authorized to be issued per the Company’s Amended and Restated Certificate of Incorporation is 310,000,000, with 10,000,000 shares designated as preferred stock with a par value of $0.0001, and 300,000,000 shares designated as common stock with a par value of $0.0001. Each share of common stock is entitled toone vote.

Shelf Registration and Equity Offerings

On July 1, 2022, the Company filed a shelf registration statement on Form S-3 (the “2022 Registration Statement”). Pursuant to the 2022 Registration Statement, the Company may offer and sell securities having an aggregate public offering price of up to $200 million. On July 21, 2023, the Company issued 16,774,193 shares of common stock at a price of $7.75 per share (the “Offering”). The net proceeds from the Offering, after underwriting discounts and commissions and other offering expenses, were $121.9 million.

In connection with the filing of the 2022 Registration Statement, the Company also entered into a sales agreement (the “Sales Agreement”) with BofA Securities, Inc. (“BofA”) and Stifel, Nicolaus & Company, Incorporated (“Stifel”), as sales agents, pursuant to which the Company may issue and sell shares of its common stock for an aggregate offering price of up to $50 million under an at-the-market offering program (the “ATM”), which is included in the $200 million of securities that may be offered pursuant to the 2022 Registration Statement. On April 23, 2023, the Company entered into an amendment to the Sales Agreement (as amended, the “Amended Sales Agreement”) to add BTIG, LLC (“BTIG”) as a sales agent under the Amended Sales Agreement (BTIG, together with BofA and Stifel, the “Sales Agents”). Pursuant to the Amended Sales Agreement, the Company will pay the Sales Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock. The Company is not obligated to make any sales of shares of its common stock under the ATM.

During the three months ended March 31, 2024, the Company issued and sold 2,068,246 shares of common stock under the ATM for net proceeds of $7.9 million, or $3.84 per share. The Company has issued shares of common stock for aggregate gross proceeds of $12.2 million under the ATM since the program’s inception.

On March 27, 2024, the Company filed a shelf registration statement on Form S-3 (the “2024 Registration Statement”). Pursuant to the 2024 Registration Statement, the Company may offer and sell securities having an aggregate public offering price of up to $200 million.

Common Stock Warrant

On November 10, 2023, in accordance with the Loan Agreement, the Company issued the Loan Warrant to purchase 730,769 shares of Common Stock at an exercise price of $1.95 with a 10-year contractual term. This equity-classified warrant is outstanding as of March 31, 2024.

NOTE 9. STOCK-BASED COMPENSATION

2021 Equity Incentive Plan

The 2021 Equity Incentive Plan (the “2021 Plan”), which provides for the grant of incentive stock options to employees, and the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants, became effective on June 30, 2021. The 2021 Plan is a successor to the Company’s Amended and Restated Stock Performance Plan that was adopted by the Company’s Board of Directors (the “Board”) and stockholders on April 8, 2013 (as amended from time to time, most recently on November 20, 2020, the “2013 Plan”). The maximum number of shares of common stock that may be issued upon the exercise of incentive stock options under the 2021 Plan is 12,000,000. Following the effectiveness of the 2021 Plan, no further grants may be made under the 2013 Plan; however, any outstanding equity awards granted under the 2013 Plan continue to be governed by the terms of the 2013 Plan. As of March 31, 2024, there were 3,231,274 options outstanding under the 2013 Plan.

The number of shares of common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to 5% of the total number of shares of common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or a lesser number of shares determined by the Board prior to the applicable January 1. On January 1, 2024, the number of shares of common stock reserved for issuance under the 2021 Plan automatically increased by 2,895,523 shares.

As of March 31, 2024, a total of 14,668,721 shares were authorized for issuance under the 2021 Plan and 2,882,485 shares remained available for issuance under the 2021 Plan.

The Company recorded stock-based compensation expense in the following expense categories of its condensed statements of operations for the periods shown (in thousands):

Stock Options

The Black-Scholes option-pricing model was used to estimate the fair value of stock options granted during the three months ended March 31, 2024 and 2023 with the following weighted average assumptions:

The weighted average grant date fair value of options granted during the three months ended March 31, 2024 and 2023, was $3.18 per share and $4.52 per share, respectively.

Stock options granted after December 31, 2017 generally vest monthly over a range of 12 to 48 months or vest monthly over a total of 48 months following aone-year cliff and all have a 10-year contractual term. Beginning in 2022, the Company has also issued annual option awards to its Board that vest in full on the first anniversary of the grant date. Stock options granted prior to December 31, 2017 were either fully vested upon grant or generally vested monthly over a range ofthree to 24 months and also have a 10-year term. The Company’s common stock became publicly traded in July 2021 and lacks sufficient company-specific historical and implied volatility information. Therefore, the Company estimates expected stock volatility using a weighted average blend of historical volatility of a publicly traded set of peer companies, as well as its own historical volatility. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined using the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield iszero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table reflects summarized stock option activity:

As of March 31, 2024, total unrecognized compensation costs related to unvested stock option awards was approximately $18.3 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years.

Restricted Stock Units

In January 2024 and 2023, the Company granted a restricted stock unit (“RSU”) award to each of its then-current employees. These RSU awards vest in equal annual installments on the first three anniversaries of the grant date.

As of March 31, 2024, total unrecognized compensation costs related to unvested RSUs was approximately $5.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.6 years.

Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the “ESPP”), which permits employees to purchase shares of common stock, became effective on June 30, 2021. The number of shares of common stock reserved for issuance automatically increases on January 1 of each calendar year through January 1, 2031, by the lesser of (1)1% of the total number of shares of common stock outstanding on the last day of the fiscal year before the date of the automatic increase, and (2)800,000 shares; provided that before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (1) and (2). On January 1, 2024, the number of shares of common stock reserved for issuance under the ESPP automatically increased by 579,105 shares. As of March 31, 2024, there are a total of 1,769,088 shares authorized for issuance under the ESPP and there have beenno purchases of shares under the ESPP, as the ESPP has not yet been implemented.

NOTE 10. COMMITMENTS AND CONTINGENCIES

The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

In November 2023, the Company entered into a Non-exclusive Collaboration and License Agreement (the “Halozyme License Agreement”) with Halozyme, Inc. (“Halozyme”). Under the terms of the Halozyme License Agreement, Halozyme granted the Company a non-exclusive license to Halozyme’s drug delivery technology for the development of a subcutaneous formulation of sabirnetug (such combination, the “Halozyme Product”). In January 2024, the Company paid a seven-figure upfront license payment for the Halozyme Product, which was included in accrued expenses and other current liabilities as of December 31, 2023. Additionally, the Company will make milestone payments tied to achievement of certain development and commercialization milestone events with respect to the Halozyme Product, as well as milestone payments based on achievement of certain net sales levels of the Halozyme Product. The Company will also make single-digit royalty payments based on worldwide net sales of the Halozyme Product.

In November 2022, the Company entered into a License Agreement (“Lonza License Agreement”) with Lonza Sales AG (“Lonza”). Under the terms of the Lonza License Agreement, Lonza granted the Company a worldwide non-exclusive license to use Lonza’s glutamine synthetase gene expression system to manufacture and commercialize sabirnetug (the “Lonza Product”). Under the terms of the Lonza License Agreement, in consideration of the licenses and consents granted to the Company, the Company paid an upfront fee of 1.0 million Swiss Francs. The Company is also required to pay certain royalties upon commercialization and annual payments on a country-by-country basis in respect of the manufacturing and sale of the Lonza Product, which include (i) a royalty of less than 1% on net sales where Lonza manufactures the Lonza Product, (ii) an annual royalty payment in Swiss Francs in the low six-digits and a royalty of less than 1% on net sales where the Company manufactures the Lonza Product and (iii) an annual payment in Swiss Francs in the mid six-digits per sublicense and a royalty on net sales in the low single digits where a third party manufactures the Lonza Product. These payment obligations expire 10 years from the first commercial sales of the Lonza Product in such country of sale.

NOTE 11. NET LOSS PER SHARE

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common stock outstanding would have been anti-dilutive. Potentially dilutive securities not included in the calculation of diluted net loss per common share, because to do so would be anti-dilutive, were as follows for the periods presented: