The following discussion and analysis should be read in conjunction with the
unaudited condensed consolidated financial statements and related notes included
elsewhere in this Quarterly Report on Form
10-Q
and our audited financial statements and related notes thereto for the year
ended December 31, 2020 included in our 2020 Annual Report on Form
10-K.  This
discussion and analysis and other parts of this Quarterly Report on Form
10-Q
contain forward-looking statements based upon current beliefs, plans and
expectations that involve risks, uncertainties and assumptions, such as
statements regarding our plans, objectives, expectations, intentions and
projections. Our actual results and the timing of selected events could differ
materially from those anticipated in these forward-looking statements as a
result of several factors, including those set forth in the "Risk Factors"
section of this Quarterly Report on Form
10-Q
and in other filings with the SEC. Please also see the section entitled "Note
Regarding Forward-Looking Statements" contained in the Quarterly Report on Form
10-Q.
Overview
We are a clinical-stage biotechnology company focused on developing and
commercializing our proprietary technology to harness the power of the immune
system to combat cancer. Our product candidate, vidutolimod (formerly
CMP-001),
is a differentiated Toll-like receptor 9 ("TLR9"), agonist delivered as a
biologic virus-like particle ("VLP"), utilizing a
CpG-A
oligonucleotide as a key component. When injected into a tumor, vidutolimod is
designed to trigger the body's innate immune system, thereby altering the tumor
microenvironment and directing activated anti-tumor T cells to attack both the
injected tumor and also tumors throughout the body. In a clinical trial of
vidutolimod in combination with a systemic checkpoint inhibitor ("CPI"), in
patients whose tumors were unresponsive or no longer responsive to a CPI, we
have observed a best objective response rate ("ORR"), of 28% (27/98), including
post-progression responders. We are evaluating vidutolimod across multiple tumor
types in combination with other immunotherapy agents. Our founder, Art Krieg,
first reported the discovery of immunostimulatory cytosine-phosphate-guanine
("CpG"), DNA in 1995, which, combined with the discovery of TLR9, led to the
recognition that synthetic
CpG-A
oligonucleotides have the potential to stimulate the TLR9 receptor for
therapeutic purposes. Our goal is to establish vidutolimod as a foundational
immuno-oncology therapy that engages the innate immune system to fight cancer
and improve outcomes for patients with a broad range of solid tumors.
Since our inception, we have devoted substantially all of our efforts and
financial resources to the research and development activities related to our
technology and our vidutolimod program, and the administrative support for such
activities including raising capital, business planning, undertaking
pre-clinical
studies and clinical trials and other support activities. We do not have any
products approved for sale and have not generated any revenue from product sales
or any other sources and do not expect to generate any revenue for the next
several years. We have not yet successfully completed any registrational
clinical trials, obtained any regulatory approvals, manufactured a
commercial-scale drug, or conducted sales and marketing activities.
We have funded our operations to date primarily with proceeds from the sale of
preferred stock, convertible debt and common stock. Since inception and through
June 30, 2021, we have received net cash proceeds of $241.7 million from sales
of our preferred stock, convertible debt and common stock.
We have incurred recurring losses and had negative operating cash flows since
inception and our ability to generate product revenue sufficient to achieve
profitability will depend heavily on the successful development and eventual
commercialization of vidutolimod or any other products we acquire or develop.
Our net losses were $28.3 million and $36.9 million for the years ended
December 31, 2019 and 2020, respectively, and for the six months ended June 30,
2021, our net loss was $33.1 million. As of June 30, 2021, we had an accumulated
deficit of $173.2 million. We expect to continue to incur significant expenses
and to increase operating losses for at least the next several years.
We expect our expenses and capital requirements will increase substantially in
connection with our ongoing activities, particularly as we:

     •    prepare for, initiate and conduct additional clinical trials and
          preclinical studies of vidutolimod, including, among others, our current
          Phase 2 trial in
          anti-PD-1

refractory melanoma, our current randomized Phase 2/3 trial in first-line


          melanoma, our current Phase 2 proof of concept study in head and neck
          squamous cell carcinoma, and our currently anticipated Phase 2 proof of
          concept trial with patient cohorts in
          anti-PD-1
          naïve and
          anti-PD-1

refractory cutaneous squamous cell carcinoma and Merkel cell carcinoma;





     •    conduct the necessary
          scale-up

activities to support the potential commercialization of vidutolimod, if


          approved;

• hire additional clinical and scientific personnel to support our ongoing


          preclinical activities and clinical trials of vidutolimod and any other
          product candidates we choose to develop;



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• develop any future product candidates;

• seek marketing approval for vidutolimod and any other product candidates


          that successfully complete clinical development;



  •   acquire or
      in-license
      additional product candidates;



  •   maintain compliance with applicable regulatory requirements;

• maintain, expand, protect and enforce our intellectual property portfolio;

• develop and expand our sales, marketing and distribution capabilities for


          vidutolimod and any other product candidates for which we obtain
          marketing approval;

• take precautionary measures to help minimize the risk of the coronavirus

or any other future pandemic to our employees and encounter continued

delays or interruptions related to current development activities, our


          supply chain, or the third-parties on whom we rely due to the
          COVID-19
          pandemic;



     •    expand our infrastructure and facilities to accommodate the planned
          growth of our employee base; and



     •    expand our operational, financial and management systems and increase

administrative personnel, including to support our clinical development

and commercialization efforts and our operations as a public company.




As a result, we will need substantial additional funding to support our
continuing operations and pursue our growth strategy. Until such time as we can
generate significant revenue from product sales, if ever, we expect to finance
our operations through a combination of equity offerings, debt financings,
collaborations, strategic alliances and marketing and distribution or licensing
arrangements. We may be unable to raise additional funds or enter into such
other agreements or arrangements when needed on favorable terms, or at all. If
we fail to raise capital or enter into such agreements as, and when, needed, we
may have to significantly delay, scale back or discontinue the development and
commercialization of vidutolimod or any of our future product candidates.
On August 11, 2020, we completed our initial public offering ("IPO"), pursuant
to which we issued and sold 5,000,000 shares of our common stock, at a price to
the public of $15.00 per share. On September 3, 2020, the underwriters of the
IPO exercised a portion of their over-allotment option by purchasing an
additional 109,861 shares from us at the IPO price. We received approximately
$67.7 million in net proceeds, inclusive of the partial over-allotment exercise
and after deducting underwriting discounts and commissions and other offering
expenses payable by us. In connection with the IPO, on August 11, 2020, all
redeemable convertible preferred stock was converted into shares of common
stock.
Because of the numerous risks and uncertainties associated with pharmaceutical
product development, we are unable to accurately predict the timing or amount of
increased expenses or when or if we will be able to achieve or maintain
profitability. Even if we are able to generate product sales, we may not become
profitable. If we fail to become profitable or are unable to sustain
profitability on a continuing basis, then we may be unable to continue our
operations at planned levels and be forced to reduce or terminate our
operations. To the extent that we raise additional capital through the sale of
equity or convertible debt securities, your ownership interest will be diluted,
and the terms of these securities may include liquidation or other preferences
that adversely affect your rights as a common stockholder.
COVID-19
In March 2020 the World Health Organization declared the global novel
coronavirus disease 2019
("COVID-19")
a pandemic. Although we have experienced some impact of the
COVID-19
pandemic on our business and operations, including delays in initiation of study
sites and enrolling patients, we cannot currently predict the scope and severity
of any potential business shutdowns or disruptions or the resulting impact on
future clinical trials. As of the date hereof, certain of our ongoing clinical
trials are nearing completion and have not been materially affected by the
COVID-19
pandemic, and the schedules for the near-term manufacture of vidutolimod at our
contract manufacturers have also been largely unaffected to date. Certain of our
clinical trials that commenced in 2020 were adversely affected by the
COVID-19
pandemic, resulting in patient enrollment delays in the first half of 2021. We
are also in the planning stages for new clinical trials, and a number of
activities are required in order to initiate patient enrollment into these
trials that could be impacted by
COVID-19
as the pandemic continues to evolve.
While the
COVID-19
pandemic did not materially impact our results of operations during 2020, the
ultimate impact on our operations is unknown and will depend on future
developments, which, despite progress in vaccination efforts, remain uncertain
and cannot be predicted with confidence, including the duration of the
COVID-19
pandemic, new strains of the virus which may impact rates of infection and
vaccination efforts, developments or perceptions regarding the safety of
vaccines, new information which may emerge, and any additional preventative and
protective actions that governments, or we, may direct, which may result in
extending ongoing business disruptions, reduced patient traffic and reduced
operations. We are continuing to monitor the latest developments regarding the
COVID-19
pandemic, including the pace of vaccinations and the emergence of new and more
contagious strains of the virus, and any resulting impact on our business,
financial condition, results of operations and prospects. Any resulting
financial impact cannot be reasonably estimated at this time and may have a
material adverse impact on our business, financial condition and results of
operations.

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Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from any sources and do not expect to
generate any revenue from the sale of products for the next several years. If
our development efforts for vidutolimod or any future product candidates are
successful and result in regulatory approval, we may generate revenue in the
future from product sales. However, we cannot predict whether, when, or to what
extent we will generate revenue from the commercialization and sale of
vidutolimod or any future product candidates as we may never succeed in
obtaining regulatory approval for any of our product candidates. If we enter
into license or collaboration agreements for any of our product candidates or
intellectual property, we may generate revenue in the future from payments as a
result of such license or collaboration agreements, however there can be no
assurance that we will be able to enter into any license or collaboration
agreements.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our
research activities and the development of our VLP technology and our
vidutolimod program and include:

     •    expenses incurred in connection with the preclinical and clinical
          development of our technology and vidutolimod, including clinical trials
          under agreements with contract research organizations ("CROs"), clinical
          investigators and consultants;

• employee-related expenses, including salaries, benefits and travel and

stock-based compensation expense, for employees engaged in research and


          development functions;



     •    the cost of contract manufacturing organizations ("CMOs"), that

manufacture drug product for use in our preclinical studies and clinical


          trials and perform analytical testing,
          scale-up
          and other services in connection with our development activities;



  •   costs related to compliance with regulatory requirements;



     •    payments made under third-party licensing agreements, such as the

exclusive license agreement we entered into with Cytos Biotechnology LTD

(now Kuros Biosciences AG, or "Kuros") (the "Kuros License Agreement");

• facilities and other expenses, which include direct and allocated


          expenses for facilities, insurance and supplies; and



  •   costs related to compliance with regulatory requirements.


We recognize external development costs based on an evaluation of the progress
to completion of specific tasks using information provided to us by our service
providers. This process involves reviewing open contracts, communicating with
our personnel to identify services that have been performed on our behalf and
estimating the level of service performed and the associated cost incurred for
the service when we have not yet been invoiced or otherwise notified of actual
costs. Any nonrefundable advance payments that we make for goods or services to
be received in the future for use in research and development activities are
recorded as prepaid expenses. Such amounts are expensed as the related goods are
delivered or the related services are performed, or until it is no longer
expected that the goods will be delivered or the services rendered.
Upfront payments under license agreements are expensed upon receipt of the
license, and any annual maintenance fees under license agreements are expensed
in the period in which they are incurred. Milestone payments under license
agreements are accrued and a corresponding expense is recognized in the period
in which the milestone is determined to be probable of achievement and the
related amount is reasonably estimable.
We do not track our research and development expenses by indication. Our direct
external research and development expenses consist primarily of external costs,
such as fees paid to CROs, CMOs, research/testing laboratories and outside
consultants in connection with our preclinical development, process development,
manufacturing and clinical development activities. Our direct research and
development expenses also include fees incurred under licensing agreements. We
do not allocate these costs to specific indications because they are deployed
across the entire the vidutolimod development program and, as such, are not
separately classified. We use internal resources primarily to manage our
preclinical development, outsourced clinical trials, process development,
manufacturing and clinical development activities. These employees work across
the entire the vidutolimod development program and, therefore, we do not track
their costs by indication.


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Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
As a result, we expect that our research and development expenses will continue
to increase substantially over the next several years as we advance vidutolimod
into later stages of clinical development toward potential regulatory approval,
advance vidutolimod for additional indications, as well as conduct translational
research efforts and other preclinical and clinical development, including
submitting regulatory filings for any other product candidates we may acquire or
develop. In addition to the expected increase in third-party costs, we expect
our personnel costs, including costs associated with stock-based compensation,
will also increase substantially in the future. In addition, as we advance
vidutolimod into potentially registrational clinical trials and, subject to
positive data and regulatory approvals, potentially commercialize vidutolimod,
we expect to incur additional expenses from milestone and royalty payments
related to the Kuros License Agreement.
We do not believe that it is possible at this time to accurately project total
program-specific expenses through commercialization of vidutolimod or any other
product candidates we may acquire or develop. This is due to numerous factors,
some of which are beyond our control, that are associated with the successful
development and commercialization of vidutolimod and any other product
candidates we may acquire or develop, including the following:

• the scope, progress, outcome and costs of our preclinical studies and

clinical trials for vidutolimod or any other product candidates we may


          acquire or develop;

• making arrangements with third-party manufacturers for both clinical and

commercial supplies of vidutolimod or any other product candidates;

• successful patient enrollment in, and the initiation and completion of


          clinical trials;

• raising additional funds necessary to complete clinical development and


          the potential commercialization, of vidutolimod or any other product
          candidates;

• receipt, timing and related terms of marketing approvals from applicable


          regulatory authorities;



     •    the extent of any required post-marketing approval commitments to
          applicable regulatory authorities;



  •   developing and implementing marketing and reimbursement strategies;

• establishing sales, marketing and distribution capabilities and launching

commercial sales of vidutolimod or any other products, if approved,


          whether alone or in collaboration with others;



     •    acceptance of vidutolimod or any other products, if approved, by
          patients, the medical community and third-party payors;

• effectively competing with other therapies and/or changes in standard of


          care;

• obtaining and maintaining third-party coverage and adequate reimbursement;

• obtaining and maintaining patent, trade secret and other intellectual


          property protection and regulatory exclusivity for our product
          candidates;

• protecting and enforcing our rights in our intellectual property portfolio;





  •   significant and changing government regulations; and

• maintaining an acceptable tolerability profile of the products following

approval, if any.




A change in the outcome of any of these variables with respect to the
development of vidutolimod or any future product candidates would significantly
change the costs and timing associated with the development of that product
candidate. We may never succeed in obtaining regulatory approval for any product
candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and benefits,
stock-based compensation and travel expense for personnel in executive, business
development, finance, human resources, legal and support functions. General and
administrative expenses also include direct and allocated facility-related costs
as well as insurance costs and professional fees for legal, patent, consulting,
accounting and audit services, investor and public relations services and
outsourced information technology services.
We anticipate that our general and administrative expenses will continue to
increase in the future as we increase our headcount to support the continued
advancement of vidutolimod toward potential commercialization and the future
development of any other product candidates that we may pursue. We also
anticipate that we will continue to experience an increase in accounting, audit,
legal, regulatory, compliance and director and officer insurance costs as well
as investor and public relations expenses associated with operating as a public
company. Additionally, if we believe a regulatory approval of vidutolimod or any
other product candidate appears likely, we anticipate an increase in payroll and
other employee-related expenses as a result of our preparation for commercial
operations to market and sell that product candidate.

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Interest Income
Interest income consists of interest earned on our cash, cash equivalent and
available-for-sale
investments balances. We expect that our interest income will fluctuate based on
prevailing interest rates, our ability to raise additional funds as well as the
amount of expenditures for our clinical development of vidutolimod and ongoing
business operations.
Income Taxes
There were no provisions for income taxes for the three and six months ended
June 30, 2021 and 2020 because we have historically incurred operating losses
and we maintain a full valuation allowance against our net deferred tax assets.
Results of operations
Comparison of the three months ("Q2") and six months ("Q2 YTD") ended June 30,
2021 and 2020
The following table summarizes our results of operations for the three and six
months ended June 30, 2021 and 2020:

                                        Three months ended                               Six months ended
                                             June 30,                Increase                June 30,                Increase
                                        2021           2020         (Decrease)         2021           2020          (Decrease)
                                                                           (unaudited,
                                                                                in
                                                                            thousands)
Operating expenses:
Research and development              $  14,865      $  6,476      $

8,389 $ 25,243 $ 12,789 $ 12,454 General and administrative

                4,090         1,795             2,295          7,893          3,305             4,588

Total operating expenses                 18,955         8,271            10,684         33,136         16,094            17,042

Loss from operations                    (18,955 )      (8,271 )

10,684 (33,136 ) (16,094 ) 17,042 Total other income (expense), net

           (15 )         (77 )             (62 )           38            (55 )              93

Net loss                              $ (18,970 )    $ (8,348 )    $     10,622      $ (33,098 )    $ (16,149 )    $     16,949



Research and Development Expenses
Research and development expenses were $14.9 million in Q2 2021 compared to
$6.5 million in the same quarter of 2020. The increase of approximately
$8.4 million was primarily related to the $4.0 million milestone payment due to
Kuros in Q2 2021, which became payable upon initiating dosing of the first
patient in a Phase 2
anti-PD-1
refractory melanoma trial for vidutolimod in May 2021. This Phase 2 trial is
intended to potentially support a BLA and marketing approval of vidutolimod and
therefore triggered the Phase 3 study milestone as defined under our license
agreement with Kuros. Also contributing to the increase was higher clinical
costs of $1.5 million associated ongoing trials, higher contract manufacturing
of $2.0 million related to producing vidutolimod to meet the needs of the
clinical trials, and higher personnel and consulting costs of $0.3 million as
well as stock-based compensation expense of $0.6 million associated with
increased staffing.
Research and development expenses were $25.2 million in Q2 YTD 2021 compared to
$12.8 million for the same period of 2020, an increase of $12.5 million. The
increase was due to combined milestones payments of $6.0 million to Kuros which
became payable upon the Company initiating dosing of patients in trials which
triggered Phase 2 and Phase 3 milestone payments. Also contributing to the
increase was increased clinical trials costs of $2.6 million and outsourced
contract manufacturing costs of $2.4 million related to greater activity in our
ongoing clinical trials, as well as additional personnel and consulting costs of
$0.7 million and stock-based compensation costs of $1.0 million associated with
increased staffing.
General and Administrative Expenses
General and administrative expenses were $4.1 million in Q2 2021 compared to
$1.8 million in the same quarter of 2020. The increase of $2.3 million was
primarily comprised of an increase in directors and officers insurance of
$0.9 million associated with being a public company in 2021, an increase is
stock-based compensation expenses of $0.8 million related to stock options
granted after our IPO and an increase in personnel and consulting expense of
$0.2 million associated with increased staffing.

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General and administrative expenses were $7.9 million in Q2 YTD 2021 compared
$3.3 million in the same period of 2020, an increase of $4.6 million. The
increase was primarily due to increased directors and officers insurance of
$1.7 million, increased stock-based compensation of $1.5 million and increased
personnel and consulting expense of $0.6 million.
Other income (expense), net
Other income (expense), net in the three and six month periods of 2021 include
interest income, which was more than offset by losses on the sale of
available-for-sale
securities in Q2 2021 and partially offset by losses on the sale of
available-for-sale
investments in Q2 YTD 2021.
Other income (expense), net in the three and six month periods of 2020 primarily
reflects the change in the fair value change of the convertible loan notes we
issued to certain investors in April 2020 (the "Convertible Loan Notes") by
$0.1 million, primarily related to the accrued interest earned on the
Convertible Loan Notes prior to conversion upon the sale of Series C preferred
stock in June 2020, slightly offset by interest income.
Liquidity and capital resources
Overview
We have funded our operations to date primarily with proceeds from the sale of
preferred stock, convertible debt and common stock. Since inception and through
June 30, 2021, we have received net cash proceeds of $241.7 million from sales
of our preferred stock, convertible debt and common stock. In April 2020, we
received $10.0 million from the issuance of Convertible Loan Notes and in June
2020, we received $74.6 million in additional net proceeds from the sale of
Series C preferred stock. The Convertible Loan Notes were converted into shares
of Series C preferred stock in June 2020.
As noted above, in August 2020, we completed an IPO in which we received net
proceeds of approximately $67.7 million, inclusive of the partial exercise of
the over-allotment exercise and after deducting underwriting discounts and
commissions and other offering expenses payable by us. In connection with the
IPO, all outstanding shares of our redeemable preferred stock were converted to
common stock.
We have not yet commercialized any of our product candidates and we do not
expect to generate revenue from sales of any product candidates for several
years, if at all. As of June 30, 2021, we had cash, cash equivalents and
available-for-sale
investments of $95.6 million.
We believe that the net proceeds from the IPO, together with our existing cash,
cash equivalents and
available-for-sale
investments as of June 30, 2021, will enable us to fund our operating expenses
and capital expenditure requirements through the end of 2022. We have based this
estimate on assumptions that may prove to be wrong, and we could exhaust our
available capital resources sooner than we expect. Our future viability beyond
that point is dependent on our ability to raise additional capital to finance
our operations.
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:

                                                    Six months ended June 30,           Increase
                                                      2021               2020          (Decrease)
                                                                  ( in thousands)
Net cash used in operating activities             $     (29,696 )      $ (16,042 )    $     13,654
Net cash provided by investing activities                49,617               -             49,617
Net cash provided by financing activities                   134           92,146           (92,012 )

Net increase in cash, cash equivalents and
restricted cash                                   $      20,055        $  76,104      $    (56,049 )





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Operating Activities
During Q2 YTD 2021, net cash used in operating activities was $29.7 million,
primarily resulting from of our net loss of $33.1 million, which was partially
offset by
non-cash
charges of $3.1 million and cash provided by working capital of $0.3 million.
During Q2 YTD 2020, net cash used in operating activities was $16.0 million,
primarily resulting from our net loss of $16.1 million and cash used in working
capital of $0.2 million, partially offset by
non-cash
charges of $0.3 million.
Investing Activities
Net cash provided by investing activities of $49.6 million during Q2 YTD 2021
reflects net liquidations of the Company's
available-for-sale
investments of $50.0 million to fund current and future operating activities,
partially offset by investments in machinery and equipment of $0.4 million.
Financing Activities
Net cash provided by financing activities in Q2 YTD 2021 was $0.1 million and
consisted of proceeds from the exercise of stock options.
Net cash provided by financing activities in Q2 YTD 2020 was $92.1 million and
consisted of the net proceeds from the issuance of Series B and Series C
redeemable convertible preferred stock of $82.5 million and the proceeds from
the issuance of the Convertible Loan Notes of $10.0 million. These were
partially offset by $0.4 million in expenditures related for issuance costs in
anticipation of the Company's IPO.
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we advance the preclinical activities and clinical
trials for vidutolimod and any other product candidates that we may develop or
acquire in the future. In addition, we have incurred, and expect to incur,
additional costs associated with operating as a public company, including
significant legal, accounting, investor relations and other expenses that we did
not incur as a private company. The timing and amount of our operating
expenditures will depend largely on:

• the initiation, progress, timing, costs and results of current and future


          preclinical studies and clinical trials for vidutolimod and any other
          product candidates we may develop or acquire in the future;



     •    the cost and timing of the manufacture of additional clinical trial

materials and the completion of commercial-scale outsourced manufacturing


          activities;

• the costs to seek regulatory approvals for any product candidates that


          successfully complete clinical trials;

• the extent to which we experience delays or interruptions to preclinical


          studies and clinical trials, to our third-party service providers on whom
          we rely, or to our supply chain due to the
          COVID-19
          pandemic;

• the need to hire additional clinical, quality assurance, quality control


          and other scientific personnel

• the number and characteristics of product candidates that we develop or may


      in-license;

• the outcome, timing and cost of meeting and maintaining compliance with

regulatory requirements established by the U.S. Food and Drug

Administration (the "FDA"), the European Medical Agency (the "EMA") and


          other comparable foreign regulatory authorities;



     •    the cost of filing, prosecuting, defending and enforcing our patent
          claims and other intellectual property rights;



  •   the terms of any collaboration agreements we may choose to enter into;

• the cost associated with the expansion of our operational, financial and


          management systems and increased personnel, including personnel to
          support our operations as a public company; and

• the cost of establishing sales, marketing and distribution capabilities

for any product candidates for which we may receive regulatory approval

in regions where we choose to commercialize our products, if approved, on

our own.




Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our operations through a combination of equity offerings, debt
financings, collaborations, strategic alliances and marketing, distribution or
licensing arrangements. We do not currently have any committed external source
of funds. To the extent that we raise additional capital through the sale of
equity or convertible debt securities, ownership interests may be materially
diluted, and the terms of such securities could include liquidation or other
preferences that adversely affect your rights as a common stockholder. Debt
financing and preferred equity financing, if available, may involve agreements
that include restrictive covenants limiting or restricting our ability to take

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specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends. In addition, debt financing would result in fixed
payment obligations. If we raise additional funds through collaborations,
strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our future revenue
streams, research programs or product candidates or grant licenses on terms that
may not be favorable to us. If we are unable to raise additional funds through
equity or debt financings or other arrangements when needed, we may be required
to delay, limit, reduce or terminate our research, product development or future
commercialization efforts or grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations and other commitments
We enter into contracts in the normal course of business with CROs, CMOs and
other third parties for clinical trials, preclinical research studies and
testing and manufacturing services. These contracts are cancelable by us upon
prior written notice. Payments due upon cancellation consist only of payments
for services provided or expenses incurred, including noncancelable obligations
of our service providers, up to the date of cancellation. The amount and timing
of such payments are not known.
We have also entered into license and collaboration agreements with third
parties, which are in the normal course of business. We have not included future
payments under these agreements since obligations under these agreements are
contingent upon future events such as our achievement of specified development,
regulatory, and commercial milestones, or royalties on net product sales.
Pursuant to the Kuros License Agreement, we are required to make payments to
Kuros for each product that achieves certain development and regulatory
milestones. We are obligated to make up to $56.0 million in milestone payments
to Kuros related to vidutolimod. We are also required to pay royalties on sales
of future products, if any. As of June 30, 2021, we have incurred license fees
and milestone payments totaling $8.3 million pursuant to the Kuros License
Agreement. These payments are comprised of (i) a license fee of $1.0 million
which was recognized in research and development expense in 2015, (ii)
$1.0 million milestone payment in connection with the dosing of the first
patient in our first Phase 1 clinical trial, which was recognized in research
and development expense in 2016, (iii) a $0.3 million license amendment fee in
connection with the signing of the second amendment to the Kuros License
Agreement, which was recognized in research and development expense in 2018,
(iv) a $2.0 million milestone payment in connection with the dosing of the first
patient in the Phase 2 first-line melanoma trial for vidutolimod, which we
recognized in March 2021 and (v) a $4.0 million milestone payment in connection
with the dosing in a Phase 2 trial intended to assess the efficacy and safety of
vidutolimod in combination with nivolumab for the treatment of patients with
anti-PD-1
refractory melanoma and to potentially support a Biologics License Application
("BLA") and marketing approval of vidutolimod, which we recognized in May 2021.
We do not currently have any long-term leases. We rent our office space in
Cambridge, Massachusetts based on a
month-to-month
license agreement with the landlord.
Critical Accounting Policies and Significant Judgments and Estimates
Our unaudited condensed consolidated financial statements are prepared in
accordance with GAAP. The preparation of our unaudited condensed consolidated
financial statements and related disclosures requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, costs and
expenses. We base our estimates on historical experience, known trends and
events and various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. We evaluate our estimates and assumptions on an ongoing basis.
Our actual results may differ from these estimates under different assumptions
or conditions.
Our critical accounting policies are described under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Critical Accounting Policies and Use of Estimates" in our 2020 Annual Report on
Form
10-K.
There have been no changes to the critical accounting policies during the six
months ended June 30, 2021.
Off-balance
sheet arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance
sheet arrangements, as defined in the rules and regulations of the Securities
and Exchange Commission.

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Recent accounting pronouncements
A description of recently issued and recently adopted accounting pronouncements
that may potentially impact our financial position and results of operations is
disclosed in Note 2 to our condensed consolidated financial statements included
elsewhere in this Quarterly Report on Form
10-Q.
Emerging Growth Company and Smaller Reporting Company Status
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), permits an
"emerging growth company" such as us to take advantage of an extended transition
period to comply with new or revised accounting standards applicable to public
companies until those standards would otherwise apply to private companies. We
have elected to not "opt out" of this provision and, as a result, we will adopt
new or revised accounting standards at the time private companies adopt the new
or revised accounting standard and will do so until such time that we either
(i) irrevocably elect to "opt out" of such extended transition period or (ii) no
longer qualify as an emerging growth company. Other exemptions and reduced
reporting requirements under the JOBS Act for emerging growth companies include
presentation of only two years of audited financial statements in a registration
statement for an initial public offering, an exemption from the requirement to
provide an auditor's report on internal controls over financial reporting
pursuant to the Sarbanes-Oxley Act of 2012, an exemption from any requirement
that may be adopted by the Public Company Accounting Oversight Board regarding
mandatory audit firm rotation, and less extensive disclosure about our executive
compensation arrangements. We would cease to be an emerging growth company upon
the earliest of: (1) the last day of the fiscal year ending after the fifth
anniversary of our initial public offering; (2) the last day of the fiscal year
in which we have more than $1.07 billion in annual revenue; (3) the last day of
the fiscal year in which we qualify as a "large accelerated filer," with at
least $700.0 million of equity securities held by
non-affiliates
as of the prior June 30th; or (4) the issuance, in any three-year period, by our
company of more than $1.0 billion in
non-convertible
debt securities held by
non-affiliates.
We are also a "smaller reporting company" and we may take advantage of certain
of the scaled disclosures available to smaller reporting companies until the
fiscal year following the determination that (i) the market value of our stock
held by
non-affiliates
is more than $250 million or (ii) our annual revenue was more than $100 million
during the most recently completed fiscal year and the market value of our stock
held by
non-affiliates
is more than $700 million measured on the last business day of our second fiscal
quarter. If we are a smaller reporting company at the time we cease to be an
emerging growth company, we may continue to rely on exemptions from certain
disclosure requirements that are available to smaller reporting companies.
Specifically, as a smaller reporting company we may choose to present only the
two most recent fiscal years of audited financial statements in our Annual
Report on Form
10-K
and, similar to emerging growth companies, smaller reporting companies have
reduced disclosure obligations regarding executive compensation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest rate risk
We are exposed to market risk related to changes in interest rates. Our current
investment policy is to maintain an investment portfolio consisting mainly of
United States money market, government-secured, and high-grade corporate
securities, directly or through managed funds, with maturities of twenty-four
months or less. Our cash is deposited in and invested through highly rated
financial institutions in North America. Our investments are subject to interest
rate risk and will fall in value if market interest rates increase. However, due
to the conservative nature of our investments, low prevailing market rates and
relatively short effective maturities of debt instruments, interest rate risk is
mitigated. If market interest rates were to increase immediately and uniformly
by 10% from levels at June 30, 2021, we estimate that the fair value of our
investment portfolio would decline by an immaterial amount. We do not own
derivative financial instruments in our investment portfolio.
Foreign currency exchange risk
Our primary exposure to market risk is foreign exchange rate sensitivity to the
British Pound. Foreign currency losses were neglectable in each of the six
months ended June 30, 2021 and 2020. These foreign currency transaction losses
were recorded as a component of general and administrative expense in our
condensed consolidated statements of operations. At June 30, 2021, an immediate
5% change in the British Pound exchange rate would not have a material effect on
our results of operations.
As we continue to grow our business, our results of operations and cash flows
may increasingly be subject to fluctuations due to changes in foreign currency
exchange rates, which could adversely impact our results of operations. To date,
we have not entered into any foreign currency hedging contracts to mitigate our
exposure to foreign currency exchange risk.

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