10-Q 1 olma-20220930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-39712

OLEMA PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

30-0409740

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

512 2nd Street, 4th Floor

San Francisco, CA

94107

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 243-5555

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class of Securities Registered

Trading Symbol

Name of Each Exchange on which Securities are Registered

Common Stock, par value $0.0001 per share

OLMA

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 4, 2022, the registrant had 40,455,427 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

Page

PART I. FINANCIAL INFORMATION

3

Item 1. Financial Statements (unaudited)

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

Condensed Consolidated Statements of Stockholders’ Equity

5

Condensed Consolidated Statements of Cash Flows

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3. Quantitative and Qualitative Disclosures About Market Risk

34

Item 4. Controls and Procedures

34

PART II. OTHER INFORMATION

35

Item 1. Legal Proceedings

35

Item 1A. Risk Factors

35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

102

Item 3. Defaults Upon Senior Securities

103

Item 4. Mine Safety Disclosures

103

Item 5. Other Information

103

Item 6. Exhibits

104

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Olema Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except for share amounts)

September 30, 

December 31, 

2022

2021

Assets

Current assets:

Cash and cash equivalents

    

$

26,804

    

$

13,812

Marketable securities

195,796

273,438

Prepaid expenses and other current assets

 

2,458

 

3,435

Total current assets

 

225,058

 

290,685

Property and equipment, net

 

1,404

 

1,474

Operating lease right-of-use assets

2,764

3,246

Other assets

 

2,771

 

540

Total assets

$

231,997

$

295,945

Liabilities and stockholders equity

Current liabilities:

Accounts payable

$

14

$

23

Operating lease liabilities, current

1,084

931

Other current liabilities

11,454

 

8,065

Total current liabilities

12,552

 

9,019

Operating lease liabilities, net of current portion

1,746

2,358

Total liabilities

14,298

 

11,377

Commitments and contingencies (Note 10)

Stockholders equity:

Preferred stock, $0.0001 par value; 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021.

Common stock, $0.0001 par value; 490,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 40,455,427 and 40,337,046 shares issued as of September 30, 2022 and December 31, 2021, respectively; 40,084,568 and 39,797,263 shares outstanding as of September 30, 2022 and December 31, 2021, respectively.

3

 

3

Additional paid-in capital

403,168

 

388,904

Accumulated other comprehensive loss

(2,674)

(149)

Accumulated deficit

(182,798)

 

(104,190)

Total stockholders equity

217,699

 

284,568

Total liabilities and stockholders equity

$

231,997

$

295,945

See accompanying notes to the condensed consolidated financial statements.

3

Olema Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(Amounts in thousands, except for share and per share amounts)

Three Months Ended September 30, 

Nine Months Ended September 30, 

2022

    

2021

2022

    

2021

Operating expenses:

Research and development

    

$

17,627

    

$

12,523

    

$

60,690

    

$

35,125

General and administrative

 

5,595

5,239

 

19,079

 

14,609

Total operating expenses

 

23,222

17,762

 

79,769

 

49,734

Loss from operations

 

(23,222)

(17,762)

 

(79,769)

 

(49,734)

Other income (expense):

 

  

 

 

  

Interest income

 

622

105

 

1,255

 

333

Other income (expense):

(120)

(56)

(94)

(57)

Total other income

 

502

49

 

1,161

 

276

Net loss

$

(22,720)

$

(17,713)

$

(78,608)

$

(49,458)

Net loss per share, basic and diluted

$

(0.57)

$

(0.45)

$

(1.97)

$

(1.25)

Weighted average shares used to compute net loss per share, basic and diluted

 

40,036,201

39,607,745

 

39,930,418

 

39,450,655

Three Months Ended September 30, 

Nine Months Ended September 30, 

2022

    

2021

2022

    

2021

Net loss

$

(22,720)

$

(17,713)

$

(78,608)

$

(49,458)

Other comprehensive (loss) gain:

Net unrealized (loss) gain on marketable securities

(276)

29

(2,525)

15

Total comprehensive loss

$

(22,996)

$

(17,684)

$

(81,133)

$

(49,443)

See accompanying notes to the condensed consolidated financial statements.

4

Olema Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(Amounts in thousands, except for share amounts)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders'

    

Shares

    

Amount

    

Capital

    

Loss

Deficit

    

Equity

Balances at June 30, 2022

39,974,459

 

$

3

 

$

398,756

 

$

(2,398)

$

(160,078)

$

236,283

Vesting of early exercised stock options

 

6,990

 

 

31

 

 

31

Vesting of restricted stock awards

 

49,318

 

 

 

 

Exercise of stock options

53,801

106

106

Stock-based compensation expense

 

 

 

4,207

 

 

4,207

Employee stock purchase plan expense

 

 

 

68

 

 

68

Net unrealized loss on marketable securities

(276)

(276)

Net loss

(22,720)

(22,720)

Balances at September 30, 2022

 

40,084,568

 

$

3

 

$

403,168

 

$

(2,674)

$

(182,798)

 

$

217,699

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders'

    

Shares

    

Amount

    

Capital

    

Loss

Deficit

    

Equity

Balances at December 31, 2021

39,797,263

$

3

$

388,904

$

(149)

$

(104,190)

$

284,568

Vesting of early exercised stock options

 

20,969

 

 

93

 

 

93

Vesting of restricted stock awards

 

147,955

 

 

 

 

Exercise of stock options

87,490

146

146

Issuance of shares under the employee stock purchase plan

30,891

57

57

Stock-based compensation expense

 

 

 

13,704

 

 

13,704

Employee stock purchase plan expense

 

 

 

264

 

 

264

Net unrealized loss on marketable securities

(2,525)

(2,525)

Net loss

(78,608)

(78,608)

Balances at September 30, 2022

 

40,084,568

 

$

3

 

$

403,168

 

$

(2,674)

$

(182,798)

 

$

217,699

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders'

    

Shares

    

Amount

    

Capital

    

Income (Loss)

Deficit

    

Equity

Balances at June 30, 2021

39,552,588

$

3

$

378,934

$

(14)

$

(64,839)

$

314,084

Vesting of early exercised stock options

58,639

280

280

Vesting of restricted stock awards

49,318

Exercise of stock options

20,753

57

57

Stock-based compensation expense

4,125

4,125

Employee stock purchase plan expense

32

32

Net unrealized gain on marketable securities

29

29

Net loss

(17,713)

(17,713)

Balances at September 30, 2021

39,681,298

$

3

$

383,428

$

15

$

(82,552)

$

300,894

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders'

    

Shares

    

Amount

    

Capital

    

Income

Deficit

    

Equity

Balances at December 31, 2020

39,308,238

$

3

$

371,228

$

$

(33,094)

$

338,137

Vesting of early exercised stock options

72,618

341

341

Vesting of restricted stock awards

192,790

Exercise of stock options

83,767

187

187

Issuance of shares under the employee stock purchase plan

23,885

386

386

Stock-based compensation expense

11,140

11,140

Employee stock purchase plan expense

146

146

Net unrealized gain on marketable securities

15

15

Net loss

(49,458)

(49,458)

Balances at September 30, 2021

39,681,298

$

3

$

383,428

$

15

$

(82,552)

$

300,894

See accompanying notes to the condensed consolidated financial statements.

5

Olema Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(Amounts in thousands)

Nine Months Ended September 30, 

    

2022

    

2021

Cash flows from operating activities:

Net loss

$

(78,608)

$

(49,458)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depreciation and amortization expense

 

260

 

90

Non-cash lease expense

 

975

 

Premium amortization and discount accretion on marketable securities, net

(216)

220

Stock-based compensation expense, including employee stock purchase plan expense

 

13,968

 

11,286

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other current assets

 

61

 

1,232

Other assets

(1,114)

Accounts payable

(9)

(527)

Other current liabilities

3,281

5,070

Operating lease liabilities

 

(952)

 

Net cash used in operating activities

 

(62,354)

 

(32,087)

Cash flows from investing activities:

 

 

Purchase of equipment

 

(190)

 

(876)

Maturities of marketable securities

244,500

186,449

Purchases of marketable securities

(169,167)

(467,011)

Net cash provided by (used in) investing activities

 

75,143

 

(281,438)

Cash flows from financing activities:

 

 

Proceeds from exercise of stock options

146

187

Proceeds from issuance of common stock under employee stock purchase plan

57

386

Net cash provided by financing activities

 

203

 

573

Net increase (decrease) in cash and cash equivalents

 

12,992

 

(312,952)

Cash and cash equivalents at beginning of period

 

13,812

 

338,549

Cash and cash equivalents at end of period

 

$

26,804

$

25,597

Supplemental disclosure of non-cash investing and financing activities:

Reclassification of prepaid expenses and other current liabilities into other assets

$

1,117

$

Vesting of early exercised stock options

$

93

$

341

Purchases of property and equipment included in accounts payable

$

$

114

See accompanying notes to the condensed consolidated financial statements.

6

Olema Pharmaceuticals, Inc.

Notes to condensed consolidated financial statements

(Unaudited)

1.

Nature of the Business and Basis of Presentation

Olema Pharmaceuticals, Inc. (“Olema” or the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of next-generation targeted therapies for women’s cancers. The Company is initially focused on developing therapies for the treatment of breast cancer. The Company’s wholly owned, lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete estrogen receptor (“ER”) antagonist (“CERAN”) and a selective ER degrader (“SERD”). It is currently being evaluated as a single agent in an ongoing Phase 1/2 clinical trial, and in Phase 1b combination with palbociclib, in patients with recurrent, locally advanced or metastatic estrogen receptor-positive (“ER+”), human epidermal growth factor receptor 2-negative (“HER2-“) breast cancer.

The Company is located in San Francisco, California and was incorporated in Delaware on August 7, 2006 under the legal name of CombiThera, Inc. and on March 25, 2009 was renamed Olema Pharmaceuticals, Inc. The Company’s principal operations are based in San Francisco, California, and has operations in Cambridge, Massachusetts. Olema Oncology Australia Pty Ltd was incorporated on January 6, 2021 and is a wholly-owned subsidiary of the Company (collectively with Olema Pharmaceuticals, Inc. referred to as “Olema” or the “Company” herein). It operates in one business segment and therefore has only one reportable segment. The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of COVID-19 and other geopolitical and macroeconomic events, the ability to secure additional capital to fund operations and commercial success of its product candidates. OP-1250 and any future product candidates the Company may develop will require extensive nonclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Liquidity

The Company had $222.6 million of cash, cash equivalents and marketable securities at September 30, 2022, which management believes is sufficient to fund its operating expenses and capital expenditure requirements into the second half of 2024.

Impact of COVID-19 and Other Geopolitical and Macroeconomic Events

The extent of the impact of the COVID-19 pandemic on the Company’s business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration of the outbreak and its impact on the Company’s development activities, planned clinical trial enrollment, future trial sites, contract research organizations (“CROs”), third-party manufacturers, and other third parties with whom the Company does business, as well as its impact on regulatory authorities and the Company’s key scientific and management personnel. During 2021 and 2022, although the Company modified its operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, its business, operations and development timelines were not material adversely affected. In October 2021, the Company re-opened its offices to administrative employees, however due to the resurgence of cases relating to the spread of the Delta and Omicron variants, the Company continued to limit access to its offices. In March 2022, the Company fully re-opened its offices to all employees and continues to comply with protocols implemented by respective health authorities. The Company continues to monitor developments related to COVID-19 and may

7

close its offices again in the future. The extent to which the COVID-19 pandemic may affect the Company’s business, operations and development timelines and plans in the future, including the resulting impact on its expenditures and capital needs, remains uncertain.

In addition to the ongoing COVID-19 pandemic, global economic and business activities continue to face widespread macroeconomic uncertainties, including labor shortages, inflation and monetary supply shifts, recession risks and potential disruptions from the Russia-Ukraine conflict, which has resulted in volatility in the U.S. and global financial markets and which has led to, and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. The extent of the impact of these factors on the Company’s operational and financial performance, including its ability to execute its business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted. Any continued or renewed disruption resulting from these factors could negatively impact the Company’s business. The Company continues to monitor the impact of these macroeconomic factors on its results of operations, financial condition and cash flows.

2.

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting, and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. These condensed consolidated financial statements include the accounts of Olema Pharmaceuticals, Inc. and its wholly-owned subsidiary, Olema Oncology Australia Pty Ltd. All intercompany balances and transactions have been eliminated upon consolidation.

Unaudited Interim Financial Information

The interim condensed consolidated balance sheet as of September 30, 2022, the statements of operations and comprehensive loss, and stockholders’ equity for the three and nine months ended September 30, 2022 and 2021, and the statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s condensed consolidated financial statements included in this report. The financial data and the other information disclosed in these notes to the condensed consolidated financial statements related to the three- and nine-month periods are also unaudited. The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Form 10-K as filed with the SEC on February 28, 2022.

Use of Estimates

The accompanying condensed consolidated financial statements are prepared in accordance with US GAAP. The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of expenses during the reporting period. Significant areas that require management’s estimates include accruals of research and development expenses, including accrual of research contract costs, stock-based compensation assumptions, including the fair value of common stock. On an ongoing basis, the Company evaluates its estimates and

8

judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash deposits are all in reputable financial institutions in the United States and as of September 30, 2022 and December 31, 2021. Cash and cash equivalents consisted of cash on deposit with U.S. banks, including the Company’s bank account for its Australia subsidiary, denominated in U.S. dollars and Australian dollars and investments in interest bearing money market funds.

Marketable Securities

All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its investments at the time of purchase and reevaluates such designation as of each balance sheet date. Unrealized gains and losses are excluded from net loss and are reported as a component of comprehensive loss. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific-identification method. Interest earned on marketable securities is included in interest income.

The Company periodically assesses its available-for-sale marketable securities for other-than-temporary impairment. For debt securities in an unrealized loss position, the Company first considers its intent to sell, or whether it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis. If either of these criteria are met, the amortized cost basis of such debt securities is written down to fair value through other expense.

For debt securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the decline in the fair value of such debt securities has resulted from credit losses or other factors. The Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the securities, among other factors. If this assessment indicates that a credit loss may exist, the Company then compares the present value of cash flows expected to be collected from such securities to their amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded through other expense, limited by the amount that the fair value is less than the amortized cost basis. Any additional impairment not recorded through an allowance for credit losses is recognized in other comprehensive loss. The Company has not recorded any impairments for its marketable securities.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, and marketable securities. The Company invests in a variety of financial instruments and, by its policy, limits these financial instruments to high credit quality securities issued by the U.S. government, U.S. government-sponsored agencies and highly rated banks and corporations, subject to certain concentration limits. The Company’s cash, cash equivalents, and marketable securities are held by financial institutions in the United States that management believes are of high credit quality. Amounts on deposit with individual banking institutions may at times exceed the limits insured by the Federal Deposit Insurance Corporation (“FDIC”); however, the Company has not experienced any losses on such deposits.

The Company’s future results of operations involve a number of other risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations

9

include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s current and potential future product candidates, uncertainty of market acceptance of the Company’s product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals or sole-source suppliers.

The Company’s product candidates require approvals from the U.S. Food and Drug Administration (“FDA”) and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company were denied approval, approval was delayed or the Company was unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued new lease accounting guidance in Accounting Standard Update (“ASU”) 2016-02, Leases, and in July 2018 issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and ASU 2018-11, Leases (Topic 842): Targeted Improvements (the foregoing ASUs collectively referred to as “Topic 842”). Under the new guidance, lessees are required to recognize for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of operations and comprehensive loss.

At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease, the Company (i) identifies lease and non-lease components, (ii) determines the consideration in the contract, (iii) determines whether the lease is an operating or finance lease; and (iv) recognizes lease ROU assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses the incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

Most leases include options to renew and, or terminate the lease, which can impact the lease term. The exercise of these options is at the Company’s discretion. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. For any lease modification, the Company reassesses the lease classification, remeasures the related lease liability using an updated discount rate that reflects the modified lease term, and adjusts the related ROU asset under the lease modification guidance under Topic 842.

The Company has operating leases for its research and development and office facilities. Fixed lease payments on operating leases are recognized over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed are recognized as incurred. Fixed and variable lease expense on operating leases is recognized within operating expenses within our condensed consolidated statements of operations and comprehensive loss.

The Company elected to not apply the recognition requirements of Topic 842 to short-term leases with terms of 12 months or less. Additional information and disclosures required by Topic 842 are contained in Note 13 “Lease” in the Company’s Form 10-K as filed with the SEC on February 28, 2022.

10

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop product candidates. These costs are recorded within research and development expenses in the condensed consolidated statements of operations and include personnel expenses, stock-based compensation expenses, allocated general and administrative expenses, and external costs including fees paid to consultants and CROs and contract manufacturing organizations (“CMOs”), in connection with nonclinical studies and clinical trials, and other related clinical trial fees, such as for investigator fees, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses and other current assets. Such amounts are recognized as an expense as the goods are delivered or the related services are performed.

Costs incurred in obtaining technology licenses are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future uses.

Reimbursements of certain costs associated with research activities performed under the agreement with Novartis Institutes for BioMedical Research, Inc. (“Novartis”) are recorded as a reduction of research and development expenses, as described in Note 10, Commitments and Contingencies – Clinical Collaboration and Supply Agreement.

Research Contract Costs and Accruals

The Company has from time to time entered into various research and development and other agreements with commercial firms, researchers, universities and others for provisions of goods and services. These agreements are generally cancelable, and the related costs are recorded as research and development expenses as incurred.

The Company records accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the projects, studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Foreign Currency Transactions

The functional currency of Olema Oncology Australia Pty Ltd, the Company’s wholly-owned subsidiary, is the U.S. dollar. Accordingly, all monetary assets and liabilities of the subsidiary are remeasured into U.S. dollars at the current period-end exchange rates and non-monetary assets are remeasured using historical exchange rates. Income and expense elements are remeasured to U.S. dollars using the average exchange rates in effect during the period. Remeasurement gains and losses are recorded as other income (expense) on the condensed consolidated statements of operations.

The Company is subject to foreign currency risk with respect to its clinical and manufacturing contracts denominated in currencies other than the U.S. dollar, predominantly the Australian dollar and the Euro. Payments on contracts denominated in foreign currencies are made at the spot rate on the day of payment. Changes in the exchange rate between billing dates and payment dates are recorded within other income (expense) on the condensed consolidated statements of operations.

11

Net Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss per common share by the weighted average number of common shares outstanding for the period without consideration of common stock equivalents. Diluted net loss per common share is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities, and by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, including unvested early exercised options, unvested restricted stock awards, and contingently issuable common stock related to the 2020 Employee Stock Purchase Plan (the “ESPP”) are considered potential dilutive common shares. Since the Company was in a loss position for both periods presented, basic net loss per share is the same as diluted net loss per share for both periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Recent Accounting Pronouncements

The Company lost its status as an emerging growth company on December 31, 2021, when it qualified as a large accelerated filer based on its market capitalization as of June 30, 2021, according to Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a result, the Company adopted all accounting pronouncements formerly deferred under the extended transition period available for emerging growth companies according to public company standards at December 31, 2021.

3.

Fair Value Measurement

The Company assesses the fair value of financial instruments based on the provisions of ASC 820, Fair Value Measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

September 30, 2022

(in thousands)

    

Level 1

Level 2

Level 3

Total

Financial Assets

Cash

$

15,381

$

$

$

15,381

Money market funds

11,444

11,444

Commercial paper

 

49,968

49,968

U.S. government treasury bills

98,531

98,531

Government-sponsored enterprise securities

 

47,297

47,297

Total

$

125,356

$

97,265

$

$

222,621

12

September 30, 2022

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Estimated

(in thousands)

    

Cost

Gains

Losses

Fair Value

Financial Assets

Cash and cash equivalents

$

26,825

$

$

$

26,825

Short-term marketable securities (<12 months to maturity)

178,995

(2,008)

176,987

Long-term marketable securities (>12 months to maturity)

 

19,475

 

 

(666)

18,809

Total

$

225,295

$

$

(2,674)

$

222,621

The Company considers its marketable securities with maturities beyond one year as current assets, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of marketable securities to be available-for-sale.

The Company periodically reviews its available-for-sale marketable securities for other-than-temporary impairment. The Company considers factors such as the duration, severity and the reason for the decline in value, the potential recovery period and its intent to sell. For debt securities, the Company also considers whether (i) it is more likely than not that the Company will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses.

There was one marketable security that has been in a consecutive loss position for more than 12 months as of September 30, 2022. It had $0.1 million unrealized loss with a fair value of $6.9 million as of September 30, 2022. The Company does not believe that the total unrealized losses of $2.7 million as of September 30, 2022 are credit related but are rather a reflection of current market yields and/or current marketplace bid/ask spreads. During the three and nine months ended September 30, 2022, the Company did not recognize any other-than-temporary impairment loss. As of September 30, 2022, there was no allowance for losses on available-for-sale debt securities attributable to credit risk.

As of September 30, 2022, all of the Company’s cash and cash equivalents consisted of cash on deposit with U.S. banks denominated in U. S. dollars and Australian dollars.

4. Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

September 30, 

December 31, 

2022

2021

Lab equipment

    

$

1,829

    

$

1,639

Computer equipment

59

59

Property and equipment, gross

1,888

1,698

Less: Accumulated depreciation

 

 

(484)

(224)

Property and equipment, net

 

$

1,404

$

1,474

13

5.

Prepaid Expenses and Other Current Assets

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

September 30, 

December 31, 

2022

2021

Reimbursable research and development costs from a collaboration partner

$

1,082

$

Interest receivable on marketable securities

457

130

Prepaid subscriptions and licenses

    

440

    

291

Prepaid insurance

387

1,766

Prepaid research contracts

14

239

Prepaid clinical trial costs

916

Other

 

 

78

93

Total

 

$

2,458

$

3,435

6.

Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

September 30, 

December 31, 

2022

2021

Accrued R&D related costs

$

6,286

$

2,645

Accrued employee bonuses

2,933

3,752

Accrued professional fees

1,569

1,011

Accrued payroll related costs

406

191

Early exercise of unvested stock options

113

206

Accrued taxes

53

88

Other

 

 

94

172

Total

 

$

11,454

$

8,065

7. Stock-Based Compensation

In 2014, the Company’s Board of Directors and stockholders approved and adopted the 2014 Stock Plan (the “2014 Plan”). The 2014 Plan permitted the grant of options and restricted stock awards (including restricted stock purchase rights and restricted stock bonus awards). The 2014 Plan was terminated on the date the 2020 Equity Incentive Plan (the “2020 Plan”), which is described below, became effective, and no additional awards will be made pursuant to the 2014 Plan. However, any outstanding awards granted under the 2014 Plan will remain outstanding, subject to the terms of the 2014 Plan award agreements, until such outstanding options are exercised or until any awards terminate or expire by their terms.

In 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Plan. The 2020 Plan permits the grant of options, restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards. The maximum number of shares of common stock that may be issued under the 2020 Plan will not exceed 6,494,510 shares of the Company’s common stock, which is the sum of (i) 2,152,080 new shares, plus (ii) an additional number of shares not to exceed 4,342,430 shares, consisting of any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the Company’s 2014 Plan that, on or after the 2020 Plan becomes effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2021 and continuing through January 1, 2030, in an amount equal to the lesser of (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the

14

immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year.

In 2022, the Company’s Board of Directors approved and adopted the 2022 Inducement Plan (the “2022 Inducement Plan”). Under the 2022 Inducement Plan, initially 2,000,000 shares of common stock were reserved for issuance. The 2022 Inducement Plan permits the grant of options, restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

The exercise price for each option and stock appreciation right shall be established at the discretion of the Board, provided that the exercise price of a stock option will not be less than 100% of the fair market value of the Company’s common stock on the date of grant. Specific vesting for stock options and stock appreciation rights is service related and determined in each award agreement, where stock options and stock appreciation rights are fully vested at the grant date or follow a graded vesting schedule. Stock options and stock appreciation rights granted under the Plan generally expire ten years after the date of grant.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company lacks company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies in addition to its own historical volatility. For options with service- based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. 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 is 0% since the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used to determine the estimated grant-date fair value of stock options granted to employees and directors under the 2020 Plan and the 2022 Inducement Plan were as follows, presented as a weighted average:

Nine Months Ended September 30, 

2022

2021

Risk-free interest rate

    

1.89%

    

0.63%

Expected term (in years)

6.03

5.98

Expected volatility

79.55%

77.07%

Expected dividend yield

 

 

15

Stock Option Activity

The following table summarizes the stock option activity under the 2014 Plan, the 2020 Plan and the 2022 Inducement Plan:

Weighted

Weighted

Average

Average

Remaining

Number of

Exercise

Contractual

Aggregate

Shares

Price

Term

Intrinsic Value

(in years)

(in thousands)

Outstanding as of December 31, 2021

    

5,768,028

    

$

15.99

    

8.82

    

$

11,365

Granted

3,132,140

6.57

Exercised(1)

(108,459)

2.71

Forfeited

(461,761)

22.32

Outstanding as of September 30, 2022(2)

8,329,948

$

12.23

8.48

$

353

Options vested and exercisable as of September 30, 2022

2,913,655

$

14.20

7.86

$

271

Options expected to vest as of September 30, 2022

5,416,293

$

11.17

8.81

$

82

(1)Exercised amount includes vesting of early exercised options.
(2)Balance as of September 30, 2022 includes 25,629 unvested early exercised stock options.

Early Exercise of Stock Options

In September 2020, one employee and one non-employee paid $0.6 million to early exercise 135,525 options with exercise prices ranging from $4.406 per share to $4.824 per share. As of September 30, 2022, 109,896 of such shares had vested with the remaining shares vesting over their respective terms. The terms of the 2014 Plan permit certain option holders to exercise options before their options are vested, subject to certain limitations. The early exercised options are subject to the same vesting provisions in the original stock option awards. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the price paid by the purchaser. Such shares are not deemed to be outstanding for accounting purposes until they vest and are therefore excluded from shares outstanding and from basic and diluted net loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature. A liability is recognized related to the cash proceeds of the unvested options and is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. Accordingly, the Company has recorded the unvested portion of the exercise proceeds of $0.1 million in other current liabilities as of September 30, 2022.

Restricted Stock Awards

In June 2020, the Company granted to certain employees 789,095 shares of restricted common stock (the “RSAs”) under the 2014 Plan as consideration for services with a deemed value of $2.40 per share, or $1.9 million. The following table summarizes the restricted stock activity under the Plan during the nine months ended September 30, 2022:

Number of Shares

Grant Date Fair Value

Unvested restricted stock as of December 31, 2021

    

493,185

    

$

2.40

Granted

Vested

(147,955)

2.40

Forfeited

Unvested restricted stock as of September 30, 2022

 

345,230

$

2.40

16

2020 Employee Stock Purchase Plan

In 2020, the Company’s board of directors and stockholders approved and adopted the 2020 ESPP. The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to 15% of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP. The price of the common stock purchased under the ESPP is equal to the lesser of (i) 85% of the fair market value of a share of the Company’s common stock on the first day of an offering; or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. Each offering period is not to exceed 27 months and will include one or more purchase periods (each a “Purchase Period”) as approved by the Company’s board of directors in the offering. The current offering period will consist of two (2) six month purchase periods (each a “Purchase Period”) during which payroll deductions of the participants are accumulated under the ESPP. The last business day of each Purchase Period is referred to as the “Purchase Date.” A total of 430,416 shares of common stock were initially reserved for issuance pursuant to the ESPP.

The ESPP is a compensatory plan as defined by the authoritative guidance for stock-based compensation. The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock offered under the ESPP. Stock-based compensation expense related to the ESPP was $0.1 million and $0.3 million for the three and nine months ended September 30, 2022, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense related to awards granted under the 2014 Plan, the 2020 Plan, the 2020 ESPP Plan and the 2022 Inducement Plan was classified in the condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

Three Months Ended September 30, 

Nine Months Ended September 30, 

2022

2021

2022

2021

Research and development

    

$

2,812

    

$

2,405

    

$

9,088

    

$

6,427

General and administrative

 

 

1,463