You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial information and notes thereto included in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, including forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company focused on developing and commercializing novel cancer therapeutics that reactivate mutant p53 tumor suppressor protein. p53 is the protein expressed from the TP53 gene, the most commonly mutated gene in cancer. We believe that mutant p53 is an attractive therapeutic target due to the high incidence of p53 mutations across a range of cancer types and its involvement in key cellular activities such as apoptosis. Cancer patients with mutant p53 face a significantly inferior prognosis even when treated with the current standard of care, and a large unmet need for these patients remains. Our lead product candidate, APR-246, or eprenetapopt, is a small molecule p53 reactivator that is in late-stage clinical development for hematologic malignancies, including myelodysplastic syndromes, or MDS, and acute myeloid leukemia, or AML. Eprenetapopt has received orphan drug, fast track and breakthrough therapy designations from the FDA for MDS, and orphan drug designation from the European Commission for MDS, AML and ovarian cancer, and we believe eprenetapopt will be a first-in-class therapy if approved by applicable regulators. We recently completed enrollment of 154 patients in our pivotal Phase 3 trial of eprenetapopt with azacitidine for frontline treatment of TP53 mutant MDS and expect top-line data from this trial by year-end 2020. Our pivotal Phase 3 trial is supported by data from two ongoing Phase 1b/2 investigator initiated trials, one in the U.S. and one in France, testing APR-246 with azacitidine as frontline treatment in TP53 mutant MDS and AML patients.

We are currently enrolling a single-arm, open-label Phase 2 trial evaluating eprenetapopt with azacitidine as post-transplant maintenance therapy in TP53 mutant MDS and AML patients who have received an allogenic stem cell transplant. We are also conducting a Phase 1 clinical trial in frontline and relapsed/refractory TP53 mutant AML, assessing eprenetapopt with venetoclax with or without azacitidine.

Our second product candidate, APR-548, is a pre-clinical, next generation p53 reactivator with the potential for oral administration. APR-548 exhibits high oral bioavailability in preclinical testing and is being developed in an oral dosage form. We have completed Investigational New Drug, or IND, enabling preclinical studies of APR-548 and filed an IND with the FDA. However, based on feedback from the FDA, we will not be able to initiate human clinical trials of APR-548 until we are able to provide additional information necessary to address questions raised by the FDA.

Aprea Therapeutics AB, or Aprea AB, was originally incorporated in 2002 and commenced principal operations in 2006. We incorporated Aprea Therapeutics, Inc. (the "Company") in May 2019. In September 2019 we completed a corporate reorganization and, as a result, all of the issued and outstanding stock of Aprea AB was exchanged for common stock, preferred stock or options, as applicable, of the Company As a result of such transactions, Aprea AB became a wholly-owned subsidiary of the Company.

We have devoted substantially all of our resources to developing our product candidates, including eprenetapopt, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations through private placements of preferred stock and the net proceeds received from the initial public offering (IPO) of our common stock. Through June 30, 2020, we had received net proceeds of approximately $223.9 million from our sales of preferred and common stock.

Since our inception, we have incurred significant losses on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were $16.4 million and $25.8 million for the three and six months ended June 30, 2020 and $28.1 million, $15.5 million and $15.2 million for the years ended December 31, 2019, 2018 and



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2017, respectively. As of June 30, 2020, we had an accumulated deficit of $116.3 million. These losses have resulted primarily from costs incurred in connection with research and development activities, patent investment, and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We anticipate that our expenses will increase substantially if and as we:

? conduct our current and future clinical trials and additional preclinical

research of eprenetapopt;

? initiate and continue research and preclinical and clinical development of our

other product candidates;

? seek to identify and develop additional product candidates;

? seek marketing approvals for any of our product candidates that successfully

complete clinical trials, if any;

? establish a sales, marketing, manufacturing and distribution infrastructure to

commercialize any products for which we may obtain marketing approval;

? require the manufacture of larger quantities of our product candidates for

clinical development and potential commercialization;

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

? acquire or in-license other drugs and technologies;

? defend against any claims of infringement, misappropriation or other violation

of third-party intellectual property;

? hire and retain additional clinical, quality control and scientific personnel;

and

add operational, financial and management information systems and personnel, ? including personnel to support our drug development, any future

commercialization efforts and our operation as a public company.

Furthermore, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.

As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. We may be unable to raise additional funds or enter into 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 or commercialization of one or more of our product candidates.

Because of the numerous risks and uncertainties associated with product development, we are unable to 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 revenue from 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.

As of June 30, 2020, we had cash and cash equivalents of $112.9 million. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2023. 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. See "-Liquidity and Capital Resources."



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The COVID-19 pandemic


The novel coronavirus outbreak (COVID-19) has been declared a "Public Health Emergency of International Concern" by the World Health Organization. COVID-19 has spread to many of the countries in which we, our suppliers, and our other business partners conduct business. Governments in affected regions have implemented, and may continue to implement or re-implement, safety precautions, including quarantines, travel restrictions, business closures, cancellations of public gatherings, and other measures they deem necessary. Like many other organizations and individuals, the Company and our employees are taking additional steps to avoid or reduce infection, including limiting travel and implementing remote work arrangements. We will continue to actively monitor the situation and may take further actions that could alter our business operations as may be required by national, state, or local authorities, or that we determine are in the best interests of our employees and stockholders.

As a result of the COVID 19 pandemic and policy responses to it, we did initially observe a decrease in both patient screening and patient enrollment in certain of our ongoing clinical trials. Recently, however, patient screening activity in many of the clinical sites has increased, resulting in a respective increase in the number of patients eligible for enrollment. Such patient screening and the number of patients eligible for enrollment in our clinical trials has returned to expected levels. Together with our investigators and clinical sites, we continue to assess the impact of the coronavirus pandemic on enrollment and the ability to maintain patients enrolled in our clinical trials and the corresponding impact on the timing of the completion of our ongoing clinical trials.

We have assessed both capacity and the current clinical supply chain associated with the production of eprenetapopt and have observed no disruptions to date in our clinical supply chain and our ability to provide supply for our on-going clinical trials. We will continue to monitor and assess the potential impact of the COVID-19 pandemic on our clinical trial supply chain.

There are many uncertainties regarding the COVID-19 pandemic, and we are closely monitoring the impact of the pandemic on all aspects of our business, including how it will impact our clinical trials, employees, suppliers, vendors and business partners. While the pandemic did not materially affect our financial results and business operations for the three and six months ended June 30, 2020, we are unable to predict the impact that COVID-19 will have on our financial position and operating results at this time due to numerous uncertainties such as the duration and spread of the outbreak. We will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to our operations if necessary.

Components of our results of operations

Revenue

We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for eprenetapopt or other product candidates that we may develop in the future are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties.

Operating expenses

Our expenses since inception have consisted solely of research and development costs and general and administrative costs.



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Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:

expenses incurred under agreements with third parties, including contract

research organizations, or CROs, that conduct research, preclinical activities ? and clinical trials on our behalf as well as contract manufacturing

organizations, or CMOs, that manufacture our product candidates for use in our

preclinical and clinical trials;

? salaries, benefits and other related costs, including stock-based compensation

expense, for personnel engaged in research and development functions;

? costs of outside consultants, including their fees, stock-based compensation

and related travel expenses;

? costs of laboratory supplies and acquiring, developing and manufacturing

preclinical study and clinical trial materials;

? expenses related to compliance with regulatory requirements; and

facility-related expenses, which include direct depreciation costs and ? allocated expenses for rent and maintenance of facilities and other operating

costs.

We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

We typically use our employee and infrastructure resources across our development programs. We track outsourced development costs and payments made to our research partners by product candidate or development program, but we do not allocate personnel costs or other internal costs to specific development programs or product candidates.

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. We expect that our research and development expenses will continue to increase for the foreseeable future as we initiate additional clinical trials of eprenetapopt, pursue later stages of clinical development of APR-246, initiate clinical trials for product candidates other than eprenetapopt and continue to discover and develop additional product candidates.

We cannot determine with certainty the duration and costs of the current or future clinical trials of our product candidates or if, when, or to what extent we will generate revenue from the commercialization and sale of any our product candidates for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

the scope, rate of progress, expense and results of our ongoing clinical trials ? of eprenetapopt, as well as of any future clinical trials of eprenetapopt or

other product candidates and other research and development activities that we

may conduct;

? uncertainties in clinical trial design and patient enrollment rates;

? significant and changing government regulation and regulatory guidance;




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? the timing and receipt of any marketing approvals; and

? the expense of filing, prosecuting, defending and enforcing any patent claims

and other intellectual property rights.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S. Food and Drug Administration, or FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

We are currently conducting multiple clinical trials of eprenetapopt: our Phase 3 trial in the United States for the treatment of TP53 mutant MDS with azacitidine, our Phase 1b/2 trials in the United States and France for the treatment of TP53 mutant MDS and AML with azacitidine, our Phase 2 trial of post-transplant maintenance therapy with azacitidine in TP53 mutant MDS and AML, and our Phase 1b/2 trial for the treatment of TP53 mutant AML with venetoclax. At this time, we cannot reasonably estimate the cost for initiating and completing other clinical trials or preclinical studies of eprenetapopt or other product candidates, as it will be highly dependent on the clinical data from ongoing clinical trials as well as any target disease subpopulations chosen for further evaluation.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our headcount to support personnel in research and development and to support our operations generally as we increase our research and development activities and activities related to the potential commercialization of our product candidates. We also expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements; director and officer insurance costs; and investor and public relations costs.

Other income and expense

Interest income and expense

Interest income consists of income earned on our cash and cash equivalents. Interest expense consists of bank charges and fees incurred on our cash and cash equivalents. Our interest income initially increased as our cash and cash equivalents were higher due to the cash proceeds received from our IPO. Such interest income is subsequently decreasing as our cash balance decreases as we continue to fund operations.

Foreign currency gain

Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency. The financial position and results of operations of our subsidiaries Aprea AB and Aprea Personal AB are measured using the foreign subsidiaries' local currency as the functional currency. Aprea AB cash accounts holding U.S. dollars are remeasured based upon the exchange rate at the date of remeasurement with the resulting gain or loss included in the consolidated statement of operations and comprehensive loss. Expenses of such subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the consolidated balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders' equity and as other comprehensive loss on the consolidated statement of operations and comprehensive loss.



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Income taxes

We have not recorded any U.S. federal, state or foreign income tax expense or benefits for the net losses we have incurred in any year, due to our uncertainty of realizing a benefit from those items. We have provided a valuation allowance for the full amount of the net deferred tax assets as, based on all available evidence, it is considered more likely than not that all the recorded deferred tax assets will not be realized in a future period.

Critical accounting policies and use of estimates

Our management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses in our financial statements. 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.

While our significant accounting policies are described in more detail in the notes to our financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses at each balance sheet. This process involves reviewing open contract and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

? CROs in connection with performing research activities on our behalf and

conducting preclinical studies and clinical trials on our behalf;

? investigative sites or other service providers in connection with clinical

trials;

? vendors in connection with preclinical and clinical development activities; and

? vendors related to product manufacturing and development and distribution of

preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting



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amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

Stock-based compensation

We measure stock options and other stock-based awards granted to employees and directors based on their fair value on the date of the grant and recognize compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditions and apply the graded-vesting method to all awards with performance-based vesting conditions or to awards with both service-based and performance-based vesting conditions.

For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed in accordance with the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The new standard largely aligns the accounting for share-based payment awards issued to employees and nonemployees by expanding the scope of ASC 718 to apply to nonemployee share-based transactions, as long as the transaction is not effectively a form of financing.

We estimate the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.

Determination of fair value of common stock

As a privately held company (through October 2, 2019), there had been no public market for our common stock, the estimated fair value of our common stock has been determined by our board of directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations of common stock and our board of directors' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using a hybrid method, which used market approaches to estimate our enterprise value. The hybrid method is a probability-weighed expected return method, or PWERM, where the equity value in one or more scenarios is calculated using an option-pricing method, or OPM. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company's securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preference at the time of the liquidity event, such as a strategic sale or a merger. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. These third-party valuations were performed at various dates, which resulted in valuations of our common stock of $0.92 per share as of May 31, 2016, $1.01 per share as of October 2, 2017, $3.18 per share as of December 31, 2018 and $10.95 per share as of July 15, 2019.

In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:

the prices at which we sold shares of preferred stock and the superior rights ? and preferences of the preferred stock relative to our common stock at the time


  of each grant;


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? the progress of our research and development programs, including the status and

results of preclinical studies and clinical trials for our product candidates;

? our stage of development and commercialization and our business strategy;

? external market conditions affecting the biopharmaceutical industry and trends

within the biopharmaceutical industry;

? our financial position, including cash on hand, and our historical and

forecasted performance and operating results;

? the lack of an active public market for our common stock and our preferred

stock;

the likelihood of achieving a liquidity event, such as an initial public ? offering, or IPO or sale of our company in light of prevailing market

conditions; and

? the analysis of IPOs and the market performance of similar companies in the

biopharmaceutical industry.

The assumptions underlying these valuations represented management's best estimate, which involved inherent uncertainties and the application of management's judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.

Income taxes

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in our tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of the assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Potential for recovery of deferred tax assets is evaluated by considering several factors, including estimating the future taxable profits expected, estimating future reversals of existing taxable temporary differences, considering taxable profits in carryback periods, and considering prudent and feasible tax planning strategies.

We account for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position. As of each balance sheet date, we did not have any uncertain tax positions.

Emerging growth company and smaller reporting company status

We are an emerging growth company (EGC), as defined in the JOBS Act. Under this act, emerging growth companies are permitted to delay adopting new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We may remain classified as an EGC until the end of the fiscal year in which the fifth anniversary of our IPO occurs, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an



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EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1 billion of non-convertible debt over a three-year period.

We are also a "smaller reporting company," as such term is defined in Rule 12b-2 of the Exchange Act, meaning that the market value of our common stock held by non-affiliates is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our common stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is less than $700 million. 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.

Results of operations

Comparison of the three months ended June 30, 2020 and 2019






                                     Three months ended June 30,
                                        2020              2019             Change
   Operating expenses:
   Research and development        $    10,694,029    $   4,319,826    $    6,374,203
   General and administrative            3,786,886        1,618,589         2,168,297
   Total operating expenses             14,480,915        5,938,415         8,542,500
   Other income (expense):
   Interest income (expense)             2,678              (4,091)             6,769
   Foreign currency (loss) gain        (1,889,690)          680,058       (2,569,748)
   Total other income (expense)        (1,887,012)          675,967       (2,562,979)
   Net loss                        $  (16,367,927)    $ (5,262,448)    $ (11,105,479)

Research and development expenses






                                                   Three months ended June 30,
                                                       2020              2019          Change
APR-246                                          $      7,568,258     $ 3,575,419    $ 3,992,839
Other early-stage development programs                    407,476         374,319       33,157
Unallocated research and development expenses           2,718,295         370,088      2,348,207

Total research and development expenses $ 10,694,029 $ 4,319,826 $ 6,374,203

Research and development expenses for the three months ended June 30, 2020 were $10.7 million, compared to $4.3 million for the three months ended June 30, 2019. The increase of $6.4 million was primarily related to the advancement of our clinical product candidate, APR-246. In Q1 2019 we commenced a pivotal Phase 3 clinical trial of APR-246 with azacitidine for frontline treatment of TP53 mutant MDS which completed enrollment in Q2 2020 and is supported by two ongoing Phase 1b/2 investigator initiated trials, one in the U.S. and one in France, testing APR-246 with azacitidine as frontline treatment in TP53 mutant MDS and AML patients. In addition, in Q1 2020, we continued to enroll patients in a Phase 2 post-transplant MDS/AML clinical trial and also began enrolling patients in a Phase 1 clinical trial in frontline and relapsed/refractory TP53 mutant AML assessing APR-246 with venetoclax with or without azacitidine.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2020 were $3.8 million, compared to $1.6 million for the three months ended June 30, 2019. The increase of $2.2 million was primarily related to increases of $0.8 million in insurance expense, $0.5 million in non-cash stock-based compensation, $0.5 million in personnel related



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costs and $0.4 million in commercial development expense. The increase in insurance expense was primarily related to costs associated with being a public company. The increase in non-cash stock-based compensation expense was primarily related to stock option grants made in October 2019 in connection with our IPO and in March 2020 in connection with the Company's annual compensation review.

Other income and expense

Foreign currency loss for the three months ended June 30, 2020 was $1.9 million compared to a foreign currency gain of $0.7 million for the three months ended June 30, 2019. The decrease of $2.6 million was primarily due to a weakening of the U.S. dollar against the Swedish Krona during the three months ended June 30, 2020. Interest income for the three months ended June 30, 2020 consisted of interest earned on our cash and cash equivalents.

Comparison of the six months ended June 30, 2020 and 2019






                                      Six months ended June 30,
                                         2020             2019             Change
    Operating expenses:
    Research and development        $   19,790,151    $   7,998,270    $   11,791,881
    General and administrative           6,563,354        2,347,915         4,215,439
    Total operating expenses            26,353,505       10,346,185        16,007,320
    Other income (expense):
    Interest income (expense)           227,120             (7,439)           234,559
    Foreign currency gain                  358,201        1,615,974       (1,257,773)
    Total other income (expense)           585,321        1,608,535       (1,023,214)
    Net loss                        $ (25,768,184)    $ (8,737,650)    $ (17,030,534)

Research and development expenses






                                                   Six months ended June 30,
                                                      2020             2019           Change
APR-246                                          $    14,605,217    $ 6,314,584    $  8,290,633
Other early-stage development programs                   976,917        673,435         303,482

Unallocated research and development expenses 4,208,017 1,010,251 3,197,766 Total research and development expenses $ 19,790,151 $ 7,998,270 $ 11,791,881

Research and development expenses for the six months ended June 30, 2020 were $19.8 million, compared to $8.0 million for the six months ended June 30, 2019. The increase of $11.8 million was primarily related to the advancement of our clinical product candidate, APR-246. In Q1 2019 we commenced a pivotal Phase 3 clinical trial of APR-246 with azacitidine for frontline treatment of TP53 mutant MDS which completed enrollment in Q2 2020 and is supported by two ongoing Phase 1b/2 investigator initiated trials, one in the U.S. and one in France, testing APR-246 with azacitidine as frontline treatment in TP53 mutant MDS and AML patients. In addition, in Q1 2020, we continued to enroll patients in a Phase 2 post-transplant MDS/AML clinical trial and also began enrolling patients in a Phase 1 clinical trial in frontline and relapsed/refractory TP53 mutant AML assessing APR-246 with venetoclax with or without azacitidine.

General and administrative expenses

General and administrative expenses for the six months ended June 30, 2020 were $6.5 million, compared to $2.3 million for the six months ended June 30, 2019. The increase of $4.2 million was primarily related to increases of $1.6 million in insurance expense, $1.0 million in non-cash stock-based compensation, $0.8 million in personnel related costs, $0.4 million in commercial development expense and $0.3 million in legal and consulting fees. The increase in insurance expense and legal and consulting fees was primarily related to costs associated with being a public company. The increase in non-cash stock-based compensation expense was primarily related to stock option grants made in October 2019 in connection with our IPO and in March 2020 in connection with our annual compensation review.



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Other income and expense

Foreign currency gain for the six months ended June 30, 2020 was $0.4 million compared to $1.6 million for the six months ended June 30, 2019. The decrease of $1.2 million was primarily due to a weakening of the U.S. dollar against the Swedish Krona during the six months ended June 30, 2020. Interest income for the six months ended June 30, 2020 consisted of interest earned on our cash and cash equivalents.

Liquidity and capital resources

Since our inception, we have incurred significant losses on an aggregate basis. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have financed our operations through private placements of our preferred and common stock and the net proceeds received from the initial public offering (IPO) of our common stock. Through June 30, 2020, we had received net proceeds of $223.9 million from our sales of preferred and common stock. As of June 30, 2020, we had cash and cash equivalents of $112.9 million.

Cash flows



The following table summarizes our sources and uses of cash for each of the
periods presented:




                                                          Six months ended June 30,
                                                             2020             2019
Net cash provided by (used in):
Operating activities                                    $ (17,179,938)    $ (9,172,819)
Investing activities                                          (10,144)          (6,189)
Financing activities                                           150,949        4,996,856

Net increase (decrease) in cash and cash equivalents $ (17,039,133) $ (4,182,152)






Operating activities.

Cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. Net cash used in operating activities was $17.2 million for the six months ended June 30, 2020 compared to $9.2 million for the six months ended June 30, 2019. The increase in cash used in operating activities of $8.0 million was primarily attributable to an increase in our net loss of $17.0 million, resulting from both increased research and development expenses and increased general and administrative expenses discussed previously partially offset by an increase in operating assets and liabilities of $5.8 million and an increase in non-cash stock-based compensation of $1.9 million.

Investing activities.

Cash used in investing activities for the six months ended June 30, 2020 and 2019, was $10,144 and $6,189, respectively. Cash used in investing activities for these periods represented the acquisition of property and equipment.

We expect that investing activities will increase over the next several years.

Financing activities.

Net cash provided by financing activities was $150,949 for the six months ended June 30, 2020 compared to $5.6 million for the six months ended June 30, 2019. The decrease in cash provided by financing activities was primarily attributable to the issuance of Series C convertible preferred stock in February 2019 for net proceeds of $5.0 million. Cash provided by financing activities for the six months ended June 30, 2020 represented proceeds received from the exercise of stock options.



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Funding requirements

We expect our expenses to increase substantially in connection with our ongoing development activities related to eprenetapopt and other product candidates and programs which are still in the early stages of clinical development. In addition, we have incurred and continue to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:

? conduct our current and future clinical trials and additional preclinical

research of eprenetapopt;

? initiate and continue research and preclinical and clinical development of our

other product candidates;

? seek to identify and develop additional product candidates;

? seek marketing approvals for any of our product candidates that successfully

complete clinical trials, if any;

? establish a sales, marketing, manufacturing and distribution infrastructure to

commercialize any products for which we may obtain marketing approval;

? require the manufacture of larger quantities of our product candidates for

clinical development and potentially commercialization;

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

? acquire or in-license other drugs and technologies;

? defend against any claims of infringement, misappropriation or other violation

of third-party intellectual property;

? hire and retain additional clinical, quality control and scientific personnel;

? build out new facilities or expand existing facilities to support our ongoing

development activity;

add operational, financial and management information systems and personnel, ? including personnel to support our drug development, any future

commercialization efforts and our transition to a public company; and

? continue to operate as a public company.

As of June 30, 2020, we had cash and cash equivalents of $112.9 million. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2023. 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.

Because of the numerous risks and uncertainties associated with the development of eprenetapopt and other product candidates and programs and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

? the scope, progress, results and costs of our current and future clinical

trials of eprenetapopt for our current targeted indications;

? the scope, progress, results and costs of drug discovery, preclinical research

and clinical trials for eprenetapopt and our other product candidates;




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? the number of future product candidates that we pursue and their development

requirements;

? the costs, timing and outcome of regulatory review of our product candidates;

the extent to which we acquire or invest in businesses, products and ? technologies, including entering into or maintaining licensing or collaboration

arrangements for product candidates on favorable terms, although we currently

have no commitments or agreements to complete any such transactions;

the costs and timing of future commercialization activities, including drug

sales, marketing, manufacturing and distribution, for any of our product ? candidates for which we receive marketing approval, to the extent that such

sales, marketing, manufacturing and distribution are not the responsibility of

any collaborator that we may have at such time;

? the amount of revenue, if any, received from commercial sales of our product

candidates, should any of our product candidates receive marketing approval;

? the impact of COVID-19 on the financial markets in general and on our business

in particular;

the costs of preparing, filing and prosecuting patent applications, ? maintaining, protecting and enforcing our intellectual property rights and

defending intellectual property-related claims;

? our headcount growth and associated costs as we expand our business operations

and our research and development activities; and

? the costs of operating as a public company.

Developing drug products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. 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 in our securities may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholders. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing ownership interest.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, 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 collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.



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Contractual obligations and commitments

In August 2020, we entered into a companion diagnostics agreement with Invivoscribe, Inc. to collaborate on the development of an in vitro companion diagnostic test for eprenetapopt. Pursuant to the companion diagnostics agreement, Invivoscribe will develop a companion diagnostic assay for regulatory approval as a companion diagnostic for eprenetapopt in exchange for payments of up to $13.2 million in the aggregate, subject to the achievement of specified milestones and reimbursement of defined out-of-pocket expenses.

For additional details regarding our contractual obligations, see Note 3 "Leases" to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

Recent accounting pronouncements

See Note 2 to our condensed consolidated financial statements which discusses new accounting pronouncements.

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 SEC.

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