You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited interim condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report and the audited financial statements and related notes and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 included in our Annual Report. In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations, intentions and belief. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A, below.

Overview

We are a biotechnology company developing novel small molecule therapeutics to treat diseases across several therapeutic areas, including, lysosomal storage disorders ("LSDs"), central nervous system ("CNS") disorders, metabolic disorders, and oncology. We use our exclusively in-licensed computational target and drug discovery platform, Site-Directed Enzyme Enhancement Therapy ("SEE-Tx®"), to discover novel allosteric binding sites on proteins implicated in a disease and to identify proprietary small molecules that bind these sites to modulate protein function and treat the underlying cause of the disease. These binding sites, distinct from the protein's active site, are called allosteric sites. We believe that targeting an allosteric binding site instead of the active binding site of a protein provides numerous advantages: the ability to regulate proteins implicated in disease through several different mechanisms of action covering both functional and conformational effects, including stabilization, destabilization, targeted degradation, allosteric inhibition, and allosteric activation of the targeted protein; improved specificity of small molecules because binding to an allosteric binding site is non-competitive with the natural substrate that binds to the active binding site; and the ability to identify small molecules with more favorable drug-like properties. The SEE-Tx® platform has been used to identify novel allosteric sites and small molecules for all of our internal programs and partnered programs. Discovering and targeting novel allosteric sites with our platform not only reduces traditional drug discovery timelines but enables rational drug design and offers the potential for superior small molecule drugs that are highly specific and, potent, and that can penetrate hard to reach tissues and cross the blood-brain barrier.

We have filed four patent applications for our novel small molecule drug candidates that are Structurally Targeted Allosteric Regulators ("STARs"). In June 2021, we announced the publication of two PCT patents. The first was directed at compounds targeting misfolded beta-glucocerebrosidase (GBA) addressing CNS diseases such as Parkinson's disease, Gaucher disease, Alzheimer's disease, and Lewy body dementia. The second was directed at compounds targeting galactosylceramidase (GALC), addressing demyelinating disorders such as Krabbe disease and multiple sclerosis.

We have identified two different STARs as the lead compounds for our Parkinson's disease program and our Gaucher disease program, and are currently developing these product candidates through preclinical studies. In September 2021, we announced positive topline data of an in vitro study evaluating these two STARs compounds for the treatment of Gaucher and Parkinson's disease in neuronal cells derived from induced pluripotent stem cells ("iPSCs") of patients with Gaucher disease that contained disease-causing mutation of the GBA1 gene and from iPSCs of a healthy donor with a normal GBA1 gene, so called wild-type cells. The results of the study, conducted at the University of Maryland School of Medicine, demonstrate a significant increase in beta-glucocerebrosidase ("GCase") protein levels, improved trafficking of GCase to the lysosome, and a significant decrease of the toxic substrates glucosylceramide as well as alpha-synuclein p129 levels in both the neuronal cells that contained the mutated GBA1 gene as well as the wild-type cells. Alpha synuclein is considered to be the hallmark of Parkinson's disease. These data provide further evidence that these product candidates have the potential to treat Gaucher disease and slow or stop the progression of GBA Parkinson's disease.

In industry standard preclinical studies, the lead compound in our Parkinson's disease program appeared to be safe up to the highest feasible dose level. We are in the process of optimizing the formulation for the preclinical studies and first-in-human clinical trial in our Parkinson's disease program as part of a de-risking strategy. We expect to leverage the knowledge gained for the formulation development of the Parkinson's program for the product formulation

intended to be used for the preclinical studies and first-in-human clinical trial for our Gaucher program.



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In addition, we plan to continue to advance research programs and initiate additional programs targeting allosteric binding sites identified with the SEE-Tx® platform in various therapeutics areas, mainly oncology. Through academic partnerships, co-development and licensing arrangements, we intend to develop a broad pipeline of therapeutics, using our novel approach of identifying and targeting previously unknown allosteric sites.

Recent Developments

In response to the current financing environment, we have streamlined our operational plans to become more capital efficient. We will focus and expect to progress our Parkinson's and Gaucher disease programs and remain opportunistic to partnering opportunities for these lead programs and our platform for novel target identification. In addition, we expect to continue to develop our program for Krabbe disease and use our SEE-Tx platform to establish new programs in oncology. Based on these adjustments, we believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into 2024.

COVID-19 Business Update

In response to the COVID-19 pandemic, we implemented a work-from-home policy allowing employees who can work from home to do so. We are in the process of transitioning back to in-office work for the majority of our employees. We have taken measures to secure our research and development project activities, while work in laboratories has been organized to reduce risk of COVID-19 transmission. Business travel was previously suspended but is now limited, and online and teleconference technology continues to be used regularly. We continue to monitor health guidance measures and may adjust our plans based upon the status of the COVID-19 pandemic.

Financial Condition

Since our inception in 2017, we have devoted substantially all of our resources to identify and develop next-generation brain-penetrant allosteric small molecules for the treatment of devastating diseases with high-unmet medical needs using our in-licensed SEE-Tx® platform. Our operations have consisted primarily of organizing and staffing the Company, expanding its operations, securing financing, performing research, conducting preclinical studies and acquiring, developing and securing our in-licensed technology. To date, we do not have any product candidates approved for sale and have not generated any revenue from product sales, and as a result, we face risks associated with early-stage biotechnology companies whose product candidates are in development. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities. These efforts require significant amounts of additional capital for us to complete our research and development, achieve our research and development objectives, defend our intellectual property rights, and recruit and retain skilled personnel, and key members of management. Even if our product development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

We have financed our operations through a combination of sales of convertible preferred stock, including Series A Preferred Stock and Series B Preferred Stock, and our initial public offering ("IPO") of our common stock, as well as research grants. Through our Series A and Series B financings, we raised $14 million in aggregate gross proceeds. On March 17, 2021, we completed our IPO and issued and sold approximately 4.1 million shares of our common stock at a public offering price of $11.00 per share, including approximately 0.5 million shares in connection with the full exercise of the underwriters' option to purchase additional shares, resulting in net proceeds of approximately $40.5 million, after deducting the underwriting discounts and commissions and offering expenses. From inception through June 30, 2022, we have raised an aggregate of $60 million of gross proceeds through the issuance of convertible preferred stock and our IPO.

As of June 30, 2022, we had cash, cash equivalents and marketable securities of $29,164 thousand. We have incurred recurring losses and negative cash flows from operations since inception and as of June 30, 2022 and December 31, 2021, had an accumulated deficit of $29,284 thousand and $20,925 thousand, respectively. We anticipate incurring additional losses until such time, if ever, that we can generate sales of our product candidates currently in development.



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We have not generated any product revenues and have not achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and, if achieved, could be sustained on a continuing basis. In addition, we will need significant additional financing to fund our operations and to develop our product candidates.

Financing Requirements; Current Financing Environment

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to seek additional funding through a combination of public or private equity offerings, debt financings, government or private party grants, collaborations, strategic alliances and licensing arrangements. We may not be able to obtain financing on acceptable terms, or at all, and we may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect our holdings or the rights of our stockholders. If we are unable to obtain funding, we could be required to delay, limit, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such candidates ourselves, which could adversely affect our business prospects.

The ongoing COVID-19 global pandemic continues to have unpredictable impacts on global societies, economies, financial markets, and business practices. We continue to monitor the impact of the COVID-19 pandemic and related developments, and our focus remains on safeguarding employee health, while minimizing the negative effects on our business and continuing to advance research and development of our product candidates.

On May 18, 2022, we filed a shelf registration statement on Form S-3, which covers the offering, issuance and sale by us of up to a maximum aggregate offering price of $100.0 million of any combination of our common stock, preferred stock, debt securities and/or warrants from time to time in one or more offerings (the "Shelf Registration Statement"). The Shelf Registration Statement was declared effective by the U.S. Securities and Exchange Commission (the "SEC") on June 1, 2022. The Shelf Registration Statement contains a sales agreement prospectus supplement covering up to a maximum aggregate offering price of $16.0 million of our common stock that may be issued and sold from time to time by us through or to Cantor Fitzgerald & Co., acting as our agent or principal, in according with the terms of a Controlled Equity OfferingSM Sales Agreement with Cantor Fitzgerald & Co. dated as of May 18, 2022 (the "Sales Agreement").

Strategic Transactions; Collaboration and Licensing Arrangements

Collaboration with Zentalis

On April 20, 2021, we entered into a multi-target collaboration agreement with Zentalis Pharmaceuticals, Inc. ("Zentalis") to discover new product candidates for the treatment of cancer. Under the terms of the agreement, we will use the licensed SEE-Tx® computational platform technology to identify binding site on target proteins and determine the potential suitability of these sites as drug targets, as well as their prospective therapeutic use in oncology. Pursuant to the terms of the agreement, Zentalis agreed to pay us, on a program-by-program basis, a non-creditable, non-refundable, program initiation fee and reimburse expenses incurred by us in accordance with the agreed-upon research budget.

With respect to any development program, and subject to the delivery of the data package, we granted to Zentalis an option to obtain an exclusive, transferable worldwide license, with the right to sublicense, under relevant intellectual property rights and know-how of the Company arising from the collaboration to develop, manufacture and commercialize any products resulting from the development program. Zentalis may exercise the option, at its reasonable discretion, and shall use commercially reasonable efforts to develop and obtain market approval for products developed from the applicable programs.

Unless terminated earlier, the agreement expires at the expiration of the last valid claim of the licensed patents, subject to certain surviving rights and obligations. Each of us and Zentalis can terminate the agreement in the event of the bankruptcy or insolvency of the other party, or a material breach by the other party and failure to cure such breach within a certain period of time. Zentalis shall have the right, at its sole discretion, exercisable at any time to terminate the



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agreement on a program-by-program basis, upon ninety (90) days' prior written notice to us or, at any time, if a safety concern arises with respect to any development program or product.

In May 2021, the first target development program was identified, and the estimated development cost amounting to $322 thousand were approved and collected in July 2021. As of June 30, 2022 and 2021, we recognized $133 thousand and $82 thousand of revenues, respectively, and as of June 30, 2022 and December 31, 2021 we reported current portion of deferred revenues of $55 thousand and $188 thousand, respectively.

Components of Our Consolidated 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 foreseeable future, if at all. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval and successfully commercialize them, we will not generate revenues in the future. Our current revenues consist primarily of revenues from a collaboration arrangement and, to a lesser extent, income related to the subleases of our office space in Lugano.

Operating Expenses

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

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, which include:

expenses incurred under collaborations with third parties, including contract

research organizations ("CROs") and Universities, that conduct research and

preclinical studies, such as in-vitro and in-vivo absorption, distribution,

? metabolism and excretion ("ADME"), cell model studies, in-vivo pharmacology and

pharmacokinetic studies, toxicology studies and chemical synthesis, stability

studies, manufacturing and control materials, process characterization,

scale-up and transfer, on our behalf;

employee salaries, benefits and other related costs, including share-based

compensation expenses, for employees engaged in research and development

? functions and overhead allocations consisting of various support and

facilities-related expenses, which include rent, utilities and maintenance of

our Barcelona labs and Lugano office space depreciation, travel and conference

expenses;

? fees paid to consultants who assist with research and development activities

and related travel expenses; and

the cost of sponsored research, which includes laboratory materials and

? supplies, manufacturing scale-up expenses and the cost of acquiring and

manufacturing preclinical studies.




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The following table provides a breakout of our research and development expenses by major categories of expense:



                                                 Three Months Ended         Six Months Ended
                                                     June 30,                  June 30,
                                                 2022         2021         2022         2021

Preclinical activities and outside services 1,721,954 1,255,470 $ 2,516,250 $ 2,255,255 Personnel expenses

                               816,258      448,842    1,543,212      881,412
Other                                             77,439      133,698      147,338      188,215
Research grants                                 (33,427)     (44,502)     (68,136)    (109,864)

Total research and development expenses 2,582,224 1,793,508 $ 4,138,664 $ 3,215,018

We recognize research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. 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 anticipate that our research and development expenses will increase substantially in future periods to support progress in our research and development activities, including the commencement of the clinical trials for product candidates we are developing. These increases will likely also result from increased headcount, expanded infrastructure and increased insurance costs.

Our primary research and development focus since inception has been the application of our in-licensed SEE-Tx® platform to various indications and targets. We are using our platform to develop a broad pipeline of program candidates, termed Structurally Targeted Allosteric Regulators ("STARs").

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will continue to increase in the foreseeable future as we (i) increase personnel costs, including stock-based compensation, (ii) continue preclinical development of our lead compounds, (iii) initiate clinical trials for certain product candidates, (iv) continue to discover and develop additional product candidates, and (v) pursue later stages of clinical development of product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, bonus and other related costs, including share-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, and other operating costs.

We anticipate that our general and administrative expenses will increase in the future, in the form of additional compensation, including salaries, benefits, incentive arrangements and share-based compensation awards, as we increase our headcount to support the expected growth, attract and retain additional personnel and the potential commercialization of our product candidates. We also expect to incur increased expenses associated with being a public company, including increased 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 Financial Income (Expense)

Other financial income (expense) consists of interest income, interest expense and foreign exchange gain or loss.



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