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    ONCR   US68236R1032

ONCORUS, INC.

(ONCR)
  Report
Delayed Nasdaq  -  04:00 2022-09-27 pm EDT
0.9109 USD   +3.39%
09/26Oncorus to Present at Chardan's 6th Annual Genetic Medicines Conference
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09/14Oncorus, Inc. : Entry into a Material Definitive Agreement, Termination of a Material Definitive Agreement, Financial Statements and Exhibits (form 8-K)
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ONCORUS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

08/04/2022 | 04:56pm EDT
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 on Form 10-Q. 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 and
under "Part I, Item 1A. Risk Factors" in our Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the Securities and Exchange Commission,
or the SEC, on March 9, 2022, and under Part II, Item 1A in our Quarterly Report
on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 4,
2022.

These statements are based upon information available to us as of the date of
this Quarterly Report on Form 10-Q, and while we believe such information forms
a reasonable basis for such statements, such information may be limited or
incomplete, and our statements should not be read to indicate that we have
conducted an exhaustive inquiry into, or review of, all potentially available
relevant information. These statements are inherently uncertain, and investors
are cautioned not to unduly rely upon these statements.

Introduction


Our Management's Discussion and Analysis of Financial Condition and Results of
Operations, or MD&A, is provided in addition to the accompanying unaudited
interim condensed consolidated financial statements and notes to assist readers
in understanding our results of operations, financial condition, and cash flows.
Our MD&A is organized as follows:

Overview - A discussion of our business and overall analysis of financial and other highlights in order to provide context for the remainder of MD&A.


Results of Operations - An analysis of our financial results comparing the three
and six months ended June 30, 2022, to the three and six months ended June 30,
2021.

Liquidity and Capital Resources - An analysis of changes in our unaudited interim condensed consolidated balance sheets and cash flows, and discussion of our financial condition and potential sources of liquidity.

Critical Accounting Policies and Significant Judgments and Estimates - A discussion of critical accounting policies and those that require us to make subjective estimates and judgments.

Overview


We are a clinical-stage biopharmaceutical company focused on developing
next-generation, systemically active viral immunotherapies to transform outcomes
for cancer patients. Using our two distinct proprietary platforms, we are
developing a pipeline of intratumorally and intravenously administered product
candidates designed to selectively attack and kill tumor cells and deliver
transgenes to stimulate multiple arms of the immune system against tumors. We
believe that the therapies we are developing could bring significant benefit to
many patients who are currently underserved by approved immuno-oncology
therapies, including other viral immunotherapies and immune checkpoint
inhibitors.

Our HSV Platform


Our lead product candidate, ONCR-177, is an intratumorally administered viral
immunotherapy based on our oncolytic HSV-1 platform, referred to as our HSV
Platform, which leverages the Herpes Simplex Virus type 1, or HSV-1, a virus
which has been clinically proven to effectively treat certain cancers. Using our
HSV Platform, we engineered ONCR-177 to overcome the limitations of existing
viral immunotherapies by enhancing potency and driving strong systemic
anti-tumor immune responses at injected as well as distant non-injected tumor
sites. ONCR-177 is armed with five immunostimulatory transgenes-a greater number
of transgenes than viral immunotherapies that are either currently approved or
in clinical development. Product candidates from our HSV Platform are designed
to maintain full viral replication competency in tumors and to be selectively
attenuated in healthy tissues, meaning they replicate and express transgenes
only in tumor cells while disabling potentially harmful effects on healthy
tissues. In multiple preclinical cancer models, we observed that these
attributes of ONCR-177 were achieved without either the systemic release of
cytokines that can be associated with toxicity or significant presence of the
virus in non-injected tumors or in circulation, in addition to favorable
tolerability when administered via intravenous and intratumoral injection in a
validated murine model of HSV-1 infection. We believe this combination of
features allows our HSV Platform to overcome the safety versus potency trade-off
that has generally limited the viral immunotherapy field to date. Based on
safety and tolerability profile observed to date and its ability to stimulate
multiple arms of the immune system to attack cancer systemically, we also
believe that ONCR-177 has potential in pre-surgical, or neoadjuvant, settings.

In June 2020, we initiated our Phase 1 clinical trial of ONCR-177 in patients with several different types of solid tumors, including breast cancers and cutaneous tumors. We presented our preliminary findings from the Phase 1 clinical trial in November 2021, which

                                       17
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included data from 14 patients in the fully enrolled and completed dose
escalation cohorts of the trial and five patients enrolled in the dose expansion
monotherapy portion of the trial. In the fully enrolled and completed surface
lesion dose escalation portion of the trial, ONCR-177 administered to heavily
pretreated patients with advanced, injectable solid tumors was well tolerated
with no dose-limiting toxicities. No treatment-related adverse events exceeded
Grade 2, and no infectious virions were detected in skin swabs. After four weeks
of monotherapy treatment with ONCR-177 at the recommended Phase 2 dose, or RP2D,
three of eight evaluable patients (one with cutaneous melanoma, one with
squamous cell carcinoma of the head and neck, or SCCHN, and one with mucosal
melanoma) had demonstrated clinical benefit. We have initiated enrollment in the
surface lesion dose combination expansion portion of the clinical trial.
Patients in the trial will receive ONCR-177 in combination with Merck's
KEYTRUDA® (pembrolizumab), an immune checkpoint inhibitor. In addition, we are
enrolling and currently dosing separate cohorts of patients with visceral tumors
in the liver with the goal of showing additional safety data. We plan to report
additional surface lesion monotherapy expansion data as well as initial surface
lesion combination expansion data in the second half of 2022.

In addition to ONCR-177, we also have additional preclinical stage programs
leveraging our HSV Platform that are intended to yeield both intratumoral and
intravenous solutions to other unmet medical needs. These preclinical programs
include ONCR-GBM, which is designed to target brain cancer through intratumoral
injection.

Our Selectively Self-Amplifying vRNA Immunotherapy Platform


We are also developing a broad pipeline of product candidates that leverages our
second platform, our selectively self-amplifying viral RNA, or vRNA,
immunotherapy platform, referred to as our vRNA Immunotherapy Platform, which
aims to enable repeat intravenous, or IV, administration of viral
immunotherapies to treat cancers that are less amenable to intratumoral
injection due to safety and feasibility reasons, such as cancers of the lung.
Our IV-administered approach involves encapbsulating in a lipid nanoparticle, or
LNP, the genomes of RNA viruses known to kill cancer cells, creating a
selectively self-amplifying vRNA immunotherapy. We believe this approach can
avoid the rapid immune clearance from circulation caused by neutralizing
antibodies otherwise observed to date with IV-administered oncolytic viruses and
is thought to limit their effectiveness in the clinic. Once inside the tumor,
the synthetic viral genome from our synthetic viruses is first amplified and
then instructs tumor cells to synthesize actual infectious virions, which can
cause tumor lysis before infecting nearby tumor cells while stimulating immune
cell recruitment and activity.

Our two product candidates from our vRNA Immunotherapy Platform are ONCR-021 and
ONCR-788. ONCR-021 encodes an optimized strain of Coxsackievirus A21, or CVA21,
and ONCR-788 encodes for a modified version of the Seneca Valley Virus, or SVV.
Both CVA21 and SVV have extensive clinical experience and favorable safety
profiles when administered IV. We believe our selectively self-amplifying vRNA
Immunotherapy Platform holds the potential for IV administration and avoids the
challenge of neutralizing antibodies seen in previous approaches with
IV-administered RNA-based oncology therapeutics. We plan to investigate our
novel vRNA immunotherapies in multiple histologies, including cancers of the
lung, both as monotherapy and in combination with immune checkpoint inhibitors
and other cancer treatments. We plan to submit an investigational new drug
application, or IND, to the U.S. Food and Drug Administration, or FDA, for
ONCR-021 in mid-2023 to enable clinical development for non-small cell lung
cancer and other cancers such as clear cell renal cell carcinoma and melanoma,
both as a single agent and in combination with immune checkpoint inhibitors.
Following the IND submission for ONCR-021 and pending additional financing, we
plan to submit an IND for ONCR-788 to enable its development in small cell lung
cancer, neuroendocrine prostate and other neuroendocrine cancers, both as a
single agent and in combination with immune checkpoint inhibitors and other
cancer treatments. In the process of developing our vRNA Immunotherapy Platform,
we also developed a proprietary LNP platform intended to efficiently deliver
large nucleic acids with minimal endosomal escape.

Manufacturing


We plan to manufacture our product candidates at our approximately 105,000
square foot manufacturing facility in Andover, Massachusetts, 41,000 square feet
of which is specifically dedicated to processes that are compliant with good
manufacturing practices, or GMP. We began process development activities at the
facility in 2021 and we anticipate this facility will be operational in late
2022.

Financial

Since inception in 2015, our operations have focused on organizing and staffing
our company, business planning, raising capital, acquiring and developing our
technology, establishing our intellectual property portfolio, identifying
potential product candidates and undertaking preclinical studies, commencing a
clinical trial, and manufacturing scale-up activities. We do not have any
products approved for sale and have not generated any revenue from product
sales. 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.

                                       18
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We have funded our operations primarily through the sale of redeemable
convertible preferred stock and from our initial public offering, or IPO, of our
common stock in 2020 and a follow-on public offering of common stock in 2021.
From inception through June 30, 2022, we raised an aggregated $306.3 million of
gross proceeds from these financing transactions. On April 1, 2022, we entered
into a Loan Agreement with K2HV which provides term loan commitments of up to
$45.0 million in four potential tranches. As of June 30, 2022, we have borrowed
$20.0 million under this Loan Agreement. In November 2021, we also entered into
an open market sale agreement pursuant to which we may sell shares of common
stock from time to time for aggregate gross proceeds of up to $50.0 million,
although, to date, we have not made any sales under this agreement.

Since inception, we have incurred significant operating losses. Our net losses
were $19.1 million and $15.5 million for the six months ended June 30, 2022 and
2021, respectively. As of June 30, 2022, we had an accumulated deficit of $231.5
million. We expect to continue to incur significant and increasing expenses and
operating losses for the foreseeable future as we advance our current and future
product candidates through preclinical and clinical development, manufacture
drug product and drug supply, seek regulatory approval for our current and
future product candidates, maintain and expand our intellectual property
portfolio, hire additional research and development and business personnel and
operate as a public company.

We will need substantial additional funding to support our continuing operations
and pursue our growth strategy. Until we can generate significant revenue from
product sales, if ever, we expect to finance our operations through a
combination of public or private equity offerings and debt financings or other
sources, such as potential collaboration agreements, strategic alliances and
licensing arrangements. We may be unable to raise additional funds or enter into
such other agreements or arrangements when needed on acceptable terms, or at
all. Our failure to raise capital or enter into such agreements as and when
needed could have a material adverse effect on our business, results of
operations and financial condition.

As of June 30, 2022, we had aggregate cash and cash equivalents and investments
of $100.2 million. We believe that our existing cash and cash equivalents and
investments will enable us to fund our operating expenses and capital
expenditure requirements into early 2024.

Recent Developments


On April 1, 2022, we entered into a loan and security agreement, or the Loan
Agreement, with K2 HealthVentures LLC, or K2HV, which we refer to together with
any other lender from time to time party thereto, as the Lenders. The Loan
Agreement provides for a loan of up to $45.0 million to be funded upon the
achievement of certain time-based, clinical and regulatory milestones (the "Term
Loan"). The Term Loan will mature on April 1, 2026 and bears a variable interest
rate equal to the greater of (i) 7.75% and (ii) the sum of (A) the prime rate
last quoted in The Wall Street Journal (or a comparable replacement rate if The
Wall Street Journal ceases to quote such rate) and (B) 4.25%. The variable
interest rate was 9.0% as of June 30, 2022. The Loan Agreement contains
customary representations and warranties, events of default and affirmative and
negative covenants, including covenants that limit or restrict our ability to,
among other things, dispose of assets, make changes to our business, management,
ownership or business locations, merge or consolidate, incur additional
indebtedness, pay dividends or other distributions or repurchase equity, make
investments, and enter into certain transactions with affiliates, in each case
subject to certain exceptions. As security for our obligations under the Loan
Agreement, we granted the Lenders a first priority security interest on
substantially all of our assets (other than intellectual property), subject to
certain exceptions.

The Lenders may elect at any time prior to the full repayment of the Term Loan
to convert any portion of the principal amount of the Term Loan then
outstanding, up to an aggregate of $5.0 million in principal amount, into shares
of our common stock at a conversion price of $2.2689, subject to customary
beneficial ownership limitations. In connection with entering into the Loan
Agreement, we also issued to K2HV a warrant to purchase a number of shares of
our common stock equal to the quotient of 2.95% of the aggregate funded term
loan amount divided by $1.5126, the exercise price, up to a maximum of 877,627
shares. As of June 30, 2022, the Warrant is exercisable for 390,056 shares of
common stock. The warrant expires on April 1, 2032.

In April 2022, we announced plans to relocate all of our company operations to
the Andover facility, which we anticipate will be complete in the fourth quarter
of 2022.

Impact of the COVID-19 Pandemic on Our Business


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 will adjust our plans if there is any change in the
COVID-19 pandemic.

Components of Operating Results

                                       19
--------------------------------------------------------------------------------

Research and Development Expenses


Research and development expenses consist primarily of costs incurred for our
research and development activities, including our product candidate discovery
efforts, preclinical and clinical studies under our research programs, which
include:

employee-related expenses, including salaries, bonuses, benefits and stock-based compensation expense for our research and development personnel;

costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on our behalf;

costs of manufacturing drug product and drug supply related to our current or future product candidates;

costs of conducting preclinical studies and clinical trials of our product candidates;

consulting and professional fees related to research and development activities, including stock-based compensation to non-employees;

costs of maintaining our laboratory, including purchasing laboratory supplies and non-capital equipment used in our preclinical studies;

costs related to compliance with clinical regulatory requirements;

facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities, insurance, depreciation and other supplies; and

fees for maintaining licenses and other amounts due under our third-party licensing agreements.


Research and development costs are expensed as incurred. Costs for certain
activities are recognized based on an evaluation of the progress to completion
of specific tasks using data such as information provided to us by our vendors
and analyzing the progress of our preclinical and clinical studies or other
services performed. Significant judgment and estimates are made in determining
the accrued expense balances at the end of any reporting period.

We track external research and development costs on a program-by-program basis
beginning, with respect to each program, upon our internal nomination of a
candidate in that program for further preclinical and clinical development. For
example, ONCR-021 and ONCR-788 were both nominated as candidates in May 2021, at
which time we began tracking their external research and development costs.
External costs include fees paid to consultants, contractors and vendors,
including contract manufacturing organizations, or CMOs, and clinical research
organizations, or CROs, in connection with our preclinical, clinical and
manufacturing activities and license milestone payments related to candidate
development. We do not allocate employee costs, costs associated with our
discovery efforts, costs incurred for laboratory supplies, and facilities,
including depreciation, or other indirect costs, to specific product development
programs because these costs are deployed across multiple product development
programs and, as such, are not separately classified.

The successful development of our product candidates is highly uncertain. We
cannot reasonably estimate or know the nature, timing, and estimated costs of
the efforts that will be necessary to complete development of our current or
future product candidates. We are also unable to predict when, if ever, material
net cash inflows will commence from the sale of our product candidates, if they
are approved. This is due to the numerous risks and uncertainties associated
with developing product candidates, including the uncertainty of:

the scope, rate of progress, and expenses of our ongoing research activities as well as any preclinical studies and clinical trials and other research and development activities;

establishing an appropriate safety profile;

successful enrollment in and completion of clinical trials;

whether our product candidates show safety and efficacy in our clinical trials;

receipt of marketing approvals from applicable regulatory authorities;

establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

commercializing product candidates, if and when approved, whether alone or in collaboration with others; and

continued acceptable safety profile of the products following any regulatory approval.

                                       20
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A change in the outcome of any of these variables with respect to the
development of our current and future product candidates would significantly
change the costs and timing associated with the development of those 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 research and development costs to increase significantly for the
foreseeable future as we commence clinical trials and continue the development
of our current and future product candidates. However, we do not believe that it
is possible at this time to accurately project expenses through
commercialization. There are numerous factors associated with the successful
commercialization of any of our product candidates, including future trial
design and various regulatory requirements, many of which cannot be determined
with accuracy at this time based on our stage of development. Additionally,
future commercial and regulatory factors beyond our control will impact our
clinical development programs and plans.

General and Administrative Expenses


General and administrative expenses include salaries, bonuses and other
compensation-related costs, including stock-based compensation, for personnel in
executive, finance and accounting, business development, operations and
administrative roles. Other significant costs include professional service and
consulting fees including legal fees relating to intellectual property and
corporate matters, audit and tax fees, recruiting costs, costs for consultants
who we utilize to supplement our personnel and insurance costs. General and
administrative expenses also include travel costs, facility and office-related
costs that are not included in research and development expenses, as well as
depreciation and amortization.

We anticipate that our general and administrative expenses will increase in the
future as our business expands to support expected growth in research and
development activities, including our future clinical programs. These increases
will likely include increased costs related to the hiring of additional
personnel and fees to outside service providers, among other expenses. We also
anticipate increased expenses associated with being a public company, including
costs for audit, legal, regulatory and tax-related services related to
compliance with the rules and regulations of the SEC and Nasdaq listing
standards, director and officer insurance premiums, and investor relations
costs. In addition, if we obtain regulatory approval for any of our product
candidates and do not enter into a third-party commercialization collaboration,
we expect to incur significant expenses related to building a sales and
marketing team to support product sales, marketing and distribution activities.

Other Income (Expense)


Other income (expense) consists primarily of interest expense associated with
our Loan Agreement with K2HV and interest income earned on our investments and
cash equivalents.

Results of Operations

The following table summarizes our results of operations for the periods
indicated.

                                                                                 SIX MONTHS
                        THREE MONTHS ENDED                                          ENDED
                             JUNE 30,                    CHANGE                   JUNE 30,                    CHANGE
                        2022          2021           $            %          2022          2021           $            %
                                                        (in thousands, except percentages)
Operating expenses:
Research and
development           $  12,480     $  10,660     $  1,820          17 %   $  24,949     $  19,107     $  5,842           31 %
General and
administrative            6,161         4,889        1,272          26 %      11,510         9,111        2,399           26 %
Total operating
expenses                 18,641        15,549        3,092          20 %      36,459        28,218        8,241           29 %

Loss from operations (18,641 ) (15,549 ) (3,092 ) -20 %

(36,459 ) (28,218 ) (8,241 ) -29 % Total other income (expense), net

             (450 )          21         (471 )     -2243 %    

(412 ) 27 (439 ) -1626 % Net loss

              $ (19,091 )   $ (15,528 )   $ (3,563 )       -23 %   

$ (36,871 ) $ (28,191 ) $ (8,680 ) -31 %

Three Months Ended June 30, 2022, Compared to the Three Months Ended June 30, 2021

Research and Development Expenses

The table below summarizes our research and development expenses by product candidate or development program and unallocated research and development expenses for each of the periods presented:

                                       21
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                                                    THREE MONTHS ENDED
                                                         JUNE 30,
                                                   2022            2021           CHANGE
                                                      (in thousands)
Direct external expenses by program
ONCR-177                                        $     1,739     $     2,778     $   (1,039 )
ONCR-021                                              2,526             468          2,058
ONCR-788                                                 41              84            (43 )
Platform development, early stage research
and unallocated

expenses:

Employee compensation and related                     4,251           3,523            728
External research, development and consulting           453             732           (279 )
Laboratory supplies                                     728             935           (207 )
Facility-related                                      2,011           1,533            478
Other expenses                                          731             607            124
Total research and development                  $    12,480     $    10,660 

$ 1,820




Research and development expenses increased from $10.7 million for the three
months ended June 30, 2021, to $12.5 million for the three months ended June 30,
2022. The increase of $1.8 million, or 17%, was primarily the result of:

a $1.1 million decrease in direct external expenses for ONCR-177 due to timing
of clinical trial dose manufacturing. In the three months ended June 30, 2022,
we were in the final stages of concluding a manufacturing run and incurred
minimal manufacturing-related costs. In the three months ended June 30, 2021,
where we had commenced a manufacturing run and were incurring associated
materials and service expenses;

a $2.1 million increase in direct external expenses for ONCR-021, which was attributable to pre-clinical development costs that were incurred subsequent to candidate nomination in May 2021;

a $0.7 million increase in employee compensation costs, including salaries, bonus and employee benefits due to increased headcount in 2022 as compared to 2021;

a $0.5 million decrease in external research, development and consulting costs
and laboratory supplies costs as expenses in these categories related to
ONCR-021 are now being captured as program costs following candidate nomination
in May 2021;

a $0.5 million increase in facility-related costs from rent and associated expenses for our manufacturing facility in Andover, Massachusetts for which we commenced payments in July 2021; and

a $0.1 million increase in other expenses primarily related to increased support costs attributable to our growth.

General and Administrative Expenses

                                              THREE MONTHS ENDED
                                                   JUNE 31,
                                               2022          2021       CHANGE
                                                      (in thousands)
Employee compensation and related           $    2,916      $ 2,092     $   

824

Professional service and consultant fees         2,235        2,273         (38 )
Facility-related                                   547           98         449
Other expenses                                     463          426          37

Total general and administrative expenses $ 6,161 $ 4,889 $ 1,272




General and administrative expenses increased from $4.9 million for the three
months ended June 30, 2021, to $6.2 million for the three months ended June 30,
2022. The increase of $1.3 million, or 26%, was primarily the result of:

a $0.8 million increase in employee compensation costs primarily related to
higher stock compensation expense incurred from increased stock option grants to
existing and new employees in 2021 and 2022 as well as higher salaries and bonus
expenses from annual salary increases and changes in employee composition due to
turnover in 2022 as compared to 2021; and

a $0.4 million increase in facility-related costs primarily due to additional
rent expense incurred from entering into an amendment to our Andover lease in
December 2021 and increasing total leased space by 17,150 square feet, changes
in rent expense allocation driven by changes in our employee headcount, and
rent-associated expenses for the Andover manufacturing facility for which we
commenced payments in July 2021.

                                       22
--------------------------------------------------------------------------------

Other Income (Expense)


Other income (expense) for the three months ended June 30, 2022, decreased by
$0.5 million compared to the three months ended June 30, 2021. This decrease was
driven by interest expense incurred as a result of our debt arrangement with
K2HV, which we entered into on April 1, 2022.

Six Months Ended June 30, 2022, Compared to the Six Months Ended June 30, 2021

Research and Development Expenses The table below summarizes our research and development expenses by product candidate or development program and unallocated research and development expenses for each of the periods presented:

                                                     SIX MONTHS ENDED
                                                         JUNE 30,
                                                   2022           2021           CHANGE
                                                      (in thousands)
Direct external expenses by program
ONCR-177                                        $    4,867     $     4,408     $       459
ONCR-021                                             3,451             468           2,983
ONCR-788                                                87              84               3
Platform development, early stage research
and unallocated

expenses:

Employee compensation and related                    8,869           6,534  

2,335

External research, development and consulting          646           1,590            (944 )
Laboratory supplies                                  1,575           1,860            (285 )
Facility-related                                     4,003           3,055             948
Other expenses                                       1,451           1,108             343
Total research and development                  $   24,949     $    19,107  

$ 5,842

Research and development expenses increased from $19.1 million for the six months ended June 30, 2021, to $24.9 million for the six months ended June 30, 2022. The increase of $5.8 million, or 30%, was primarily the result of:

a $0.5 million increase in direct external expenses for our product candidate ONCR-177, which was attributable to increased clinical trial and dose manufacturing costs associated with our Phase 1 trial of ONCR-177;

a $3.0 million increase in direct external expenses for our product candidate ONCR-021, which is attributable to pre-clinical development costs that were incurred subsequent to candidate nomination in May 2021;

a $2.3 million increase in employee compensation costs, including salaries, bonus and employee benefits, due to increased headcount and annual salary increases in 2022, as compared to 2021. Employee compensation costs also increased due to higher stock compensation expense incurred from increased stock option grants to existing and new employees in 2021 and 2022;

a $1.2 million decrease in external research, development, and consulting as
well as laboratory supplies as costs in these categories related to ONCR-021 are
now being captured as program costs following candidate nomination in May 2021;

a $0.9 million increase in facility-related costs primarily due to additional
rent expense incurred from entering into an amendment to our Andover lease in
December 2021 and increasing total leased space by 17,150 square feet, changes
in rent expense allocation driven by changes in our employee headcount, and
rent-associated expenses for the Andover manufacturing facility for which we
commenced payments in July 2021; and

a $0.3 million increase in other expenses primarily related to increased support costs attributable to our growth.

General and Administrative Expenses


                                                 SIX MONTHS
                                               ENDED JUNE 30,
                                              2022        2021       CHANGE
                                               (in thousands)
Employee compensation and related           $  5,455     $ 3,741     $ 

1,714

Professional service and consultant fees       4,157       4,362        (205 )
Facility-related                                 943         206         737
Other expenses                                   955         802         153

Total general and administrative expenses $ 11,510 $ 9,111 $ 2,399





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General and administrative expenses increased from $9.1 million for the six months ended June 30, 2021, to $11.5 million for the six months ended June 30, 2022. The increase of $2.4 million, or 26%, was primarily the result of:

a $1.7 million increase in employee compensation costs primarily related to
higher stock compensation expense from increased stock option grants to existing
and new employees in 2021 and 2022 as well as higher salaries, bonus and
employee benefits costs, due to increased headcount and annual salary increases
in 2022 as compared to 2021;

a $0.2 million decrease in professional service and consultant fees primarily
related to the continuing buildout of the G&A function and work being completed
by our personnel instead of being outsourced; and

a $0.7 million increase in facility-related expenses primarily as a result of
commencing payments on rent-associated expenses in July 2021 and changes in rent
expense allocation driven by changes in our employee headcount.

Other Income (Expense)

Other income (expense) for the six months ended June 30, 2022 decreased by $0.4 million compared to the six months ended June 30, 2021. This decrease was primarily driven by interest expense incurred as a result of our debt arrangement with K2HV, which we entered into on April 1, 2022.

Liquidity and Capital Resources

Sources of Liquidity


From inception through June 30, 2022, we funded our operations with aggregate
gross proceeds of $306.3 million from equity financings and $20.0 million from
our debt arrangement with K2HV. As of June 30, 2022, our cash and cash
equivalents and investments totaled $100.2 million.

In November 2021, we entered into an open market sale agreement pursuant to
which we may sell shares of common stock from time to time for aggregate gross
proceeds of $50.0 million. There have been no sales under this agreement as of
June 30, 2022.

Cash Flows

                                                          SIX MONTHS ENDED
                                                              JUNE 30,
                                                         2022          2021
                                                           (in thousands)
Net cash (used in) provided by:
Operating activities                                   $ (36,694 )   $ (21,538 )
Investing activities                                       1,115        (2,177 )
Financing activities                                      19,624        53,330

Net (decrease) increase in cash and cash equivalents $ (15,955 ) $ 29,615




Operating Activities

Net cash used in operating activities for the six months ended June 30, 2022 was
$36.7 million and was primarily related to our net loss for the period of $36.9
million, partially offset by non-cash charges consisting primarily of
depreciation and amortization of $1.1 million, stock-based compensation expense
of $4.2 million and non-cash interest expense related to our term loan of $0.2
million. Our net cash used in operating activities also included a net use of
cash of $5.3 million related to changes in operating assets and liabilities as
follows:

a net use of cash of $12.7 million from decreases in accounts payable and accrued expenses primarily due to the timing of Andover construction invoices;

a source of cash of $4.5 million from the reimbursement of certain Andover construction costs through our tenant improvement allowance;

a source of cash of $2.3 million due to a decrease in prepaid expenses and other
current assets primarily due to services being performed on amounts already paid
to vendors; and

a net source of cash of $0.5 million from changes in operating lease liability
and associated right-of-use asset due to the difference in the timing of rent
expense compared to rent payments.

Net cash used in operating activities for the six months ended June 30, 2021,
was $21.5 million and was primarily related to our net loss for the period of
$28.2 million, partially offset by non-cash charges consisting of depreciation
and amortization of $0.8 million

                                       24
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and stock-based compensation expense of $2.8 million. Our net cash used in operating activities also included a net source of cash of $3.0 million related to changes in operating assets and liabilities as follows:

a net source of cash of $2.1 million from changes in the operating lease liability and associated right-of-use asset due to the difference in the timing of rent expense compared to rent payments;

a net source of cash of $0.7 million from an increase in accounts payable as a result of overall expense growth and the timing of invoicing; and

a net source of cash of $0.2 million from a decrease in prepaid expenses and other current assets primarily due to a decrease in payments to vendors in advance of services being performed.

Investing Activities


Net cash provided by investing activities for the six months ended June 30,
2022, was $1.1 million, which consisted of maturities of investments of $7.7
million, offset by purchases of property and equipment of $6.6 million. Net cash
used by investing activities of $2.2 million for the six months ended June 30,
2021, was associated with purchases of property and equipment and, specifically,
leasehold improvements and laboratory equipment for our Andover facility.

Financing Activities


Net cash provided by financing activities for the six months ended June 30,
2022, was $19.6 million, which consisted primarily of borrowings under our term
loan from K2HV. Net cash provided by financing activities for the six months
ended June 30, 2021, was $53.3 million and consisted primarily of net proceeds
from the issuance of common stock in connection with our follow-on offering.

Funding Requirements


We expect our expenses to increase in connection with our ongoing activities,
particularly as we continue our research and development, initiate clinical
trials, continue the buildout of our Andover manufacturing facility and seek
marketing approval for our current and any of our future product candidates. In
addition, if we obtain marketing approval for any of our current or our future
product candidates, we expect to incur significant commercialization expenses
related to product sales, marketing, manufacturing and distribution, which costs
we may seek to offset through entry into collaboration agreements with third
parties. We also expect to incur additional costs associated with operating as a
public company. Accordingly, we will need to obtain substantial additional
funding in connection with our continuing operations. If we are unable to raise
capital when needed or on acceptable terms, we would be forced to delay, reduce
or eliminate our research and development programs or future commercialization
efforts.

We believe that our existing cash and cash equivalents will enable us to fund
our operating expenses and capital expenditure requirements into early 2024. We
have based this estimate on assumptions that may prove to be wrong, and we may
use our available capital resources sooner than we currently expect. Our future
capital requirements will depend on a number of factors, including:

the costs of conducting preclinical studies and clinical trials;

the costs of manufacturing;

the scope, progress, results and costs of discovery, preclinical development,
laboratory testing, and clinical trials for product candidates we may develop,
if any;

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

our ability to establish and maintain collaborations on favorable terms, if at all;

the achievement of milestones or occurrence of other developments that trigger
payments under any license or collaboration agreements we might have at such
time;

the costs associated with the ongoing buildout of our Andover facility;

the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;

the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights, and defending intellectual property-related claims;

our headcount growth and associated costs as we expand our business operations, research and development activities and manufacturing capabilities; and

                                       25
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the costs of operating as a public company.


Our cash and cash equivalents and investments as of June 30, 2022, will not be
sufficient to complete development of ONCR-177 or any other product candidate.
Accordingly, we will be required to obtain further funding to achieve our
business objectives.

Until such time, if ever, as we can generate substantial product revenues, we
expect to finance our cash needs through a combination of public or private
equity offerings and debt financings or other sources, such as potential
collaboration agreements, strategic alliances and licensing arrangements. We may
also raise additional capital from sales of common stock under our Sales
Agreement. To the extent that we raise additional capital through the sale of
equity or convertible debt securities, ownership interests of stockholders may
be diluted, and the terms of these securities may include liquidation or other
preferences that could adversely affect the rights of our common stockholders.
In addition to the Term Loan, additional debt financing, if available, may
involve agreements that include restrictive covenants that limit our ability to
take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends, that could adversely impact our ability to
conduct our business.

If we raise funds through potential collaborations, strategic alliances or
licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs or product
candidates, or to grant licenses on terms that may not be favorable to us. If we
are unable to raise additional funds when needed, we may be required to delay,
limit, reduce or terminate our product development or future commercialization
efforts or grant rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves.

Critical Accounting Policies and Significant Judgments and Estimates


Our unaudited interim condensed consolidated financial statements and
accompanying notes have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these unaudited interim condensed
consolidated financial statements requires us to make judgments and estimates
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the unaudited interim condensed
consolidated financial statements and the reported amounts of expenses during
the reported periods. We base our estimates on historical experience, known
trends and events, and various other factors that we believe to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. On an ongoing basis, we evaluate our
judgments and estimates in light of changes in circumstances, facts, and
experience. The effects of material revisions in estimates, if any, will be
reflected in the consolidated financial statements prospectively from the date
of change in estimates.

There have been no significant changes to our critical accounting policies or
other significant judgements and estimates from those described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in our Annual Report on Form 10-K for the year ended December 31, 2021,
filed with the SEC on March 9, 2022.

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 under SEC rules.

Contractual Obligations


On April 1, 2022, we entered into a Loan Agreement with K2HV which increased our
contractual obligations and commitments related to future principal and interest
payments. See "-Recent Developments" above for further discussion about this
Loan Agreement.

As of June 30, 2022, there have been no other material changes to our contractual obligations and commitments, consisting of operating lease obligations, from those described in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 9, 2022.

Emerging Growth Company and Smaller Reporting Company Status


We are an ''emerging growth company,'' or EGC, under the Jumpstart Our Business
Startups Act of 2012, or the JOBS Act. Section 107 of the JOBS Act provides that
an EGC can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards. Thus, an EGC can delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. We have
elected to avail ourselves of the delayed adoption of new or revised accounting
standards and, therefore, we will be subject to the same requirements to adopt
new or revised accounting standards as private entities.

As an EGC, we may also take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC:

                                       26
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we may present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual reports on Form 10-K filed with the SEC;

we will avail ourselves of the exemption from providing an auditor's attestation report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

we will avail ourselves of the exemption from complying with any requirement
that may be adopted by the Public Company Accounting Oversight Board, or PCAOB,
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements,
known as the auditor discussion and analysis;

we may provide reduced disclosure about our executive compensation arrangements in our proxy statements filed with the SEC; and

we will not require nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments.


We will remain an EGC until the earliest of (i) December 31, 2025, (ii) the last
day of the fiscal year in which we have total annual gross revenues of $1.07
billion or more, (iii) the date on which we have issued more than $1 billion in
non-convertible debt during the previous rolling three-year period, or (iv) the
date on which we are deemed to be a large accelerated filer under the Securities
Exchange Act of 1934, as amended, or the Exchange Act.

We are also a ''smaller reporting company,'' meaning that the market value of
our stock held by non-affiliates is less than $700 million and our annual
revenue was less than $100 million during our most recently completed fiscal
year. We may continue to be a smaller reporting company for so long as (i) the
market value of our stock held by non-affiliates is less than $250 million or
(ii) our annual revenue is less than $100 million during our most recently
completed fiscal year and the market value of our 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 EGC, 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
EGCs, smaller reporting companies have reduced disclosure obligations regarding
executive compensation.

Recent Accounting Pronouncements


Refer to Note 2 in the accompanying notes to our unaudited interim condensed
consolidated financial statements appearing elsewhere in this Quarterly Report
on Form 10-Q for a discussion of recent accounting pronouncements.

                                       27

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