SELLAS LIFE SCIENCES GROUP, INC.

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SELLAS LIFE SCIENCES GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/12/2022 | 04:12pm EDT
This management's discussion and analysis of financial condition as of March 31,
2022 and results of operations for the three months ended March 31, 2022 and
2021, respectively, should be read in conjunction with 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, as filed with
the Securities and Exchange Commission, or SEC, on March 31, 2022, or our 2021
Annual Report, and our other public reports filed with the SEC.

Overview


We are a late-stage clinical biopharmaceutical company focused on the
development of novel cancer therapies for a broad range of indications. Our
product development candidates currently include galinpepimut-S, or GPS, and
GFH009. We are pursuing an outlicensing strategy for a third product candidate,
nelipepimut-S, or NPS.

Galinpepimut-S, or GPS

Our lead product candidate, GPS, is a cancer immunotherapeutic agent licensed
from Memorial Sloan Kettering Cancer Center, or MSK, that targets the Wilms
tumor 1, or WT1, protein, which is present in 20 or more cancer types. Based on
its mechanism of action as a directly immunizing agent, GPS has potential as a
monotherapy or in combination with other immunotherapeutic agents to address a
broad spectrum of hematologic, or blood, cancers and solid tumor indications.

In January 2020, we commenced in the United States a Phase 3 clinical trial, the
REGAL study, for GPS monotherapy in patients with acute myeloid leukemia, or
AML, in the maintenance setting after achievement of second complete remission,
or CR2, following successful completion of second-line antileukemic therapy. We
expect this study will be used as the basis for submission of a Biologics
License Application, or BLA, subject to a statistically significant and
clinically meaningful data outcome and agreement with the U.S. Food & Drug
Administration, or the FDA. We plan to enroll approximately 116 patients at up
to approximately 85 clinical sites in the United States, Europe and Asia with a
planned interim safety and futility analysis after 80 events (deaths). Under our
current planning assumptions, which take into account our best estimates of
potential delays due to COVID-19, we believe that we will complete enrollment
for the REGAL study in late 2022 or early in the first quarter of 2023. Based
upon these current assumptions with respect to completion of enrollment and the
estimated survival times for both the treated and control groups in the study,
we believe, after discussions with our external statisticians and experts, that
the planned interim analysis after 80 events (deaths) per the protocol will
occur by the end of the first half of 2023, provided that our statistical
assumptions and assumptions regarding the impact of COVID-19 on the operations
of our clinical sites as well as the duration of the pandemic remain unchanged.
Because this analysis is event driven, it may occur at a different time than
currently expected.

In December 2020, we entered into an exclusive license agreement with 3D
Medicines Inc., or 3DMed, a China-based biopharmaceutical company developing
next-generation immuno-oncology drugs, for the development and commercialization
of GPS, as well as our next generation heptavalent immunotherapeutic GPS Plus,
which is at preclinical stage, across all therapeutic and diagnostic uses in the
Greater China territory (mainland China, Hong Kong, Macau and Taiwan). We have
retained sole rights to GPS and GPS Plus outside of the Greater China area. On
March 30, 2022, an investigational new drug, or IND, application filed by 3DMed
to initiate the first clinical trial in China for 3D189, also known as GPS, was
approved by China's National Medical Products Administration, or NMPA. The IND
is for a small Phase 1 clinical trial investigating safety. The approval by the
NMPA triggered a $1.0 million milestone payment to the Company which was
received in the second quarter of 2022.

In December 2018, pursuant to a Clinical Trial Collaboration and Supply
Agreement, we initiated a Phase 1/2 multi-arm "basket" type clinical study of
GPS in combination with Merck & Co., Inc.'s, or Merck, anti-PD-1 therapy,
Keytruda® (pembrolizumab). In 2020, we and Merck determined to focus on ovarian
cancer (second or third line WT1+ relapsed or refractory metastatic ovarian
cancer). We reported updated clinical and initial immune response data from this
study in June 2021. In February 2022, we reported that we had completed
enrollment of 17 evaluable patients in this study. Data from 15 of the 17
evaluable patients is expected to be examined by mid-2022, with final data
analysis for all evaluable patients expected by the end of 2022.
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In February 2020, we commenced a Phase 1 open-label investigator-sponsored
clinical trial of GPS, in combination with Bristol-Myers Squibb's anti-PD-1
therapy, nivolumab (Opdivo®), in patients with malignant pleural mesothelioma,
or MPM, who harbor relapsed or refractory disease after having received
frontline standard of care multimodality therapy at MSK. In June 2021, we
announced updated data from this study. Completion of enrollment of a target
total of 10 evaluable patients is expected during the second half of 2022. We
expect to report additional clinical and immune response data in the first half
of 2022.

GPS was granted Orphan Drug Product Designations from the FDA, as well as Orphan
Medicinal Product Designations from the European Medicines Agency, or EMA, for
GPS in AML, MPM, and multiple myeloma, or MM, as well as Fast Track designation
for AML, MPM, and MM from the FDA.

GFH009


On March 31, 2022, we entered into an exclusive license agreement with GenFleet
Therapeutics (Shanghai), Inc., or GenFleet, a clinical-stage biotechnology
company developing cutting-edge therapeutics in oncology and immunology, that
grants rights to us for the development and commercialization of GFH009, a
highly selective small molecule cyclin-dependent kinase 9, or CDK9, inhibitor,
across all therapeutic and diagnostic uses worldwide outside of mainland China,
Hong Kong, Macau and Taiwan.

CDK9 activity has been shown to correlate negatively with overall survival in a
number of cancer types, including hematologic cancers, such as AML and
lymphomas, as well as solid cancers, such as osteosarcoma, pediatric soft tissue
sarcomas, and melanoma, and endometrial, lung, prostate, breast and ovarian
cancer. As demonstrated in pre-clinical and clinical data, to date, GFH009's
high selectivity has the potential to reduce toxicity as compared to older CDK9
inhibitors and other next-generation CDK9 inhibitors currently in clinical
development.

GFH009 is currently in Phase 1 clinical trials in the United States and China.
There are six dose levels in this dose-escalating trial of up to 80 patients
(2.5 mg, 4.5 mg, 9 mg, 15 mg, 22.5 mg, and 30 mg) and the indications are
relapsed/refractory AML, chronic lymphocytic leukemia, or CLL, small lymphocytic
leukemia, or SLL, and lymphoma. The fifth dose level (22.5 mg) cohort of the
study (in relapsed/refractory AML) began in early April 2022. GFH009 is
administered twice a week in this study. The primary goal of the trial is to
establish the maximum tolerated dose and to assess safety. We expect the trial
to be completed by the end of 2022.

Following completion of the Phase 1 clinical trial and achievement of a maximum tolerated dose, we intend to commence a Phase 2 clinical trial of GFH009 in combination with venetoclax and azacitidine in AML patients. The current standard of care for the vast majority of AML patients, including older patients, is venetoclax in combination with a hypomethylating agent such as azacitidine. GFH009 has shown in preclinical models a strong synergy with venetoclax.


The goal of the Phase 2 clinical trial, which we expect to initiate by the end
of the second quarter of 2023, would be to show improved efficacy of venetoclax
and would include patients who are resistant to venetoclax. We also intend to
commence a Phase 1/2 basket clinical trial of monotherapy GFH009 in pediatric
soft tissue sarcomas including Ewing's sarcoma and rhabdomyosarcoma in late 2022
or early 2023 and complete by the end of 2023. We believe positive results from
this program could provide the basis for a rare pediatric disease priority
voucher.

Nelipepimut-S or NPS


Nelipepimut-S, or NPS, is a cancer immunotherapy that targets human epidermal
growth factor receptor 2, or HER2, expressing cancers. We do not currently plan
to conduct or fund a further development program for NPS and are seeking to
out-license the asset.


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Impact of COVID-19


The ongoing global COVID-19 pandemic, including the surges of cases from the
Delta and Omicron variants, continues to disrupt our business operations and
those of our collaborators, including 3D Med and GenFleet, contractors, contract
research organizations, or CROs, suppliers, clinical sites, contract
manufacturing organizations, or CMOs, and other partners. The COVID-19 pandemic
could affect the health and availability of our workforce and that of the
third-parties we rely on, such as our CROs, clinical sites, CMOs, and other
contractors as well as the governmental agencies, such as the FDA and health
authorities in other countries which could delay or otherwise adversely impact
the ability of such parties to fulfill their obligations. We have implemented a
return-to-work policy in compliance with federal, state and local requirements
and guidance, which provides for a hybrid of remote and in-office work. We are
continuously monitoring the impact of the pandemic on our clinical development
programs and on those of our partners, 3DMed and GenFleet. Our Phase 3 REGAL
study is progressing, with the necessary work to activate additional sites in
the United States, Europe and Asia continuing. However, since the onset of the
COVID-19 pandemic, we have observed that, at certain times and in certain
instances, clinical site initiations, patient screening and patient enrollment
have been delayed. These delays are likely due to many reasons, which have been
changing and evolving as the COVID-19 pandemic itself has evolved, including the
prioritization of hospital resources towards the care of patients with COVID-19,
delays in reviews and approvals by independent institutional review boards, or
IRBs, and/or ethics committees at clinical sites, the challenges for clinicians
and patients to comply with clinical trial protocols due to quarantines impeding
patient movement or interrupting operations at sites, restrictions on travel
and, most recently, inadequate staffing at clinical sites, supply chain-related
delays, materials shortages and, most recently, lockdowns in China. Throughout
the United States, Europe and Asia, newly initiated sites have taken longer than
expected to become fully operational and begin enrolling patients. We are
continuing to monitor each clinical site through our CROs as well as conducting
direct outreach to investigators and study staff through site visits
investigator meetings and other modes of communication. The full extent to which
the COVID-19 pandemic will continue to directly or indirectly impact our
business, results of operations and financial condition will depend on future
developments that are highly uncertain, subject to change and cannot be
predicted with confidence, including the duration of the outbreak, the continued
availability and efficacy of vaccines, new information which may emerge
concerning the severity of COVID-19, the emergence of new variants of COVID-19,
and the actions to contain COVID-19 or treat its impact, including continuing or
new lockdowns, among others.

                                       22
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Components of Results of Operations

License Revenue


License revenue consists of revenue recognized pursuant to our Exclusive License
Agreement with 3DMed dated December 7, 2020, or the 3DMed License Agreement. In
the future, we may generate revenue from a combination of reimbursements,
up-front payments, milestone payments and royalties in connection with the 3DMed
License Agreement.

Cost of License Revenue

Cost of license revenue consists of sublicensing fees incurred under our license from MSK in connection with the 3DMed License Agreement.

Research and Development Expense

Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:

•expenses incurred under agreements with CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;

•manufacturing expenses;

•quality control and quality assurance services;

•outsourced professional scientific development services;

•employee-related expenses, which include salaries, benefits and stock-based compensation;

•payments made under our license agreements, under which we acquired certain intellectual property;

•expenses relating to certain regulatory activities, including filing fees paid to regulatory agencies;

•laboratory materials and supplies used to support our research activities; and

•allocated expenses, utilities and other facility-related costs.


The successful development of our current and future product candidates is
highly uncertain. At this time, we cannot reasonably estimate or know the
nature, timing and costs of the efforts that will be necessary to complete the
remainder of the development of, or when, if ever, material net cash inflows may
commence from any current or future product candidates. This uncertainty is due
to the numerous risks and uncertainties associated with the duration and cost of
our clinical trials, which vary significantly over the life of a project as a
result of many factors, including, but not limited to:

•the number of clinical sites and participating countries included in the trials;

•the length of time required to enroll suitable patients;

•the number of patients that ultimately participate in the trials;

•the number of doses patients receive;

•the duration of patient follow-up;

•the results of clinical trials;

•the expenses associated with manufacturing;

•the receipt of marketing approvals;

•the commercialization of current and future product candidates; and

•the impact of the COVID-19 pandemic.

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Research and development activities are central to our business model. Oncology
product candidates in the later stages of clinical development generally have
higher development costs than those in the earlier stages of clinical
development, primarily due to the increased size and duration of the later-stage
clinical trials. We expect our research and development expenses to increase for
the foreseeable future as we conduct and complete our ongoing early and late
stage clinical trials and initiate additional clinical trials.

Our expenditures are subject to additional uncertainties, including the terms
and timing of regulatory approvals. We may never succeed in achieving regulatory
approval for any of our current or future product candidates. We may obtain
unexpected results from our clinical trials. We may elect to discontinue, delay
or modify clinical trials of some product candidates or target indications or
focus on others. 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 FDA or other regulatory authorities were to require us to
conduct clinical trials beyond those that we currently anticipate, or if we
experience significant delays in enrollment in any of our clinical trials due to
the COVID-19 pandemic or otherwise, we could be required to expend significant
additional financial resources and time on the completion of clinical
development.

Acquired In-Process Research and Development

Acquired in-process research and development consists of costs to acquire or license product candidates from third-parties for development with no alternative future use.

General and Administrative Expense


General and administrative expenses consist principally of salaries and related
costs for personnel in executive, administrative, finance and legal functions,
including stock-based compensation, travel expenses and recruiting expenses,
fees for outside legal counsel, amortization of contract acquisition costs
(commissions), and director and officer insurance premiums. Other general and
administrative expenses include facility related costs, patent filing and
prosecution costs, professional fees for business development, accounting,
consulting, legal and tax-related services associated with maintaining
compliance with our Nasdaq listing and SEC reporting requirements, investor
relations costs, and other expenses associated with being a public company.

If and when we believe that regulatory approval of a product candidate appears
likely, we anticipate that an increase in general and administrative expenses
will occur as a result of our preparation for commercial operations,
particularly as it relates to the sales and marketing of such product candidate.
Oncology product commercialization may take several years and millions of
dollars in development costs.

Non-Operating (Expense) Income, Net


Non-operating (expense) income, net consists of changes in fair value of our
warrant liability, changes in fair value of our contingent consideration, and
interest income. Interest income primarily reflects interest earned from our
cash and cash equivalents.

Critical Accounting Policies and Estimates


In the 2021 Annual Report, we disclosed our critical accounting policies and
estimates upon which our financial statements are derived. There have been no
material changes to these policies since December 31, 2021 that are not included
in Note 3 of the accompanying consolidated financial statements for the three
months ended March 31, 2022. Readers are encouraged to read the 2021 Annual
Report in conjunction with this Quarterly Report on Form 10-Q.

                                       24
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Results of Operations for the Three and Nine Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):


                                                       Three Months Ended March 31,
                                                        2022                    2021                Change
Licensing revenue                                $          1,000          $     5,700          $    (4,700)
Operating expenses:
Cost of license revenue                                       100                  100                    -
Research and development                                    4,611                4,284                  327
Acquired in-process research and development               10,000                    -               10,000
General and administrative                                  3,024                3,561                 (537)
Total operating expenses                                   17,735                7,945                9,790
Operating loss                                            (16,735)              (2,245)             (14,490)
Non-operating income (expense), net                            (9)                (158)                 149
Net loss                                         $        (16,744)         $    (2,403)         $   (14,341)


Further analysis of the changes and trends in our operating results are discussed below.

Licensing Revenue


Licensing revenue was $1.0 million for the three months ended March 31, 2022 and
was related to China's NMPA approving an IND application for a small Phase I
clinical trial investigating safety of GPS in China, which triggered a
development milestone under the 3DMed License Agreement. Licensing revenue was
$5.7 million for the three months ended March 31, 2021 and was related to the
initial transaction price of $9.5 million under the 3DMed License Agreement,
which was recognized over a period of time to satisfy the out-licensing of
intellectual property rights and transfer of technical know-how.

Cost of License Revenue


We incurred $0.1 million of sublicensing fees payable under our license from MSK
in connection with the 3DMed License Agreement during the three months ended
March 31, 2022 and 2021.

Research and Development
Research and development expenses were $4.6 million for the three months ended
March 31, 2022 compared to $4.3 million for the three months ended March 31,
2021. The $0.3 million increase was primarily attributable to a $1.3 million
increase in clinical trial expenses primarily related to our ongoing Phase 3
REGAL clinical trial of GPS in AML and a $0.3 million increase in personnel
related expenses due to increased headcount. These increases were partially
offset by a $1.1 million decrease in manufacturing expenses due to the timing of
the manufacturing of registration batches of GPS in the prior year and a $0.2
million decrease in other research and development expenses. We anticipate that
our research and development expenses will increase in the future as we continue
to advance the development of GPS and GFH009, including our Phase 3 clinical
trial of GPS in AML, the ongoing basket trial of GPS in combination with
pembrolizumab, and the ongoing Phase 1 clinical trial of GFH009.

Acquired In-Process Research and Development

During the three months ended March 31, 2022, we recognized $10.0 million for the acquisition of in-process research and development related to the in-licensing of GFH009. There was no acquired in-process research and development during the three months ended March 31, 2021.

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General and Administrative


General and administrative expenses were $3.0 million for the three months ended
March 31, 2022 compared to $3.6 million for the three months ended March 31,
2021. The $0.6 million decrease was primarily due to a $0.8 million decrease
related to the amortization of contract asset costs associated with the 3DMed
License Agreement in the prior year with no comparable expense in the current
year and a $0.3 million decrease in professional service fees. These decreases
were partially offset by a $0.4 million increase in personnel related expenses,
including a $0.2 million increase in non-cash stock-based compensation, due to
increased headcount and a $0.1 million increase in other general and
administrative expenses.

Non-Operating Income (Expense), Net

Non-operating income (expense), net for the three months ended March 31, 2022 and 2021, respectively, was as follows (in thousands):


                                                               Three Months 

Ended March 31,

                                                       2022                2021              Change

Change in fair value of warrant liability $ (11) $

  (31)         $       20
Change in fair value of contingent consideration            -               (129)                129
Interest income                                             2                  2                   -

Total non-operating income (expense), net $ (9) $ (158) $ 149

Net non-operating expense was nominal for the three months ended March 31, 2022.


Net non-operating expense of $0.2 million during the three months ended March
31, 2021 was primarily due to the increase in the change in the fair value of
the contingent consideration liability and a slight increase in the change in
the fair value of the warrant liability partially offset by nominal interest
income. The change in the fair value of contingent consideration liability
reflects the interest component of contingent consideration related to the
passage of time. The increase in the estimated fair value of our warrant
liability was primarily due to an increase in our common stock price. Interest
income consisted of interest earned from our cash and cash equivalents.

The change in fair value of warrant liability and change in fair value of contingent consideration are non-cash in nature.

Income Tax Expense

There was no income tax expense for the three months ended March 31, 2022 and 2021. We continue to maintain a full valuation allowance against our net deferred tax assets.

Liquidity and Capital Resources


We did not generate any revenue from product sales during the three months ended
March 31, 2022 and 2021. Through March 31, 2022, the Company has only generated
licensing revenue from the 3DMed License Agreement. Since inception, we have
incurred net losses, used net cash in our operations, and have funded
substantially all of our operations through proceeds of the sale of equity
securities and convertible notes.

On April 5, 2022, we consummated an underwritten public offering, or the April
2022 Offering, issuing 4,629,630 shares of common stock and accompanying common
stock warrants to purchase an aggregate of 4,629,630 shares of common stock. The
shares of common stock and accompanying common stock warrants were sold at a
combined price of $5.40 per share and accompanying common stock warrant. Each
common stock warrant sold with the shares of common stock represents the right
to purchase one share of our common stock at an exercise price of $5.40 per
share. The common stock warrants are exercisable immediately and will expire on
April 5, 2027, five years from the date of issuance. The net proceeds to us from
the April 2022 Offering, after deducting the underwriting discounts and
commissions and other offering expenses, and excluding the exercise of any
warrants, were approximately $23.0 million.


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On March 31, 2022, the Company announced that an IND application filed by 3DMed,
pursuant to its Exclusive License Agreement for GPS, for a small Phase 1
clinical trial investigating safety of GPS in China was approved by China's
NMPA. The IND approval by the NMPA triggered a $1.0 million milestone payment to
the Company which was received subsequent to March 31, 2022. An additional
$191.5 million in potential future development, regulatory, and sales
milestones, not including future royalties, remains under the 3DMed License
Agreement as of March 31, 2022, which milestones are variable in nature and not
under the Company's control. The current clinical development plan provides for
initiation of a Phase II clinical trial following receipt of satisfactory safety
data from the Phase 1 clinical trial; the initiation of the Phase II clinical
trial will also trigger a milestone payment to the Company which is expected in
the second half of 2022, subject to any potential delays due to COVID-related
lockdowns in China.

On April 16, 2021, we entered into a Controlled Equity OfferingSM Sales
Agreement, or the Sales Agreement, with Cantor Fitzgerald & Co., or the Agent.
From time to time during the term of the Sales Agreement, we may offer and sell
shares of our common stock having an aggregate offering price up to a total of
$50.0 million in gross proceeds. The Agent will collect a fee equal to 3% of the
gross sales price of all shares of common stock sold. Shares of common stock
sold under the Sales Agreement are offered and sold pursuant to our registration
statement on Form S-3, which was filed with the SEC on April 16, 2021 and
declared effective on April 29, 2021. Under the Sales Agreement, we sold a total
of 786,927 shares of common stock at an average price of $12.04 per share for
aggregate net proceeds of approximately $9.0 million during the year ended
December 31, 2021. There were no sales of shares of common stock under the Sales
Agreement during the three months ended March 31, 2022. There remains
approximately $40.5 million available for future sales of shares of common stock
under the Sales Agreement. Other than the Sales Agreement, we currently do not
have any commitments to obtain additional funds.

As of March 31, 2022, we had an accumulated deficit of $155.3 million, cash and
cash equivalents of $14.3 million and restricted cash and cash equivalents of
$0.1 million. In addition, we had current liabilities of $10.7 million as of
March 31, 2022. We expect that our cash and cash equivalents, together with the
net proceeds of approximately $23.0 million from the April 2022 Offering, will
be sufficient to fund current planned operations for at least the next twelve
months from the date of issuance of these financial statements, although we may
pursue additional capital resources through public or private equity or debt
financings or by establishing additional collaborations with other companies.
Our expectations with respect to our ability to fund current planned operations
is based on estimates that are subject to risks and uncertainties. If actual
results are different from management's estimates, we may need to seek
additional strategic or financing opportunities sooner than would otherwise be
expected. There is no guarantee that any of these strategic or financing
opportunities will be executed or executed on favorable terms, and some could be
dilutive to existing stockholders. If we are unable to obtain additional funding
on a timely basis, we may be forced to significantly curtail, delay, or
discontinue one or more of our planned research and development programs or be
unable to expand our operations or otherwise prepare for the potential
regulatory approval and commercialization of our product candidates, assuming
positive data.

Our future operations are highly dependent on a combination of factors,
including (i) the timely and successful completion of any additional financings,
(ii) our ability to complete revenue-generating partnerships with pharmaceutical
and biotechnology companies, (iii) the success of our research and development
activities, (iv) the development of competitive therapies by other biotechnology
and pharmaceutical companies, and, ultimately, (v) regulatory approval and
market acceptance of our proposed future products.


                                       27
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Cash Flows


The following table summarizes our cash flows from operating and financing
activities for the three months ended March 31, 2022 and 2021 (in thousands):

                                                                    Three Months Ended March 31,
                                                                     2022                   2021
Net cash (used in) provided by:
Operating activities                                           $       (7,150)         $   (10,269)

Financing activities                                                       47                3,000
Net decrease in cash, cash equivalents, restricted cash, and
restricted cash equivalents                                    $       (7,103)         $    (7,269)


We had no investing activities during the three months ended March 31, 2022 and 2021.

Net Cash Used in Operating Activities


Net cash used in operating activities of $7.2 million during the three months
ended March 31, 2022 was primarily attributable to our net loss of $16.7 million
and the net change in our operating assets and liabilities of approximately $0.9
million, which were partially offset by various net non-cash charges of $10.4
million. The net change in our operating assets and liabilities of $0.9 million
is primarily attributable to an increase in accounts receivable under the 3DMed
License Agreement for $1.0 million and an increase in prepaid expenses and other
current assets of $0.6 million, which were partially offset by an increase in
accounts payable of $0.7 million. Net non-cash charges were driven by $10.0
million in expense related to the acquired in-process research and development
and $0.4 million in non-cash stock compensation expense.

Net cash used in operating activities of $10.3 million during the three months
ended March 31, 2021 was primarily attributable to a $9.1 million change in our
operating assets and liabilities and our net loss of $2.4 million, which was
offset by various net non-cash charges of $1.2 million. The net change in our
operating assets and liabilities of $9.1 million is primarily attributable to a
decrease in deferred revenue of $4.7 million and one-time payments totaling $1.4
million for contract acquisition costs related to the out-licensing of
intellectual property rights and transfer of technical know-how associated with
the 3DMed License Agreement, a $2.7 million increase in prepaid expenses and
other assets primarily for prepaid insurance premiums and clinical trial costs
and a $0.3 million decrease in accounts payable and accrued expenses and other
current liabilities.

Net Cash Provided by Financing Activities

We generated $0.1 million in net cash from financing activities during the three months ended March 31, 2022 from the purchase of shares of common stock by employees under the Company's 2021 Employee Stock Purchase Plan.


We generated $3.0 million of net cash from financing activities for the three
months ended March 31, 2021 from the exercise of warrants to acquire shares of
common stock.


Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet financing arrangements as of March 31, 2022.

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Analyst Recommendations on SELLAS LIFE SCIENCES GROUP, INC.
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