Apogee Therapeutics Inc

The following table summarizes our consolidated statements of operations for the periods presented (in thousands):

The following table summarizes our research and development expenses incurred for the periods presented (in thousands):

(1)

External research and development costs for APG808 for the three months ended June 30, 2023 were recorded as unallocated external discovery related costs as the development candidate for APG808 was nominated in November 2023.

(2)

External research and development costs for APG990 for the three months ended June 30, 2023 were recorded as unallocated external discovery related costs as the development candidate for APG990 was nominated in May 2024.

Research and development expenses for the three months ended June 30, 2024 and 2023 were $33.2 million and $13.9 million, respectively. The increase of $19.3 million was primarily driven by further development of our APG777, APG808, APG990 and APG333 programs and advancement of our pipeline into clinical trials, as well as increases in personnel costs, including equity-based compensation expense, associated with the growth in our research and development team. Research and development expense related to the APG777 program increased by $0.5 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily driven by an increase in clinical trial-related expenses and clinical manufacturing activities to support our Phase 1 clinical trials and prepare for our Phase 2 clinical trial, which initiated in the second quarter of 2024. Research and development expense related to the APG808 and APG990 programs were $2.2 million and $6.6 million for the three months ended June 30, 2024, respectively. No such expenses were recorded in the three months ended June 30, 2023, as APG808 and APG990 expenses were recorded as unallocated external-discovery related costs until the program candidates were nominated in November 2023 and May 2024, respectively. Other external-discovery related costs increased by $1.2 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily driven by the advancement of our APG333 program. Once we have selected a development candidate for APG333, we will provide a program breakout of research and development expenses. Personnel-related expenses increased $8.7 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, primarily due to increased headcount and share-based compensation.

General and Administrative Expense

The following table summarizes our general and administrative expenses for the periods presented (in thousands):

General and administrative expenses for the three months ended June 30, 2024 were $10.9 million, compared to $4.9 million for the three months ended June 30, 2023. The increase of $6.0 million was primarily due to an increase of personnel costs of $4.5 million and an increase of other expenses of $2.0 million, which were the result of the expansion of our operations to support the growth in our business and the cost of operating as a public company, partially offset by a decrease in legal and professional services of $0.6 million.

Other Income, Net

Interest income increased $10.3 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, which was primarily related to interest on our cash, cash equivalents and marketable securities.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes our consolidated statements of operations for the periods presented (in thousands):

The following table summarizes our research and development expenses incurred for the periods presented (in thousands):

(1)

External research and development costs for APG808 for the six months ended June 30, 2023 were recorded as unallocated external discovery related costs as the development candidate for APG808 was nominated in November 2023.

(2)

External research and development costs for APG990 for the six months ended June 30, 2023 were recorded as unallocated external discovery related costs as the development candidate for APG990 was nominated in May 2024.

Research and development expenses for the six months ended June 30, 2024 and 2023 were $61.9 million and $22.4 million, respectively. The increase of $39.5 million was primarily driven by further development of our APG777, APG808, APG990 and APG333 programs and advancement of our pipeline into clinical trials, as well as increases in personnel costs, including equity-based compensation expense, associated with the growth in our research and development team. Research and development expense related to the APG777 program for the six months ended June 30, 2024 and 2023 were $14.1 million and $11.8 million, respectively. The increase of $2.3 million was primarily driven by an increase in clinical trial-related expenses and clinical manufacturing activities to support our Phase 1 clinical trials and prepare for our Phase 2 clinical trial, which initiated in the second quarter of 2024. For the six months ended June 30, 2024, we recorded $6.2 million of research and development expense related to the APG808 program, which included a $2.0 million milestone payment related to the first dosing of a human patient in a Phase 1 clinical trial in March 2024. No such expense was recorded in the six months ended June 30, 2023, as APG808 expenses were recorded as unallocated external-discovery related costs until the program candidate was nominated in November 2023. For the six months ended June 30, 2024, we recorded $10.9 million of research and development expense related to the APG990 program, which included a $1.0 million milestone payment related to the nomination of a development candidate in May 2024. No such expense was recorded in the six months ended June 30, 2023, as APG990 expenses were recorded as unallocated external-discovery related costs until the program candidate was nominated in 2024. Other external-discovery related costs increased by $4.2 million in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily driven by a one-time non-refundable payment of $2.0 million to Paragon in January 2024 for finalizing the Research Plan for TSLP, and advancement of our APG333 program. Once we have selected a development candidate for APG333, we will provide a program breakout of research and development expenses. Personnel-related expenses increased $15.9 million in the six months ended June 30, 2024, compared to the six months ended June 30, 2023 primarily due to increased headcount and share-based compensation.

General and Administrative Expense

The following table summarizes our general and administrative expenses for the periods presented (in thousands):

General and administrative expenses for the six months ended June 30, 2024 were $20.4 million, compared to $9.1 million for the six months ended June 30, 2023. The increase of $11.2 million was primarily due to an increase of personnel costs and other expenses of $8.2 million and $3.2 million, respectively, all of which were the result of the expansion of our operations to support our growth in our business and the cost of operating as a public company, and was partially offset by a decrease in legal and professional services of $0.2 million.

Other Income, Net

Interest income increased $16.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, which was primarily related to interest on our cash, cash equivalents and marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant losses. We have not yet commercialized any of our programs, which are in various phases of early-stage development, and we do not expect to generate revenue from sales of any of our programs for several years, if at all. To date, we have financed our operations from the proceeds from the issuance of preferred units and the sale of common stock in our IPO and our March 2024 Offering. As of June 30, 2024, we had cash and cash equivalents of $307.3 million, marketable securities of $368.9 million and long-term marketable securities of $113.4 million.

Prior to our IPO, we received gross proceeds of $169.0 million from sales of our preferred units. In connection with our IPO in July 2023, we issued and sold an aggregate of 20,297,500 shares of common stock (inclusive of 2,647,500 shares pursuant to the exercise in full of the underwriters’ option to purchase additional shares) at a price of $17.00 per share for aggregate net proceeds of $315.4 million, after deducting underwriting discounts and commissions and other offering expenses. In connection with our March 2024 Offering, we issued and sold an aggregate of 7,790,321 shares of common stock (inclusive of 1,016,128 shares pursuant to the exercise in full of the underwriters’ option to purchase additional shares) at a public offering price of $62.00 per share, for aggregate net proceeds of $450.0 million after deducting underwriting discounts and commissions and other offering expenses.

Cash Flows

The following table provides information regarding our cash flows for the periods presented (in thousands):

Net Cash used in Operating Activities

Cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of operating assets and liabilities, which are generally attributable to timing of payments, and the related effect on certain account balances, operational and strategic decisions and contracts to which we may be a party.

For the six months ended June 30, 2024, operating activities used $60.9 million of cash, primarily due to a net loss of $65.9 million and amortization of discounts on marketable securities of $5.8 million. This was partially offset by a non-cash charge of $9.9 million for equity-based compensation.

For the six months ended June 30, 2023, operating activities used $25.1 million of cash, primarily due to a net loss of $31.4 million, partially offset by non-cash charges of $2.4 million for equity-based compensation and net changes in our operating assets and liabilities of $3.9 million.

Net Cash used in Investing Activities

For the six months ended June 30, 2024, net cash used in investing activities of $200.5 million was primarily related to the $352.9 million purchase of marketable securities, partially offset by $152.8 million in maturities of marketable securities.

Net Cash provided by Financing Activities

For the six months ended June 30, 2024, financing activities provided $450.4 million of cash, primarily related to the issuance and sale of 7,790,321 shares of common stock, net of paid issuance costs, in our March 2024 Offering.

Future Funding Requirements

To date, we have not generated any revenue from product sales. We do not expect to generate revenue from product sales unless and until we successfully complete preclinical and clinical development of, receive regulatory approval for, and commercialize a program and we do not know when, or if at all, that will occur. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical activities and studies and initiate clinical trials. In addition, if we obtain regulatory approval for any programs, we expect to incur significant expenses related to product sales, marketing, and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. We expect to incur additional costs associated with operating as a public company. The timing and amount of our operating expenditures will depend largely on the factors set out above. For more information, see the section titled “Risk Factors—Risks Related to Our Limited Operating History, Financial Position and Capital Requirements.”

Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:

•

the rate of progress in the development of our APG777, APG808, APG990 and APG333 programs;

•

the scope, progress, results and costs of preclinical studies and clinical trials for any other current and future programs;

•

the number and characteristics of programs and technologies that we develop or may in-license;

•

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

•

the costs necessary to obtain regulatory approvals, if any, for any approved products in the United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained;

•

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

•

the continuation of our existing licensing arrangements and entry into new collaborations and licensing arrangements;

•

the costs we incur in maintaining business operations;

•

the costs of hiring additional clinical, quality control, manufacturing and other scientific personnel;

•

the costs adding operational, financial and management information systems and personnel;

•

the costs associated with being a public company;

•

the costs and timing of future laboratory facilities;

•

the revenue, if any, received from commercial sales of our programs for which we receive marketing approval;

•

the effect of competing technological and market developments; and

•

the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for programs.

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

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests could be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect our stockholders’ rights.

Additional debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute our stockholders’ ownership interests.

If we raise additional funds through strategic collaborations 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 grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.

As of June 30, 2024, we had $307.3 million of cash and cash equivalents, $368.9 million of marketable securities and $113.4 million of long-term marketable securities. Based on our current operating plan, as of the date of this Quarterly Report, we estimate that our existing cash, cash equivalents, marketable securities and long-term marketable securities will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through at least the next 12 months following the issuance of our consolidated financial statements included elsewhere in this Quarterly Report. Moreover, based on our current operating plan, we estimate that such funds will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2028. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Contractual Obligations and Other Commitments

We enter into contracts in the normal course of business with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”) and other third parties for preclinical research studies and testing, clinical trials, manufacturing and other services. These contracts do not contain any minimum purchase commitments and provide for termination by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred up to the date of cancellation, including non-cancelable obligations of our service providers and, in some cases, wind-down costs. The exact amounts of such obligations are dependent on the timing of termination and the terms of the associated agreement. Accordingly, these payments are not disclosed as the amount and timing of such payments are not known.

Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of specific development and clinical milestones. As of June 30, 2024, we have incurred $7.0 million of the maximum aggregate potential milestone payments. We are also obligated to pay royalties to (i) Paragon at a royalty rate of a low single-digit percentage based on net sales of any products under the License Agreements, once commercialized and (ii) WuXi Biologics at a royalty rate of a fraction of a single digit percentage of global net sales of WuXi Biologics Licensed Products manufactured by a third-party manufacturer.

We do not have any off-balance sheet arrangements that are material or reasonably likely to become material to our financial condition or results of operations.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues recognized and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles generally accepted in the United States of America that are most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements. While our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report, we believe that our most critical accounting policies are those relating to Research and Development Expenses, Asset Acquisitions and Acquired In-Process Research and Development Expenses, and Equity-Based Compensation, which are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgment and Estimates” in our Annual Report on Form 10-K. There have been no material changes to our critical accounting policies from those described in the Annual Report on Form 10-K.

JOBS Act Transition Period and Smaller Reporting Company Status

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards and delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from complying with new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board 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 will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (A) following the fifth anniversary of the completion of our IPO, (B) in which we have total annual gross revenues of at least $1.235 billion or (C) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock and non-voting common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company,” as defined by Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), meaning that the market value of our common stock and non-voting common stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our common stock and non-voting common stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our common stock and non-voting common stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Based on the aggregate market value of our common stock held by non-affiliates as of June 30, 2024, we believe we will become a “large accelerated filer” and no longer qualify as an emerging growth company or smaller reporting company as of December 31, 2024. Because we believe our emerging growth company and non-accelerated filer status will expire on December 31, 2024, we expect to be required, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, to include in our Annual Report on Form 10-K for the year ending December 31, 2024, an attestation report as to the effectiveness of our internal control over financial reporting that is issued by our independent registered public accounting firm. In addition, beginning with our Quarterly Report on Form 10-Q for the quarter ending March 31, 2025, we expect to no longer be permitted to take advantage of the reduced reporting requirements applicable to smaller reporting companies.

For more information, see the section titled “Risk Factors—Risks Related to Our Common Stock—We are an “emerging growth company” and a “smaller reporting company” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.”

Recently Issued Accounting Pronouncements

We have reviewed all recently issued accounting standards and have determined that, other than as disclosed in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report, such standards are not expected to have a material impact on our consolidated financial statements or do not otherwise apply to our operations.