10-Q

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number

001-39244

Vincerx Pharma, Inc.

(Exact name of Registrant as Specified in Its Charter)


Delaware		83-3197402
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

260 Sheridan Avenue, Suite 400 Palo Alto, CA		94306
(Address of principal executive offices)		(Zip Code)

(650)

800-6676

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	VINC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

As of April 30, 2024, there were 29,534,238 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS


Forward-Looking Statements			1
Frequently Used Terms			2
Summary Risk Factors			3
Part I			5
ITEM 1. Condensed Consolidated Financial Statements			5
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			23
ITEM 4. Controls and Procedures			24
Part II			25
ITEM 1. Legal Proceedings			25
ITEM 1A. Risk Factors			25
ITEM 5. Other Information			53
ITEM 6. Exhibits			54

Forward-Looking Statements

This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future periods, future events or our future operating or financial plans or performance. When used in this report, the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “forecast,” “goal,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “seeks,” “suggests,” “scheduled,” “target,” or “will,” and similar expressions are intended to identify forward-looking statements, and include but are not limited to:

•

our future financial and business performance;

•

strategic plans for our business and product candidates;

•

the attributes of, and our ability to develop or commercialize, our product candidates;

•

the strength of our pipeline, product candidates, VersAptx Platform, and management team;

•

the expected results and timing of clinical trials and nonclinical studies;

•

our ability to comply with the terms of the Bayer License Agreement;

•

our future capital requirements and sufficiency of available cash, including our expected cash runway, the timing of those requirements, and sources and uses of cash;

•

our ability to obtain funding for our operations and continue as a going concern;

•

our ability to adjust our operating plan spending levels;

•

developments and projections relating to our competitors and industry;

•

our expectations regarding our ability to obtain, develop, and maintain intellectual property protection and not infringe on the rights of others;

•

our ability to retain key scientific or management personnel;

•

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

•

the outcome of any known and unknown litigation and regulatory proceedings;

•

our business, expansion plans, and opportunities; and

•

changes in applicable laws or regulations.

These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements, including the following:

•

risks associated with preclinical or clinical development and trials, including clinical trials conducted prior to our in-licensing;

•

risks related to the rollout of our business and the timing of expected business and product development milestones;

•

changes in the assumptions underlying our expectations regarding our future business or business model;

•

our ability to develop, manufacture, and commercialize product candidates;

•

our ability to raise capital and continue as a going concern;

•

general economic, financial, legal, political, and business conditions and changes in domestic and foreign markets;

•

changes in applicable laws or regulations, including the impact of the Inflation Reduction Act of 2022 and potential legislation restricting the use of foreign third-party service providers;

•

the impact of natural disasters, including climate change, and the impact of health pandemics and epidemics on our business;

•

the size and growth potential of the markets for our products, and our ability to compete in those markets;

•

market acceptance of our planned products;

•

the effects of other economic, business, or competitive factors, including the impact of inflation and the wars in Ukraine and Israel; and

•

other risks and uncertainties set forth in this report in the section entitled “Risk Factors.”

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expected. These risks and uncertainties include, but are not limited to, those risks discussed in Part II, Item 1A of this report. These forward-looking statements made by us in this report speak only as of the date of this report. Except as required under the federal securities laws and rules and regulations of the Securities and Exchange Commission (the “SEC”), we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. You should, however, review additional disclosures we make in our definitive proxy statement for the 2024 Annual Meeting of Stockholders, Annual Report on Form 10-K for the year ended December 31, 2023, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed with the SEC.

You should read this report completely and with the understanding that our actual future results, levels of activity and performance as well as other events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Frequently Used Terms

Unless the context indicates otherwise, references in this report to the “Company,” “Vincerx,” “we,” “us,” “our,” and similar terms refer to Vincerx Pharma, Inc. (f/k/a Vincera Pharma, Inc. f/k/a LifeSci Acquisition Corp.) and its consolidated subsidiaries. References to “LSAC” refer to LifeSci Acquisition Corp., our predecessor company prior to the consummation of the Business Combination (as defined below). Additional terms frequently used in this report include the following:

•

“ADC” means antibody-drug conjugate.

•

“Bayer License Agreement” means that certain License Agreement, dated October 7, 2020, by and among Legacy Vincera Pharma, Bayer Aktiengesellschaft and Bayer Intellectual Property GmbH.

•

“BLA” means a biologics license application.

•

“BPCIA” means the Biologics Price Competition and Innovation Act of 2009.

•

“Business Combination” means the Merger and the other transactions described in the Merger Agreement.

•

“Bylaws” means our amended and restated bylaws.

•

“CDK9” means cyclin-dependent kinase 9.

•

“Certificate of Incorporation” means our second amended and restated certificate of incorporation, as amended.

•

“cGMP” means current Good Manufacturing Practice.

•

“common stock” means our common stock, $0.0001 par value per share.

•

“CPT” means camptothecin.

•

“Earnout Shares” means certain rights to common stock after the closing of the Business Combination that Legacy Holders may be entitled to receive pursuant to the Merger Agreement.

•

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

•

“FDA” means the U.S. Food and Drug Administration.

•

“GAAP” means accounting principles generally accepted in the United States of America.

•

“IND” means an investigational new drug application.

•

“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.

•

“KSPi” means kinesin spindle protein inhibitor.

•

“Legacy Holders” means the stockholders of Legacy Vincera Pharma immediately prior to the Business Combination.

•

“Legacy Vincera Pharma” means Vincera Pharma, Inc. prior to the consummation of the Business Combination, which changed its name to VNRX Corp. following the Business Combination.

•

“Merger” means the merger of Merger Sub with and into Legacy Vincera Pharma, with Legacy Vincera Pharma surviving as the surviving company and as a wholly-owned subsidiary of LSAC, which occurred on December 23, 2020.

•

“Merger Agreement” means that certain Merger Agreement, dated September 25, 2020, by and among LSAC, Merger Sub, Legacy Vincera Pharma and Raquel E. Izumi, as the representative of the Legacy Holders.

•

“Merger Sub” means LifeSci Acquisition Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of LSAC at the time of the Business Combination.

•

“NDA” means a new drug application.

•

“public warrants” means warrants originally issued in the initial public offering of LSAC, which were redeemed in April 2021.

•

“private warrants” means the warrants issued simultaneously with the closing of the initial public offering of LSAC in a private placement to LifeSci Holdings LLC and Rosedale Park, LLC and the warrants issued pursuant to Section 8.6 of the Merger Agreement.

•

“P-TEFb” means positive transcription elongation factor beta.

•

“Securities Act” means the Securities Act of 1933, as amended.

•

“SMDC” means small molecule drug conjugate.

•

“USPTO” means the United States Patent and Trademark Office.

Vincerx^®, Vincerx Pharma^®, the Vincerx Wings logo design, CellTrapper^®, and VersAptx^™ are our trademarks or registered trademarks. This report may also contain trademarks and trade names that are the property of their respective owners.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Part II, Item 1A of this report, “Risk Factors,” before deciding whether to invest in our company.

•

We rely on the Bayer License Agreement to provide rights to the core intellectual property relating to all of our current product candidates, which agreement imposes significant payment and other obligations on us. Any failure by us to perform our obligations under the Bayer License Agreement could give Bayer AG (“Bayer”) the right to terminate or seek other remedies under the agreement, and any termination or loss of important rights under the Bayer License Agreement would significantly and adversely affect our ability to develop and commercialize VIP236, VIP943, VIP924, enitociclib, the VersAptx Platform, and other product candidates and technologies that incorporate such intellectual property, raise capital, or continue our operations.

•

We are substantially dependent on the success of VIP236, VIP943, and enitociclib, our lead product candidates. If we are unable to complete development of, obtain approval for, and commercialize these lead product candidates in a timely manner, our business will be harmed.

•

We are at an early stage in development efforts for our product candidates, and we may not be able to successfully develop, manufacture, complete clinical trials, and commercialize our product candidates on a timely basis or at all.

•

Our long-term prospects depend in part upon discovering, developing, manufacturing, and commercializing additional product candidates, which may fail in development or suffer delays that adversely affect their commercial viability.

•

Results from early-stage clinical trials may not be predictive of results from late-stage or other clinical trials.

•

Interim, “topline,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in subsequent or final data.

•

We have incurred net losses since inception and expect to continue to incur significant net losses for the foreseeable future, and there can be no assurance we will be able to raise capital.

•

We require substantial capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce, or eliminate one or more of our research and drug development programs or future commercialization efforts and may not be able to continue as a going concern.

•

Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors, and others in the medical community necessary for commercial success.

•

If the market opportunity for any product candidate that we develop is smaller than we believe, our revenue may be adversely affected and our business may suffer.

•

We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer, or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

•

We may expend our limited resources to pursue a particular product candidate, target, or indication and fail to capitalize on product candidates, targets, or indications that may be more profitable or for which there is a greater likelihood of success.

•

Clinical trials are expensive, time consuming, subject to enrollment and other delays, and may be required to continue beyond our available funding, and we cannot be certain that we will be able to raise sufficient funds to successfully complete the development, clinical trials, and commercialization of any of our product candidates currently in preclinical and clinical development, should they succeed.

•

Our business entails a significant risk of product liability, and if we are unable to obtain sufficient insurance coverage such inability could have an adverse effect on our business and prospects.

•

Any product candidates we develop may become subject to unfavorable third-party coverage and reimbursement practices, as well as pricing regulations, including those under the Inflation Reduction Act of 2022.

•

We are at an early stage of development as a company, and our limited operating history may make it difficult to evaluate our ability to succeed.

•

The Bayer License Agreement obligates us to make significant milestone and royalty payments, some of which will be triggered prior to the commercialization of any of our product candidates, and we may not be able to raise additional capital or enter into strategic alliances at levels sufficient to pay these amounts when due.

•

We may be unable to obtain U.S. or foreign regulatory approvals and, as a result, may be unable to commercialize our product candidates.

•

Our current or future product candidates may cause adverse events, toxicities, or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential, or result in significant negative consequences.

•

If we are not able to maintain compliance with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted, which could negatively impact the liquidity and price of our common stock, our ability to access the capital markets, and the confidence of investors and others.

PART I

ITEM 1.

Financial Statements.

VINCERX PHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	March 31, 2024			December 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,110		$	12,782
Restricted cash		82			72
Prepaid expenses		700			51
Grant receivable		1,025			1,044
Other current assets		760			784

Total current assets		7,677			14,733
Right-of-use assets, net		1,950			2,201
Property, plant and equipment, net		111			125
Grant receivable		1,207			1,076
Other assets		138			82

Total assets	$	11,083		$	18,217

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	2,314		$	2,497
Accrued expenses		1,727			1,755
Lease liability		1,198			1,162
Common stock warrant liabilities		5,395			191

Total current liabilities		10,634			5,605
Lease liability, net of current portion		1,021			1,340
Other noncurrent liabilities		50			50

Total liabilities		11,705			6,995

Commitments and contingencies—Note 5
Stockholders’ equity (deficit)
Preferred stock, $0.0001 par value; 30,000,000 shares authorized, none issued or outstanding as of March 31, 2024 and December 31, 2023		—			—
Common stock, $0.0001 par value; 120,000,000 shares authorized, 21,413,389 shares and 21,407,510 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		2			2
Additional paid-in capital		170,857			170,324
Accumulated other comprehensive income		60			8
Accumulated deficit		(171,541	)		(159,112	)

Total stockholders’ equity (deficit)		(622	)		11,222

Total liabilities and stockholders’ equity (deficit)	$	11,083		$	18,217

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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VINCERX PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except per share amounts)


	For the three months ended March 31,
	2024			2023
Operating expenses:
General and administrative	$	2,922		$	4,497
Research and development		4,556			10,911

Total operating expenses		7,478			15,408

Loss from operations		(7,478	)		(15,408	)

Other income (expense)
Change in fair value of warrant liabilities		(5,204	)		18
Interest income		99			466
Other income (expense)		154			274

Total other income (expense)		(4,951	)		758

Net loss		(12,429	)		(14,650	)
Other comprehensive income:
Net foreign currency translation gain		52			30
Net unrealized gain on marketable securities		—			31

Comprehensive loss	$	(12,377	)	$	(14,589	)

Net loss per common share, basic and diluted	$	(0.58	)	$	(0.69	)

Weighted average common shares outstanding, basic and diluted		21,400			21,188

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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VINCERX PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(

in thousands

)


	For the Three Months Ended March 31, 2024
	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
	Shares		Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stockholders’ Equity (Deficit)
Balance as of January 1, 2024		21,408	$	2	$	170,324	$	8	$	(159,112	)	$	11,222
Issuance of common stock from employee stock plans		5		—		5		—		—			5
Stock-based compensation		—		—		528		—		—			528
Cumulative translation adjustment		—		—		—		52		—			52
Net loss		—		—		—		—		(12,429	)		(12,429	)

Balance as of March 31, 2024		21,413	$	2	$	170,857	$	60	$	(171,541	)	$	(622	)


	For the Three Months Ended March 31, 2023
	Common Stock				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance as of January 1, 2023		21,243	$	2	$	166,647	$	(26	)	$	(118,955	)	$	47,668
Issuance of common stock from employee stock plans		3		—		3		—			—			3
Stock-based compensation		—		—		1,384		—			—			1,384
Cumulative translation adjustment		—		—		—		30			—			30
Unrealized gain on marketable securities		—		—		—		31			—			31
Net loss		—		—		—		—			(14,650	)		(14,650	)

Balance as of March 31, 2023		21,246	$	2	$	168,034	$	35		$	(133,605	)	$	34,466

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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VINCERX PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(

in thousands

)


	For the three months ended March 31,
	2024			2023
Cash flows from Operating activities
Net loss	$	(12,429	)	$	(14,650	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		13			13
Stock-based compensation		528			1,384
Amortization of right-of-use assets		251			141
Change in fair value of warrant liabilities		5,204			(18	)
Net amortization of discounts on marketable securities		—			(337	)
Changes in operating assets and liabilities:
Prepaid and other current assets		(625	)		(734	)
Grant receivable		(131	)		(273	)
Other assets		(56	)		—
Accounts payable		(183	)		2,108
Accrued expenses		(28	)		(568	)
Lease liabilities		(283	)		(158	)

Net cash used in operating activities		(7,739	)		(13,092	)

Cash Flows from Investing Activities:
Purchases of marketable securities		—			(4,192	)
Sales and maturities of marketable securities		—			10,077

Net cash provided by investing activities		—			5,885

Cash Flows from Financing Activities:
Proceeds from issuance of common stock from employee stock plans		5			3

Net cash provided by financing activities		5			3

Effect of exchange rate changes on cash, cash equivalents, and restricted cash		72			30

Net increase (decrease) in cash, cash equivalents, and restricted cash		(7,662	)		(7,174	)
Cash, cash equivalents, and restricted cash at beginning of the period		12,854			11,733

Cash, cash equivalents, and restricted cash at end of the period	$	5,192		$	4,559

Supplemental disclosure of cash flow information:
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	—

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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VINCERX PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1. NATURE OF BUSINESS

LSAC was initially formed on December 19, 2018 as a Delaware corporation for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more businesses. In December 2020, the Merger Sub merged with and into Legacy Vincera Pharma, with Legacy Vincera Pharma surviving the Merger as a wholly- owned subsidiary of LSAC. In connection with the Business Combination, LSAC changed its name to Vincera Pharma, Inc., and subsequently in January 2021, changed its name to Vincerx Pharma, Inc. (together with its consolidated subsidiaries, the “Company”).

The Company is a clinical-stage biopharmaceutical company focused on leveraging its extensive development and oncology expertise to advance new therapies intended to address unmet medical needs for the treatment of cancer. The Company’s current pipeline is entirely derived from the Bayer License Agreement (see Note 3), pursuant to which the Company has been granted an exclusive, royalty-bearing, worldwide license under certain Bayer patents and

know-how

to develop, use, manufacture, commercialize, sublicense, and distribute (i) a bioconjugation platform, which includes next-generation antibody-drug conjugates and small molecule-drug conjugates, and (ii) a small molecule drug program, including a

P-TEFb

inhibitor compound. The Company intends to use these product candidates to treat various cancers in a patient-specific, targeted approach.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form

10-Q

and Article 8 of Regulation

S-X

of the rules and regulations of the SEC. They include the accounts of Vincerx and its wholly-owned subsidiaries VNRX Corp, Vincerx Pharma GmbH, and Vincerx Pharma Australia Pty Limited. All intercompany accounts and transactions have been eliminated. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form

10-K

for the year ended December 31, 2023, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2023 is derived from the audited financial statements presented in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2023. The interim results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.

Liquidity and Going Concern

As of March 31, 2024, the Company had approximately $5.1 million in cash and cash equivalents. In April 2024, the Company raised $17.8 million, net of commissions and underwriting discounts, through the sale of shares of common stock, warrants and

pre-funded

warrants (see Note 9). The Company has incurred recurring operating losses and negative cash flows from operating activities since its inception and expects to continue to incur operating losses and negative cash flows in the future. Based on current business plans and assumptions, the Company believes that its existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements through the end of 2024, although this estimate is based on plans and assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than it currently expects. Accordingly, the Company will need to raise additional capital through public or private equity offerings, debt financings, collaborations and licensing arrangements, or other sources, and such additional capital may not be available on favorable terms or at all, particularly in light of the current economic and market conditions. Market volatility resulting from pandemics or other epidemics, inflation and other economic and market conditions, the wars in Ukraine and Israel, the inability to maintain our listing on the Nasdaq Capital Market, and other factors could also adversely impact the Company’s ability to raise additional capital. The failure to raise additional capital as and when needed or on acceptable terms would have a negative impact on the Company’s financial condition and the ability to pursue its business strategy, and the Company may have to reduce its workforce or delay, reduce the scope of, suspend, or eliminate one or more preclinical programs, clinical trials, or future commercialization efforts, or curtail its business operations.

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In accordance with Accounting Standards Update (“ASU”)

2014-15,

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

(Subtopic

205-40),

the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for a period of one year after the date that its unaudited condensed consolidated financial statements are issued. In light of the Company’s existing cash resources and current and expected operating losses and negative cash flows, the Company expects to need additional capital prior to the

one-year

anniversary of the issuance of its unaudited condensed consolidated financial statements, and such additional capital may not be available as and when needed on acceptable terms or at all. As a result, the Company has concluded that these circumstances and the uncertainties associated with its ability to obtain additional capital raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date that its unaudited condensed consolidated financial statements are issued.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business, and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements as well as reported amounts of expenses during the reporting periods. Estimates made by the Company include, but are not limited to, common stock warrant liabilities and stock-based compensation. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.

Significant Accounting Policies

Concentrations of Credit Risk

The Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company or its competitors of technological innovations, risks of failure of clinical studies, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to transition from preclinical manufacturing to commercial production of products.

The Company’s future product candidates will require approvals from the FDA and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company was denied approval, approval was delayed, or the Company was unable to maintain approval for any product candidate, it could have a material adverse impact on the Company.

Cash and Cash Equivalents

Management considers all highly liquid investments with an insignificant interest rate risk and original maturities of three months or less to be cash equivalents.

German Grant Income

The Company recognizes grant income in the period when the underlying eligible expenses are incurred. The German government grant program provides for tax refunds or direct reimbursements of eligible

research expenses

of up to 1.0 million euros per year over a period of six years. The grant was approved in 2022 and is retroactive to 2021. Grant income for the three months ended March 31, 2024 has been recorded in other income (expense), net on the Company’s condensed unaudited consolidated statements of operations and comprehensive loss. The corresponding receivable is included in current assets or other assets, $1.0 million and $1.2 million, respectively, at March 31, 2024, on the Company’s condensed unaudited consolidated balance sheet depending upon expectations for collection within 12 months of the balance sheet date.

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Recent Accounting Pronouncements

In November 2023, Financial Accounting Standards Board (“FASB”) issued ASU

No. 2023-07

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.

ASU

2023-07

requires incremental annual and quarterly disclosures about segment measures of profit or loss as well as significant segment expenditures. It also requires public entities with a single reportable segment to provide all segment disclosures required by the amendments in the update and all existing segment disclosures in Topic 280. The Company expects to adopt this guidance on January 1, 2025 on a retrospective basis and has yet to assess the impact to the consolidated financial statements.

In December 2023, FASB issued ASU

No. 2023-09

Income Taxes (Topic 740): Improvements to Income Tax Disclosures.

ASU

2023-09

requires incremental annual disclosures around income tax rate reconciliations, income taxes paid and other related disclosures. This guidance requires prospective application and permits retrospective application to prior periods presented. The Company expects to adopt this guidance on January 1, 2025. The Company expects the adoption of this standard to result in increased disclosures in its notes to consolidated financial statements.

There have been no other material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report on Form

10-K.

NOTE 3. BAYER LICENSE

On October 7, 2020, the Company entered into the Bayer License Agreement, which became effective on December 23, 2020 upon the closing of the Business Combination. Pursuant to the Bayer License Agreement, the Company has an exclusive, worldwide, royalty-bearing license under certain Bayer patents and

know-how

P-TEFb

inhibitor compound.

Following the closing of the Business Combination, the Company paid Bayer a $5.0 million upfront license fee on January 5, 2021. During 2022 and 2023, the Company recorded $1.0 million in development milestones payable to Bayer in connection with the Company’s IND filings for each of VIP236 and VIP943. Each of these milestone obligations were expensed as incurred.

If the Company achieves all of the development and commercial sales milestones for license products under the Bayer License Agreement for each of the countries and disease indications, the Company would be obligated to pay milestone payments that range from $110.0 million to up to $318.0 million per licensed product, and upon successful commercialization of at least five licensed products, the Company could be required to pay aggregate milestone payments in excess of $1.0 billion. In addition to milestone payments, the Company is also required to pay Bayer under the Bayer License Agreement ongoing royalties in the single digit to low double-digit percentage range on net commercial sales of licensed products.

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NOTE 4. FAIR VALUE MEASUREMENT

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (amounts in thousands):


	Fair Value Measured as of March 31, 2024
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	4,463	$	—	$	—	$	4,463

Total cash equivalents	$	4,463	$	—	$	—	$	4,463


	Fair Value Measured as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	4,682	$	—	$	—	$	4,682
U.S. government treasuries		6,233		—		—		6,233
U.S. government agency securities		—		999		—		999

Total cash equivalents	$	10,915	$	999	$	—	$	11,914

The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly. There were no transfers of assets between Level 1, Level 2, or Level 3 during the three-month period ended March 31, 2024.


	Fair Value Measured as of March 31, 2024
	Level 1		Level 2		Level 3		Total
Liabilities:
Common stock warrant liabilities	$	—	$	—	$	5,395	$	5,395

Total fair value	$	—	$	—	$	5,395	$	5,395


	Fair Value Measured as of December 31, 2023
	Level 1		Level 2		Level 3		Total
Liabilities:
Common stock warrant liabilities	$	—	$	—	$	191	$	191

Total fair value	$	—	$	—	$	191	$	191

The estimated fair value of the warrant liability for the private warrants at March 31, 2024 and December 31, 2023 was determined using Level 3 inputs. Inherent in a Monte Carlo options pricing model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate, and dividend yield. The Company estimates the volatility of its ordinary shares based on its historical volatility for a time period that approximates the expected remaining life of the warrants. The risk-free interest rate is based on the U.S.

Treasury zero-coupon

yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. There were no changes to the number of private warrants underlying the Level 3 financial i

nstrumen

ts during the three months ended March 31, 2024. There were no transfers between Level 1, 2, or 3 during the three months ended March 31, 2024 and the three months and year ended December 31, 2023.

The following table presents changes in Level 3 liabilities measured at fair value for the three-month period ended March 31, 2024. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs (in thousands).

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	Warrant Liability
Balance – January 1, 2024	$	191
Change in fair value		5,204

Balance – March 31, 2024	$	5,395

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of March 31, 2024 and December 31, 2023 is as follows:


	As of March 31, 2024			As of December 31, 2023
Stock price	$	5.06		$	1.18
Exercise price	$	11.50		$	11.50
Term (years)		1.7			2.0
Volatility (annual)		114.9	%		90.9	%
Risk-free rate		4.6	%		4.2	%
Dividend yield (per share)		0	%		0	%

NOTE 5. COMMITMENTS AND CONTINGENCIES

Leases

On December 23, 2020, the Company entered into a five-year term lease agreement which commenced on January 1, 2021. On April 1, 2021, and again on May 1, 2021, the lease was amended to include additional space. The annual rent expense is approximately $1.2 million.

At March 31, 2024, the Company had operating lease liabilities of approximately $2.2 million and

right-of-use

assets of approximately $2.0 million, which were included in the condensed unaudited consolidated balance sheet.

In connection with the Company’s strategic plan and workforce reduction in 2022, the Company consolidated its leased office space at its corporate headquarters location. Effective July 8, 2022, the Company subleased substantially all of its remaining unused office space for a term of 18 months at a base rent of $50,000 per month and renewed this sublease in Ja

nuar

y 2024 to include additional unused space for an additional term of approximately 24 months. The Company has not been legally released from its primary obligation

s under t

he original lease and subsequent amendments and, therefore, continues to account for the original lease according to Accounting Standard Codification (“ASC”) Topic 842,

Leases.

The Company records both fixed and variable payments received from the sublessee in its condensed consolidated statements of operations and comprehensive loss on a straight-line basis as an offset to rent expense. Such payments received in the three months ended March 31, 2024 were approximately $107,000. The Company also received a $50,000 deposit with the initial sublease, recorded as a noncurrent liability in the condensed consolidated balance sheets.

The following summarizes quantitative information about the Company’s operating leases (amounts in thousands):


	For the three months ended March 31,
	2024			2023
Lease cost
Operating lease cost	$	299		$	299
Variable lease cost		—			—

Total operating lease expense	$	299		$	299

Other information
Operating cash flows from operating leases	$	330		$	317
Right-of-use assets obtained in exchange for operating lease liabilities	$	—		$	—
Weighted-average remaining lease term – operating leases		1.8			2.8
Weighted-average discount rate – operating leases		8	%		8	%

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As of March 31, 2024, future minimum payments during the remaining period and the next two years are as follows (in thousands):


Remaining period ended December 31, 2024	$	986
Year ended December 31, 2025		1,372
Year ended December 31, 2026		28

Total		2,386
Less present value discount		(167	)

Operating lease liabilities included in the condensed consolidated balance sheet at March 31, 2024	$	2,219

NOTE 6. STOCKHOLDERS’ EQUITY

The Company’s Certificate of Incorporation authorizes the issuance of 120,000,000 shares of common stock, $0.0001 par value per share and 30,000,000 shares of undesignated preferred stock, $0.0001 par value per share. As of March 31, 2024 and December 31, 2023, there were 21,413,389 shares and 21,407,510 shares, respectively, of common stock outstanding, and no shares of preferred stock outstanding.

Restricted Stock

A summary of restricted stock activity for the three months ended March 31, 2024 and 2023 is presented below:


	Number of Shares			Weighted Average Grant Date Fair Value per Share
Nonvested at January 1, 2024		18,062		$	0.103
Vested		(10,848	)		—

Nonvested at March 31, 2024		7,214		$	0.089


	Number of Shares			Weighted Average Grant Date Fair Value per Share
Nonvested at January 1, 2023		67,002		$	0.065
Vested		(16,396	)		—

Nonvested at March 31, 2023		50,606			0.074

As of March 31, 2024, there was approximately $800 of unrecognized stock-based compensation related to restricted stock that will be amortized in 0.2 years.

Warrants

As of March 31, 2024 and December 31, 2023, there were 3,295,000 private warrants to purchase common stock outstanding. No public warrants remain outstanding at March 31, 2024 and December 31, 2023.

The private warrants are identical to the previously outstanding public warrants except that (i) each private warrant is exercisable for one share of common stock at an exercise price of $11.50 per share and (ii) such private warrants will be exercisable for cash (even if a registration statement covering the shares of common stock issuable upon exercise of such private warrants is not effective) or on a cashless basis, at the holder’s option (except with respect to 500,000 of the private warrants held by Rosedale Park, LLC and 500,000 of the private warrants held by LifeSci Holdings LLC, which were amended to remove the cashless exercise provision), and will not be redeemable by the Company (except with respect to 500,000 of the private warrants held by Rosedale Park, LLC and 500,000 of the private warrants held by LifeSci Holdings LLC, which were amended to include a redemption provision substantially identical to that of the public warrants; provided, however, that such redemption rights may not be exercised during the first 12 months following the closing of the Business Combination unless the last sales price of the Company’s common stock has been equal to or greater than $20.00 per share for any 20 trading days within a 30 trading day period ending on the third business day prior to the date on which notice of redemption is given), in each case so long as they are still held by the initial purchasers or their affiliates. The private warrants purchased by Rosedale Park, LLC, will expire on March 5, 2025, provided that once the private warrants are not beneficially owned by Chardan Capital Markets, LLC or any of its related persons anymore, the private warrants may not be exercised five years following the completion of the Company’s initial business combination.

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The previously outstanding public warrants and the private warrants issued to LifeSci Holdings LLC that were amended as described above were determined to be equity classified in accordance with ASC 815,

erivat

ives and Hedging

(see Note 4). The remaining private warrants were determined to be liability classified in accordance with ASC 815,

Derivatives and Hedging

(see Note 4).

NOTE 7. EQUITY INCENTIVE PLANS

In connection with the Business Combination, the stockholders approved the Vincerx Pharma, Inc. 2020 Stock Incentive Plan (the “2020 Plan”), which became effective upon the closing of the Business Combination on December 23, 2020. As of March 31, 2024, the Company had 6,664,648 shares of common stock reserved for issuance, and 106,610 options to acquire common stock that are available to grant, under the 2020 Plan.

The 2020 Plan allows for the grant of stock options and rights to acquire restricted stock to employees, directors, and consultants of the Company. The terms and conditions of specific awards are set at the discretion of the Company’s board of directors. Options granted under the 2020 Plan expire no later than 10 years from the date of grant. Unvested common shares obtained upon early exercise of options

are

subject to repurchase by the Company at the original issue price.

Stock option activity under the 2020 Plan is as follows (in thousands, except per share amounts):


	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2024		5,219		$	8.74		8.1	$	134
Options granted		1,381			7.38		—		—
Options exercised		(6	)		0.90		—		—
Options cancelled		(36	)		6.71		—		—

Outstanding at March 31, 2024		6,558		$	8.47		8.2	$	9,393

Options vested and exercisable at March 31, 2024		3,997		$	10.68		7.5	$	5,716

Stock-based compensation expense is based on the grant-date fair value, or $5.68 for all awards granted during the three months ended March 31, 2024. The Company recognizes compensation expense for all stock-based awards on a straight-line basis over the requisite service period of the awards, which is generally the option vesting term of three years.

As of March 31, 2024, the Company had stock-based compensation of approximately $8.1 million related to unvested stock options not yet recognized that are expected to be recognized over an estimated weighted average period of 1.8 years.

The following weighted average assumptions were used as inputs to the Black-Scholes option valuation model in determining the estimated grant-date fair value of the Company’s stock options granted during the three months ended March 31, 2024 and 2023:


	For the three months ended March 31,
	2024			2023
Exercise price	$	7.38		$	1.17
Expected term (years)		6.0			5.5
Volatility (annual)		91.8	%		89.5	%
Risk-free rate		4.1	%		4.0	%
Dividend yield (per share)		0	%		0	%

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Total stock-based compensation expense recognized in the three months ended March 31, 2024 and 2023 was as follows (amounts in thousands):


	For the three months ended March 31,
	2024		2023
Research and development	$	246	$	742
General and administrative		282		642

SEC Form 10-Q filed by Vincerx Pharma Inc.