You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the "SEC"). This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a precision oncology company focused on the development of targeted therapeutics for the treatment of cancer in genomically defined patient populations. Our vision is to elevate precision medicine to the forefront of every cancer treatment journey, as we believe that each patient living with cancer deserves the opportunity to benefit from a genomically-driven treatment decision. We utilize our deep expertise in developing drugs for rare, genomically defined patient populations and strategic collaborations with our diagnostic collaborators to work towards a future where each tumor's unique genomic test result can be matched with a purpose-built precision medicine.

We are focused on identifying oncogenic drivers that are known to be predominantly mutually exclusive with other driver alterations, and pursuing innovations and efficiencies in the conduct of clinical trials that we believe may enable development of targeted therapeutics against those oncogenic drivers.

Our most advanced program is focused on NRG1 fusions, which are rare genomic alterations that have been identified as oncogenic driver alterations and that we believe have the potential to be therapeutically actionable through targeted HER3 inhibition. We have designed and initiated our potentially registration-enabling Phase 2 CRESTONE trial to investigate the safety and efficacy of seribantumab, an anti-HER3 monoclonal antibody, in advanced solid tumors harboring an NRG1 fusion. We are conducting this trial in a tumor-agnostic fashion, such that any patient with a solid tumor that harbors an NRG1 fusion, regardless of the tissue of origin, may be eligible. We believe that the design and conduct of the CRESTONE trial has the possibility to produce results that may provide support for us to seek accelerated approval of seribantumab for patients with advanced solid tumors harboring an NRG1 fusion, subject to discussions with the U.S. Food and Drug Administration ("FDA"). Any accelerated marketing approval is subject to continued discussions with the FDA, and agreement on post-approval confirmatory trials to confirm an anticipated clinical benefit. If the CRESTONE trial meets its primary endpoint, and subject to continued discussions with the FDA, we anticipate submitting a Biologics License Application ("BLA") under an accelerated approval pathway for the treatment of patients with solid tumors harboring an NRG1 fusion. Even if the CRESTONE trial meets its primary endpoint, there can be no assurance that the FDA or other regulators will find such data sufficient to support a BLA submission or that additional trials will not be required. Further updates on the CRESTONE trial may be provided following additional information including, but not limited to, interactions with the FDA or other regulators, with whom we plan to discuss the interim clinical data and any resulting development pathways and opportunities. As of mid-2022, exploratory Cohorts 2 and 3 of the CRESTONE trial are closed to further enrollment. Also as of mid-2022, we completed enrollment of the first 20 patients in Cohort 1 of the CRESTONE trial.

In May 2022, we announced the FDA's decision to grant Fast Track designation to seribantumab for the tumor-agnostic treatment of advanced solid tumors harboring NRG1 gene fusions. A drug candidate that receives Fast Track designation is afforded greater access to the FDA for the purpose of expediting the drug's development, review and potential approval, and allows for eligibility for Accelerated Approval and Priority Review if relevant criteria are met.

In June 2022, we presented initial clinical data from Cohort 1 of the CRESTONE trial at the American Society of Clinical Oncology (ASCO) 2022 Annual Meeting. We believe the findings presented at ASCO 2022 represent positive clinical proof-of-concept data supporting the potential of seribantumab to induce deep and durable benefit for patients with tumors harboring NRG1 fusions. Key findings from the CRESTONE trial as of the data cut-off date of April 18, 2022 were as follows:



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From 12 evaluable patients with a median of one line of prior systemic therapy,

the investigator-assessed objective response rate (INV-ORR) was 33% across all

? tumor types, including two complete responses (CRs; 17%) and two partial

responses (PRs; 17%). In patients with non-small cell lung cancer (n=11), the

INV-ORR was 36%.

? Durations of response ranged from 1.4 - 11.5 months.

There was a favorable and tolerable safety profile across 35 patients with

eight different tumor types evaluable for safety from Cohorts 1, 2, and 3 along

? with those from the safety run-in portion of the study. The majority (80%) of

adverse events ("AEs") were mild or moderate (Grade 1 or 2) in severity, with

two Grade 3 treatment-related adverse events ("TRAEs") and no Grade 4 or 5

TRAEs. No patients discontinued seribantumab due to AEs.

We expect to report additional interim data from Cohort 1 of the CRESTONE trial in the first half of 2023, followed by topline data in 2024.

In July 2022, we entered into an exclusive license agreement (the "CSPC License Agreement") with CSPC Megalith Biopharmaceutical Co., Ltd., a subsidiary of CSPC Pharmaceutical Group ("CSPC"), to develop and commercialize EO-3021 (SYSA1801), a differentiated, clinical stage antibody drug conjugate ("ADC") targeting Claudin18.2, in all global territories (outside of the People's Republic of China, Hong Kong, Macau and Taiwan (such worldwide territory excluding the foregoing, the "Territory")). Pursuant to the terms of the CSPC License Agreement, we paid to CSPC a one-time, upfront payment of $27.0 million. CSPC will also be eligible to receive up to $148.0 million in potential development and regulatory milestone payments and up to $1.0 billion in potential commercial milestone payments plus royalties on net sales.

SYSA1801 is currently being evaluated by CSPC in a Phase 1, dose-escalation clinical trial in China. We expect to initiate a Phase 1 clinical trial evaluating EO-3021 in the United States in 2023. Claudin18.2 is a protein expressed across several types of solid tumors including many gastrointestinal cancers such as gastric, gastroesophageal junction and pancreatic cancer. EO-3021 is an ADC containing monomethyl auristatin E ("MMAE") payload, a potent anti-mitotic agent. MMAE has been clinically validated as an effective anti-tumor payload and is the cytotoxic component of several FDA-approved ADCs. Additionally, EO-3021 was granted orphan drug designation by the FDA for the treatment of gastric cancer (including cancer of gastroesophageal junction) in November 2020 and for the treatment of pancreatic cancer in May 2021.

We also plan to expand our drug development pipeline beyond seribantumab and EO-3021 into additional genomically defined cancers by leveraging our value-driving partnerships with Caris Life Sciences and others, as well as by exploring further opportunities to selectively partner on additional precision oncology assets.

In July 2022, we secured a $50.0 million senior secured loan facility from funds managed by K2HV. The initial proceeds from the facility primarily supported the exclusive license of EO-3021 in the Territory from CSPC and the execution of our pipeline. The facility provides us with up to $50.0 million in borrowing capacity in two tranches, with an initial tranche of $30.0 million available immediately. A second tranche, consisting of up to $20.0 million, will be available in the future, subject to mutual agreement between us and K2HV. We expect to use any future proceeds from the facility to support the continued development of EO-3021 and seribantumab, for additional pipeline expansion, and for general corporate purposes.

We were incorporated in April 2019. We have devoted substantially all of our resources to developing seribantumab, sponsoring the CRESTONE clinical trial, building our intellectual property portfolio, in-licensing EO-3021, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations through private placements of convertible preferred stock, our initial public offering, or IPO, and debt financing. On June 29, 2021, we closed our IPO and issued 6,250,000 shares of our common stock at a price of $16.00 per share, for net proceeds of $91.1 million, after deducting underwriting discounts, commissions, and other expenses of $8.9 million. In connection with the IPO, all shares of Series A and Series B convertible preferred stock outstanding automatically converted into 15,736,053 shares of common stock. On July 19, 2021, in connection with our IPO, the underwriters exercised the right to purchase 403,407 shares of our common stock at a price of $16.00 for net proceeds of $6.0 million. Prior to our IPO, we had received net proceeds of approximately $97.2 million from sales of our convertible



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preferred stock. In July 2022, we entered into the Sales Agreement with Cowen, under which Cowen may offer and sell, from time to time, shares of common stock having aggregate gross proceeds of up to $50.0 million. At our option, we may sell shares of common stock through Cowen as our sales agent.

Since inception, we have incurred significant operating losses annually and on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $38.8 million and $12.3 million for the three months ended September 30, 2022 and 2021, $76.0 million and $22.4 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, we had an accumulated deficit of $131.2 million. These losses have resulted primarily from costs incurred in connection with research and development activities, acquisition, patent investment, and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We believe our cash, cash equivalents and marketable securities of $107.9 million as of September 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements into 2024. 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. We will need to raise additional capital in the future to continue developing the drugs in our pipeline and to commercialize any approved drug. We may seek to obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan.

Impact of COVID-19

Since it was reported to have surfaced in December 2019, COVID-19 has spread across the world and has been declared a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 by the United States, Europe and Asia have included severe travel restrictions, social distancing requirements, stay-at-home orders and have delayed the commencement of non-COVID-19 related clinical trials, among other restrictions. As a result, the ongoing COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as contributing to significant volatility and negative pressure on the U.S. economy and in financial markets.

While we are currently continuing the clinical trials we have underway, COVID-19 precautions may directly or indirectly impact the timeline for some of our clinical trials. To date, the COVID-19 pandemic has not affected our enrollment of patients in our Phase 2 CRESTONE clinical trial and we currently do not anticipate any interruptions of clinical enrollment which would be primarily due to the COVID-19 pandemic. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets.

Components of our Results of Operations

Operating Expenses

Research and Development Expenses

Our operating expenses have consisted solely of research and development costs and general and administrative costs. Research and development expenses consist primarily of costs related to our research activities, including the development



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of our product candidates, and costs incurred for the in-licensing of EO-3021. Our research and development expenses include:

a one-time, upfront payment of $27.0 million paid to CSPC pursuant to the CSPC

? License Agreement for the exclusive rights to develop and commercialize EO-3021

in the Territory. Of this amount, $25.7M was recorded as research and

development expense and $1.3M was recorded as prepaid expense;

employee-related expenses, including salaries, related benefits, and

? stock-based compensation expense for employees engaged in research and

development activities;

external research and development expenses incurred in connection with the

? preclinical and clinical development of seribantumab, as well as the

preclinical development of EO-3021, including expenses incurred under

agreements with contract research organizations and consultants;

costs incurred with contract manufacturing organizations that manufacture drug

? products for use in our preclinical studies and clinical trials of

seribantumab;

? fees paid to consultants for services directly related to our product

development and regulatory efforts; and

? costs related to compliance with regulatory requirements related to conducting

our clinical activity.

Research and development costs consist of salaries and benefits, including associated stock-based compensation, and fees paid to other entities that conduct certain research and development activities on our behalf. Research and development costs are expensed as incurred. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations, and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimates accordingly.

To date, our research and development expenses have primarily been incurred to advance seribantumab and in-license EO-3021. We expect that significant additional spending will be required to progress seribantumab through the remainder of its clinical development, as well as advance EO-3021 and any future product candidate through clinical development. These expenses will primarily consist of expenses for the administration of clinical studies as well as manufacturing costs for clinical material supply. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates.



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



                                                   Three months ended        Nine months ended
                                                     September 30,            September 30,
                                                    2022          2021       2022         2021

                                                                 (in thousands)
Seribantumab                                     $     5,729    $  7,745   $  29,119    $ 13,881
EO-3021                                               25,895           -      25,895           -
Unallocated and other research and
development expenses                                     508         611       2,547       1,240
Unallocated personnel costs (including
stock-based compensation)                              2,208         942       6,654       2,225

Total research and development expenses $ 34,340 $ 9,298 $ 64,215 $ 17,346

The successful development and commercialization of seribantumab, EO-3021 or our other future product candidates is highly uncertain. The success of seribantumab, EO-3021 or any other future product candidate will depend on several factors, including the following:

? successful completion of preclinical studies and clinical trials, including our

CRESTONE trial;

acceptance of a biologic license application, or BLA, by the FDA, or other

? similar clinical trial applications from foreign regulatory authorities for

seribantumab and our future clinical trials for our future product candidates;

? timely and successful enrollment of patients in, and completion of, clinical

trials with favorable results;

demonstration of safety, efficacy and acceptable risk-benefit profiles of our

? product candidates, including our most advanced product candidate,

seribantumab, to the satisfaction of the FDA and foreign regulatory agencies;

? our ability, or that of our collaborators, to develop and obtain clearance or

approval of companion diagnostics, on a timely basis, or at all;

receipt and related terms of marketing approvals from applicable regulatory

? authorities, including the completion of any required post-marketing studies or

trials;

raising additional funds necessary to complete clinical development of and

? commercialize our product candidates, including our most advanced product

candidate, seribantumab;

? successfully identifying future acquisition, collaboration or in-license

candidates to expand our product candidate pipeline;

obtaining and maintaining patent, trade secret and other intellectual property

? protection and regulatory exclusivity for our product candidates, including our

most advanced product candidate, seribantumab;

making arrangements with third-party manufacturers, or establishing

? manufacturing capabilities, for both clinical and commercial supplies of our

product candidates;

? developing and implementing marketing and reimbursement strategies;

establishing sales, marketing and distribution capabilities and launching

? commercial sales of our products, if and when approved, whether alone or in

collaboration with others;

? acceptance of our products, if and when approved, by patients, the medical

community and third-party payors;

? effectively competing with other therapies;

? obtaining and maintaining third-party payor coverage and adequate


   reimbursement;


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? protecting and enforcing our rights in our intellectual property portfolio; and

? maintaining a continued acceptable safety profile of the products following

approval.

Many of these factors are beyond our control, and it is possible that none of our product candidates, including our most advanced product candidate, seribantumab, will ever obtain regulatory approval even if we expend substantial time and resources seeking such approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business. For example, our business could be substantially harmed if results of our ongoing CRESTONE clinical trial of seribantumab vary adversely from our expectations.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services, and insurance costs.

We anticipate that our general and administrative expenses will increase in the future as we support our continued research activities and development of our product candidates. We also expect to incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, investor and public relations, directors and officers insurance, and regulatory and tax related services associated with maintaining compliance with exchange listings and SEC requirements. In addition, if we obtain regulatory approval for seribantumab, or any of our future product candidates, we expect to incur significant expenses related to building a sales and marketing team to support product sales, and marketing and distribution activities, to the extent that such activities are not supported by one or more third-party collaborators.

Results of Operations

Three months ended September 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021:



                                         Three months ended
                                           September 30,
                                  2022          2021         Change

                                           (in thousands)
Operating expenses:
Research and development       $   34,340    $    9,298    $   25,042
General and administrative          4,191         2,979         1,212
Total operating expenses           38,531        12,277        26,254
Loss from operations             (38,531)      (12,277)      (26,254)
Other income (expense), net         (306)            10         (316)
Net loss                       $ (38,837)    $ (12,267)    $ (26,570)

Research and Development Expenses

Research and development expenses were $34.3 million for the three months ended September 30, 2022, compared to $9.3 million for the three months ended September 30, 2021. The increase of $25.0 million was primarily due to a $25.9 million cost related to the CSPC License Agreement for the exclusive rights to develop and commercialize EO-3021 in the Territory, a $1.3 million increase in employee related costs, including stock-based compensation, partially offset by a $2.0 million decrease in costs related to manufacturing clinical supply of seribantumab for use in the CRESTONE clinical trial, and a $0.2 million decrease in clinical trial expenses associated with the CRESTONE clinical trial, regulatory, consulting, and other expenses.



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General and Administrative Expenses

General and administrative expenses were $4.2 million for the three months ended September 30, 2022, compared to $3.0 million for the three months ended September 30, 2021. The increase of $1.2 million was primarily due to an increase of $0.9 million in personnel costs, including stock-based compensation, an increase of $0.2 million of professional fees and other consulting costs, and an increase of $0.1 million in administrative costs including Directors and Officers insurance.

Nine months ended September 30, 2022 and 2021

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:



                                         Nine months ended
                                           September 30,
                                  2022          2021         Change

                                           (in thousands)
Operating expenses:
Research and development       $   64,215    $   17,346    $   46,869
General and administrative         11,797         5,076         6,721
Total operating expenses           76,012        22,422        53,590
Loss from operations             (76,012)      (22,422)      (53,590)
Other income (expense), net          (26)             5          (31)
Net loss                       $ (76,038)    $ (22,417)    $ (53,621)

Research and Development Expenses

Research and development expenses were $64.2 million for the nine months ended September 30, 2022, compared to $17.3 million for the nine months ended September 30, 2021. The increase of $46.9 million was primarily due to a $25.9 million cost related to the CSPC License Agreement for the exclusive rights to develop and commercialize EO-3021 in the Territory, a $15.2 million increase in costs related to manufacturing clinical supply of seribantumab for use in the CRESTONE clinical trial, a $4.5 million increase in employee related costs, including stock-based compensation, and an increase of $1.3 million in clinical trial expenses associated with the CRESTONE clinical trial, regulatory, consulting, and other expenses.

General and Administrative Expenses

General and administrative expenses were $11.8 million for the nine months ended September 30, 2022, compared to $5.1 million for the nine months ended September 30, 2021. The increase of $6.7 million was primarily due to an increase of $3.5 million in personnel costs, including stock-based compensation, an increase of $2.4 million in administrative costs including Directors and Officers insurance, and an increase of $0.8 million of professional fees and other consulting costs.

Liquidity and Capital Resources

Since inception, we have not generated any revenue from product sales or any other sources and have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for several years, if ever.

Through September 30, 2022, we have funded our operations with proceeds from the sale of convertible preferred stock, proceeds from our IPO, and borrowings under loan agreements. As of September 30, 2022, we had cash, cash equivalents and marketable securities of $107.9 million.



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In July 2022, we entered into the Sales Agreement with Cowen, under which we may offer and sell, from time to time, shares of common stock having aggregate gross proceeds of up to $50.0 million. As of September 30, 2022, we have not sold any shares under the Sales Agreement.

In July 2022, we entered into the Loan Agreement with K2HV, as administrative agent for the Lenders, and Ankura Trust Company, LLC, as collateral agent for the Lenders. The Loan Agreement provides up to $50.0 million principal in the Term Loan consisting of a first tranche of $30.0 million funded at closing and a subsequent second tranche of up to $20.0 million upon our request, subject to review by the Lenders of certain information from us and discretionary approval by the Lenders.

For additional information regarding the Loan Agreement, please refer to Note 7, "Debt-K2 HealthVentures Loan and Security Agreement," to the accompanying unaudited consolidated financial statements.

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