10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 ________________________________

FORM 10-Q

 ________________________________

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

For the quarterly period ended September 30, 2022

OR

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

Commission File Number: 001-33958

SELLAS Life Sciences Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-8099512
(State of incorporation)	(I.R.S. Employer Identification No.)

7 Times Square, Suite 2503, New York, NY 10036

(646) 200-5278

(Address, including zip code, and telephone number, including

area code, of registrant's principal executive offices)

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	SLS	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 time 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:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

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 November 10, 2022, SELLAS Life Sciences Group, Inc. had outstanding 20,588,247 shares of common stock.

SELLAS LIFE SCIENCES GROUP, INC.

FORM 10-Q - Quarterly Report

For the Quarter Ended September 30, 2022

TABLE OF CONTENTS

		Page
	PART I - FINANCIAL INFORMATION
Item 1	Financial Statements	3
	Unaudited Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	3
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	4
	Unaudited Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021	5
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	6
	Unaudited Notes to Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4	Controls and Procedures	30
	PART II - OTHER INFORMATION
Item 1	Legal Proceedings	32
Item 1A	Risk Factors	32
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3	Defaults Upon Senior Securities	32
Item 4	Mine Safety Disclosures	32
Item 5	Other Information	32
Item 6	Exhibits	32
	Signatures

The names “SELLAS Life Sciences Group, Inc.,” “SELLAS,” the SELLAS logo, and other trademarks or service marks of SELLAS Life Sciences Group, Inc. appearing in this Quarterly Report on Form 10-Q are the property of SELLAS Life Sciences Group, Inc. Other trademarks, service marks or trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. We do not intend the use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of or by either of, these other companies.

Unless the context otherwise indicates, references in these notes to the “Company,” “we,” “us” or “our” refer to SELLAS Life Sciences Group, Inc. and its wholly owned subsidiaries.

1

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements that reflect our current views with respect to our development programs, business strategy, business plan, financial performance and other future events. These statements include forward-looking statements both with respect to us, specifically, and our industry, in general. Such forward-looking statements include the words "expect," "intend,” "plan," "believe," "project," "estimate,” "may,” "should," "anticipate," "will" and similar statements of a future or forward-looking nature identify forward-looking statements.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. The COVID-19 pandemic has caused a widespread global health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could impact our operating results. We expect the COVID-19 pandemic may continue to have both a direct and an indirect impact on our business operations and financial results and the business operations of our partners and collaborators, including direct and indirect economic effects as a result of inflation, supply chain disruptions and labor shortages. The extent of the impact on our clinical development and regulatory efforts and those of our partners and collaborators, our corporate development objectives, our financial position and the value of and market for our common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, including infection rate and hospitalizations, the emergence of new variants, travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, including the European Union and China, and the effectiveness of actions taken globally to contain and treat the disease, including the availability of safe and effective vaccines and the uptake thereof. There are or will be important factors that could cause actual results to differ materially from those indicated in these statements. These factors include, but are not limited to, those factors set forth in the sections captioned "Business – Overview,” “Risk Factors,” “Legal Proceedings,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission ("SEC") on March 31, 2022 ("2021 Annual Report") and in our other public filings with the SEC, all of which you should review carefully. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

2

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

(Unaudited)

	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	21,348	$	21,355
Restricted cash and cash equivalents	100		100
Prepaid expenses and other current assets	1,157		1,589
Total current assets	22,605		23,044
Operating lease right-of-use assets	961		723
Goodwill	1,914		1,914
Deposits and other assets	521		594
Total assets	$	26,001	$	26,275
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,127	$	2,144
Accrued expenses and other current liabilities	4,570		2,640
Operating lease liabilities	356		198
Acquired in-process research and development payable	5,500		—
Total current liabilities	12,553		4,982
Operating lease liabilities, non-current	680		610
Warrant liability	1		40
Contingent consideration	170		296
Total liabilities	13,404		5,928
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; Series A convertible preferred stock, 17,500 shares designated; no shares issued and outstanding at September 30, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value; 350,000,000 shares authorized, 20,588,247 and 15,895,637 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	2		2
Additional paid-in capital	183,378		158,948
Accumulated deficit	(170,783)		(138,603)
Total stockholders’ equity	12,597		20,347
Total liabilities and stockholders’ equity	$	26,001	$	26,275

See accompanying notes to these unaudited consolidated financial statements.

3

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Licensing revenue	$	—	$	—	$	1,000	$	7,600
Operating expenses:
Cost of licensing revenue	—		—		100		200
Research and development	4,282		4,541		14,422		12,281
Acquired in-process research and development	—		—		10,000		—
General and administrative	2,864		2,436		8,982		8,794
Total operating expenses	7,146		6,977		33,504		21,275
Operating loss	(7,146)		(6,977)		(32,504)		(13,675)
Non-operating income (expense), net:
Change in fair value of warrant liability	2		30		39		(29)
Change in fair value of contingent consideration	11		(140)		126		(403)
Interest income	111		2		159		6
Total non-operating income (expense), net	124		(108)		324		(426)
Net loss	$	(7,022)	$	(7,085)	$	(32,180)	$	(14,101)
Per share information:
Net loss per common share, basic and diluted	$	(0.34)	$	(0.45)	$	(1.70)	$	(0.92)
Weighted-average common shares outstanding, basic and diluted	20,562,351		15,874,076		18,932,571		15,344,210

See accompanying notes to these unaudited consolidated financial statements.

4

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Amounts in thousands, except share amounts)

(Unaudited)

	Three Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2022	20,551,918	$	2	$	182,816	$	(163,761)	$	19,057
Issuance of common stock and common stock warrants, net of issuance costs	21,602	—		69		—		69
Issuance of common stock under employee stock purchase plan	14,727	—		38		—		38
Stock-based compensation	—	—		455		—		455
Net loss	—	—		—		(7,022)		(7,022)
Balance at September 30, 2022	20,588,247	$	2	$	183,378	$	(170,783)	$	12,597
	Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2021	15,895,637	$	2	$	158,948	$	(138,603)	$	20,347
Issuance of common stock and common stock warrants, net of issuance costs	4,667,521	—		23,065		—		23,065
Issuance of common stock under employee stock purchase plan	25,089	—		85		—		85
Stock-based compensation	—	—		1,280		—		1,280
Net loss	—	—		—		(32,180)		(32,180)
Balance at September 30, 2022	20,588,247	$	2	$	183,378	$	(170,783)	$	12,597

	Three Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2021	15,873,941	$	2	$	158,333	$	(124,920)	$	33,415
Issuance of common stock upon exercise of warrants	190	—		2		—		2
Stock-based compensation	—	—		275		—		275
Net loss	—	—		—		(7,085)		(7,085)
Balance at September 30, 2021	15,874,131	$	2	$	158,610	$	(132,005)	$	26,607
	Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2020	14,254,554	$	1	$	145,864	$	(117,904)	$	27,961
Issuance of common stock and common stock warrants, net of issuance costs	786,927	—		9,005		—		9,005
Issuance of common stock upon exercise of warrants	832,650	1		3,018		—		3,019
Stock-based compensation	—	—		723		—		723
Net loss	—	—		—		(14,101)		(14,101)
Balance at September 30, 2021	15,874,131	$	2	$	158,610	$	(132,005)	$	26,607

See accompanying notes to these unaudited consolidated financial statements.

5

SELLAS LIFE SCIENCES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(32,180)	$	(14,101)
Adjustment to reconcile net loss to net cash used in operating activities:
Acquired in-process research and development expense	10,000		—
Non-cash stock-based compensation	1,280		723
Non-cash lease expense	334		—
Change in fair value of common stock warrants	(39)		29
Change in fair value of contingent consideration	(126)		403
Changes in operating assets and liabilities:
Contract asset	—		1,128
Prepaid expenses and other assets	505		(2,181)
Accounts payable	(17)		(2,112)
Accrued expenses and other current liabilities	1,930		666
Operating lease liabilities	(344)		—
Deferred revenue	—		(5,600)
Net cash used in operating activities	(18,657)		(21,045)
Cash flows from investing activities:
Cash paid for acquisition of in-process research and development	(4,500)		—
Net cash used in investing activities	(4,500)		—
Cash flows from financing activities:
Proceeds from issuance of common stock and common stock warrants, net of offering costs	23,065		9,005
Proceeds from employee stock purchases	85		—
Net proceeds from exercise of warrants	—		3,019
Net cash provided by financing activities	23,150		12,024
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	(7)		(9,021)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the beginning of period	21,455		35,402
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the end of period	$	21,448	$	26,381
Supplemental disclosure of cash flow information:
Cash received during the period for interest	$	159	$	6
Supplemental disclosure of non-cash investing and financing activities:
Payable for acquired in-process research and development	$	5,500	$	—
Increase in operating right of use assets and current and non-current lease liabilities	$	449	$	—

See accompanying notes to these unaudited consolidated financial statements.

6

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business

Overview

SELLAS Life Sciences Group, Inc. (the "Company" or "SELLAS") is a late-stage clinical biopharmaceutical company focused on novel therapeutics for a broad range of cancer indications. SELLAS’ lead product candidate, galinpepimut-S ("GPS"), is a cancer immunotherapeutic agent licensed from Memorial Sloan Kettering Cancer Center ("MSK") and targets the Wilms Tumor 1 ("WT1") protein, which is present in an array of tumor types. GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers and solid tumor indications. SELLAS' second product candidate is GFH009, a small molecule, highly selective cyclin-dependent kinase 9 ("CDK9") inhibitor, which is licensed from GenFleet Therapeutics (Shanghai), Inc. ("GenFleet"), for all therapeutic and diagnostic uses in the world outside of Greater China (mainland China, Hong Kong, Macau and Taiwan).

2. Liquidity

Since inception, the Company has incurred recurring losses and negative cash flows from operations and, as of September 30, 2022, has an accumulated deficit of $170.8 million. During the nine months ended September 30, 2022, the Company incurred a net loss of $32.2 million, which includes a one-time $10.0 million expense for acquired in-process research and development related to the upfront license fee for GFH009, and used $18.7 million of cash in operations. The Company expects to generate losses from operations for the foreseeable future primarily due to research and development costs for its product candidates, which raises substantial doubt about the Company's ability to continue as a going concern.

On April 16, 2021, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. (the "Agent"). From time to time during the term of the Sales Agreement, the Company may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds. The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to the Company's registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and declared effective on April 29, 2021. During the year ended December 31, 2021, the Company sold a total of 786,927 shares of common stock pursuant to the Sales Agreement at an average price of $12.04 per share for aggregate net proceeds of approximately $9.0 million. During the nine months ended September 30, 2022, the Company sold an additional 37,891 shares of common stock pursuant to the Sales Agreement at an average price of $3.25 per share for aggregate net proceeds of approximately $0.1 million. There remains approximately $40.4 million available for future sales of shares of common stock under the Sales Agreement. Other than the Sales Agreement, the Company currently does not have any commitments to obtain additional funds.

In December 2020, the Company, together with its wholly-owned subsidiary, SLSG Limited, LLC, entered into an Exclusive License Agreement (the “3DMed License Agreement”) with 3D Medicines Inc. ("3DMed"), pursuant to which the Company granted 3DMed a sublicensable, royalty-bearing license, under certain intellectual property owned or controlled by the Company, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS product candidates for all therapeutic and other diagnostic uses in mainland China, Hong Kong, Macau and Taiwan ("3DMed Territory"). To date, the Company has received $10.5 million in upfront payments and certain technology transfer and regulatory milestones. The participation of 3DMed in the REGAL Phase 3 clinical trial in China will trigger two development milestone payments totaling $13.0 million to the Company, which the Company expects to receive in the first half of 2023. A total of $191.5 million in potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3DMed License Agreement as of September 30, 2022, which milestones are variable in nature and not under the Company's control.

As of September 30, 2022, the Company had cash and cash equivalents of approximately $21.3 million and restricted cash and cash equivalents of $0.1 million. In accordance with Accounting Standards Codification ("ASC") 205-40, Presentation of Financial Statements - Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a

7

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

going concern within one year after the consolidated financial statements are issued. The Company expects its cash and cash equivalents will not be sufficient to fund its current planned operations for at least the next twelve months from the date of issuance of these financial statements.

The Company will require substantial additional financing to commercially develop any current or future product candidates. If the Company is unable to obtain additional funding on a timely basis, it will be required to scale back its plans and place certain activities on hold. Other than the Sales Agreement, the Company currently does not have any commitments to obtain additional funds. The Company's management continues to evaluate different strategies to obtain the required funding for future operations. These strategies may include utilizing the Sales Agreement, public and private placements of equity and/or debt securities, payments from potential strategic research and development collaborations, and licensing and/or marketing arrangements with pharmaceutical companies. Additionally, the Company may continue to pursue discussions with global and regional pharmaceutical companies for licensing and/or co-development rights to its product candidates. The Company has prepared its consolidated financial statements assuming that it will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

3. Basis of Presentation and Significant Accounting Policies

The Company's complete summary of significant accounting policies can be found in "Item 8. Financial Statements and Supplementary Data - Note 3. Basis of Presentation and Significant Accounting Policies" in the audited annual consolidated financial statements included in the 2021 Annual Report. The significant accounting policies summarized and included in the 2021 Annual Report have not materially changed, except as set forth below.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the ASC and Accounting Standards Updates ("ASUs") of the Financial Accounting Standards Board ("FASB").

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. Unless the context otherwise indicates, reference in these notes to the "Company" refer to SELLAS Life Sciences Group, Inc., and its wholly owned subsidiaries, SELLAS Life Sciences Group, Ltd., a privately held Bermuda exempted company, SLSG Limited, LLC, Sellas Life Sciences Limited, and Apthera, Inc.

Unaudited Interim Results

These consolidated financial statements and accompanying notes should be read in conjunction with the Company's annual consolidated financial statements and the notes thereto included in the 2021 Annual Report. The accompanying consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021, are unaudited, but include all adjustments, consisting of normal recurring entries, that management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2021 have been derived from the audited financial statements as of that date.

Impact of COVID-19

The ongoing global COVID-19 pandemic, including the surges of cases from various variants, continues to disrupt the Company’s business operations and those of its collaborators, including 3DMed and GenFleet, contractors, contract research organizations (“CROs”), suppliers, clinical sites, contract manufacturing organizations (“CMOs”), and other partners. The COVID-19 pandemic has and may continue to affect the health and availability of the Company’s workforce and that of the third-parties it relies on, such as its CROs, clinical sites, CMOs, and other

8

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

contractors as well as the governmental agencies, such as the U.S. Food and Drug Administration (“FDA”) and health authorities in other countries which could delay or otherwise adversely impact the ability of such parties to fulfill their obligations. The Company is continuously monitoring the impact of the pandemic on its clinical development programs. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that, despite progress in vaccination efforts, remain highly uncertain, subject to change and cannot be predicted with confidence, including the duration of the outbreak, the continued availability and efficacy of vaccines and booster shots, developments or perceptions regarding safety of vaccines, new information which may emerge concerning the severity of COVID-19, the emergence of new strains of COVID-19, including any future variants that may emerge, the actions to contain COVID-19 or treat its impact, including continuing or new lockdowns, among others, and the direct and indirect economic effects of the pandemic, including as a result of inflation, supply chain disruptions, shifting demand and labor shortages. The estimates of the impact on the Company’s business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

Acquired In-Process Research and Development

Costs incurred in obtaining technology licenses are immediately recognized as acquired in-process research and development expense, provided the technology licensed has no alternative future use. Payments related to contingent consideration such as development milestones, commercial milestones and royalties (Note 5) will be recognized when the contingency is probable and reasonably estimable as prescribed by ASC 450, Contingencies.

Net Loss Per Share

Net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options and unvested restricted stock that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted average number of shares remains the same for both calculations due to the fact that, when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	As of September 30,
	2022	2021
Common stock warrants	5,148	558
Stock options	1,071	526
Restricted stock units ("RSUs")	297	210
	6,516	1,294

Recent Accounting Standards Adopted

In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications of Exchanges of Freestanding Equity-Classified Written Call Options to clarify the accounting for modifications or exchanges of freestanding equity-classified written call options, such as warrants, that remain equity classified after modification or exchange. This ASU became effective for the Company on January 1, 2022 and did not have a material impact on the Company's consolidated financial statements.

Recent Accounting Standards Not Yet Adopted

9

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which, among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard becomes effective for the Company in the first quarter of 2024 and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its consolidated financial statements.

4. Fair Value Measurements

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):

Description	September 30, 2022		Quoted Prices In Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	20,967	$	20,967	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	21,067	$	21,067	$	—	$	—
Liabilities:
Warrant liability	$	1	$	—	$	—	$	1
Contingent consideration	170		—		—		170
Total liabilities measured and recorded at fair value	$	171	$	—	$	—	$	171

Description	December 31, 2021		Quoted Prices In  Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	21,000	$	21,000	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	21,100	$	21,100	$	—	$	—
Liabilities:
Warrant liability	$	40	$	—	$	—	$	40
Contingent consideration	296		—		—		296
Total liabilities measured and recorded at fair value	$	336	$	—	$	—	$	336

The Company did not transfer any financial instruments into or out of Level 3 classification, during the nine months ended September 30, 2022 or during the year ended December 31, 2021. See Note 9, Warrants to Acquire Shares of Common Stock, for a reconciliation of the changes in the fair value of the warrant liability for the nine months ended September 30, 2022.

A reconciliation of the change in the fair value of the contingent consideration liability for the nine months ended September 30, 2022 is as follows (in thousands):

10

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent consideration, December 31, 2021	$	296
Change in the fair value of the contingent consideration	(126)
Contingent consideration, September 30, 2022	$	170

The contingent consideration relates to the future contingent payments of up to $32.0 million based on the achievement of certain development and commercial milestones relating to the Company’s nelipepimut-S ("NPS") product candidate, of which $2.0 million has been paid to date. The remaining contingent consideration of up to $30.0 million is payable at the election of the Company in either cash or shares of common stock, provided that the Company may not issue any shares in satisfaction of any contingent consideration, unless it has first obtained approval from its stockholders in accordance with Rule 5635(a) of the Nasdaq Marketplace Rules. The fair value of the contingent consideration is measured at the end of each reporting period using Level 3 inputs. The fair value of development and regulatory milestones are estimated utilizing a probability adjusted, discounted cash flow approach and the fair value of net sales milestones is estimated utilizing an option pricing model with Monte Carlo simulation.

The following significant unobservable inputs were used in the valuation of the contingent consideration liability:

	As of September 30, 2022		As of December 31, 2021
Potential milestone payments	$0 - $30 million		$0 - $30 million
Discount rate	16.8	%	15.5	%
Cumulative probability of success	5.3	%	5.3	%
Projected years of payments	2028 - 2031		2028 - 2031

5. Acquired In-Process Research and Development

Exclusive License Agreement with GenFleet

On March 31, 2022, the Company entered into an exclusive license agreement with GenFleet pursuant to which GenFleet granted to the Company a sublicensable, royalty-bearing license, under certain of its intellectual property, to develop, manufacture, and commercialize GFH009 for the treatment, diagnosis or prevention of disease in humans and animals in all countries and territories of the world other than mainland China, Hong Kong, Macau, and Taiwan (the "GFH009 Territory"). GFH009 is currently in a Phase 1 clinical trial in the United States and China.

In consideration for the exclusive license, the Company has agreed to pay to GenFleet (i) an upfront and technology transfer fee of $10.0 million, of which $4.5 million was paid in April 2022 and $5.5 million is due upon the first day of the 15th calendar month following the effective date of the license agreement, (ii) development and regulatory milestone payments for up to three indications totaling up to $48.0 million in the aggregate, and (iii) sales milestone payments totaling up to $92.0 million in the aggregate upon the achievement of certain net sales thresholds in a given calendar year. The Company has also agreed to pay GenFleet single-digit tiered royalties based upon a percentage of annual net sales of GFH009 in the GFH009 Territory, with the royalty rate escalating based on the level of annual net sales ranging from the low to high single digits.

During the nine months ended September 30, 2022, the Company expensed $10.0 million related to the acquired technology as in-process research and development based on the assessment that the technology has no alternative future use, $4.5 million of which was paid in April 2022 and the remaining $5.5 million expected to be paid by the end of the second quarter of 2023 for which the Company has recorded an acquired in-process research and development payable as of September 30, 2022.

11

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

6. Balance Sheet Accounts

Prepaid expenses and other current assets consist of the following (in thousands):

	September 30, 2022		December 31, 2021
Insurance	$	667	$	217
Clinical development	316		1,309
Professional fees	127		36
Other	47		27
Prepaid expenses and other current assets	$	1,157	$	1,589

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30, 2022		December 31, 2021
Clinical trial costs	$	2,947	$	1,325
Compensation and related benefits	1,228		989
Professional fees	203		165
Other	192		161
Accrued expenses and other current liabilities	$	4,570	$	2,640

7. Commitments and Contingencies

Leases

The Company has a non-cancelable operating lease for certain executive, administrative, and general business office space for its headquarters in New York, New York, which began on June 5, 2020, was amended in February 2022 to add additional space, and has a term through December 31, 2024. The Company assessed the lease amendment for the additional space and determined it should be accounted for as a separate contract.

The weighted average discount rate of the Company's operating leases under ASC 842, Leases is approximately 13.95%. As of September 30, 2022, the leases have a remaining term of 2.25 years.

Rent expense related to the Company's operating leases was approximately $0.1 million for each of the three months ended September 30, 2022 and 2021, and $0.3 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively. The Company made cash payments related to its operating leases of approximately $0.1 million for each of the three months ended September 30, 2022 and 2021, and $0.3 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Future minimum lease payments are as follows as of September 30, 2022 (in thousands):

Future minimum lease payments:
2022 (remaining)	$	127
2023	518
2024	533
Total future minimum lease payments	1,178
Less: imputed interest	(142)
Current and non-current operating lease liabilities	$	1,036

12

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Legal Proceedings

From time to time, the Company is subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business, which may include employment matters, breach of contract disputes and stockholder litigation. Such actions and proceedings are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, when the Company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. As of September 30, 2022, there was no pending or threatened litigation.

8. Stockholders’ Equity

Preferred Stock

The Company has authorized up to 5,000,000 shares of preferred stock, $0.0001 par value per share, for issuance. There were no preferred shares outstanding as of September 30, 2022 and December 31, 2021.

Common Stock

The Company has authorized up to 350,000,000 shares of common stock, $0.0001 par value per share, for issuance.

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

As of September 30, 2022, the Company has shares of common stock reserved for future issuance as follows (in thousands):

Warrants outstanding	5,148
Stock options outstanding	1,071
RSUs outstanding	297
Shares reserved for future issuance under the Company’s 2019 Equity Incentive Plan	608
Shares reserved for future issuance under the 2021 Employee Stock Purchase Plan	275
Total common stock reserved for future issuance	7,399

13

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

9. Warrants to Acquire Shares of Common Stock

Warrants Outstanding

The following is a summary of the activity of the Company's warrants to acquire shares of common stock for the nine months ended September 30, 2022 (in thousands):

Warrant Issuance	Outstanding, December 31, 2021	Granted	Canceled/Expired	Outstanding, September 30, 2022	Exercise Price per Share		Expiration
Warrants classified as equity:
April 2022 Offering	—	4,630	—	4,630	$	5.40	April 2027
January 2020 Offering	309	—	—	309	$	3.93	July 2025
July 2020 PIPE Offering	25	—	—	25	$	3.30	August 2025
July 2018 Offering	132	—	—	132	$	7.50	July 2023
March 2019 Exercise Agreement	30	—	—	30	$	7.50	March 2024
Other	9	—	—	9	$	306.66	December 2022 - June 2024
	505	4,630	—	5,135
Warrants classified as liability	14	—	(1)	13	$	7.50	September 2023 - November 2023
	519	4,630	(1)	5,148

Warrants to acquire shares of common stock primarily consist of equity-classified warrants. In addition, warrants to acquire shares of common stock that may require the Company to settle in cash are liability-classified warrants.

Warrants Classified as Equity

The warrants to acquire shares of common stock issued during the April 2022 Offering were recorded as equity upon issuance. During its evaluation of equity classification of these warrants, the Company considered the conditions as prescribed within ASC 815-40, Derivatives and Hedging, Contracts in an Entity’s own Equity (“ASC 815-40”). The conditions within ASC 815-40 are not subject to a probability assessment. The warrants to acquire shares of common stock do not fall under the liability criteria within ASC 480, Distinguishing Liabilities from Equity, as they are not puttable and do not represent an instrument that has a redeemable underlying security. The warrants do meet the definition of a derivative instrument under ASC 815, but are eligible for the scope exception as they are indexed to the Company’s own stock and would be classified in permanent equity if freestanding.

Warrants Classified as Liabilities

Liability-classified warrants consist of warrants to acquire common stock which may be settled in cash and were determined not to be indexed to the Company’s common stock.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date, and any decrease or increase in estimated fair value is recorded in the consolidated statement of operations as change in fair value of warrant liability. The fair value of the warrants is estimated using a Black-Scholes pricing model with the following inputs:

14

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

	September 30, 2022			December 31, 2021
Risk-free interest rate	4.05		%	0.65		%
Volatility	89.94		%	131.04		%
Expected term (years)	1.00			1.75
Expected dividend yield	—		%	—		%
Strike price	$	7.50		$	7.50

The expected volatility assumption is based on the Company's implied volatility. The expected term assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

The changes in fair value of the warrant liability for the nine months ended September 30, 2022 were as follows (in thousands):

 

Warrant liability, December 31, 2021	$	40
Change in fair value of warrants	(39)
Warrant liability, September 30, 2022	$	1

10. License Revenue

Exclusive License Agreement with 3D Medicines Inc.

In December 2020, the Company, together with its wholly-owned subsidiary, SLSG Limited, LLC, entered into the 3DMed License Agreement with 3DMed, pursuant to which the Company granted 3DMed a sublicensable, royalty-bearing license, under certain intellectual property owned or controlled by the Company, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS (referred to as GPS Plus) product candidates ("GPS Licensed Products") for all therapeutic and other diagnostic uses in the 3DMed Territory. The license is exclusive except with respect to certain know-how that has been non-exclusively licensed to the Company and is sublicensed to 3DMed on a non-exclusive basis. The Company has retained development, manufacturing and commercialization rights with respect to the GPS Licensed Products in the rest of the world.

In partial consideration for the rights granted by the Company, 3DMed agreed to pay the Company (i) a one-time upfront cash payment of $7.5 million, and (ii) milestone payments totaling up to $194.5 million in the aggregate upon the achievement of certain technology transfer, development and regulatory milestones, as well as sales milestones based on certain net sales thresholds of GPS Licensed Products in the 3DMed Territory in a given calendar year. 3DMed also agreed to pay tiered royalties based upon a percentage of annual net sales of GPS Licensed Products in the 3DMed Territory ranging from the high single digits to the low double digits.

The Company determined the initial transaction price of the single performance obligation to be $9.5 million, which included the $7.5 million upfront fee as well as $2.0 million in development milestones that were assessed as probable of being achieved at the inception of the 3DMed License Agreement and therefore were not constrained. As of December 31, 2021, the full $9.5 million initial transaction price was fully recognized as licensing revenue. The Company determined that the remaining $192.5 million in certain future development, regulatory, and sales milestones is variable consideration subject to constraint at inception. At the end of each reporting period, the Company reevaluates the probability of achievement of the future development, regulatory, and sales milestones subject to constraint and, if necessary, will adjust its estimate of the overall transaction price. Any such adjustments will be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

15

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

On March 31, 2022, the Company announced that an IND application filed by 3DMed for a small Phase 1 clinical trial investigating safety of GPS in China was approved by China's NMPA. The IND approval by the NMPA triggered a $1.0 million milestone payment to the Company which was recognized as licensing revenue in the first quarter of 2022 and payment was received in May 2022. An additional $191.5 million in potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3DMed License Agreement as of September 30, 2022, which milestones are variable in nature and not under the Company's control.

For the sales-based royalties, the Company will recognize revenue when the related sales occur. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

There was no license revenue recognized during each of the three months ended September 30, 2022 and 2021. There was $1.0 million and $7.6 million in license revenue recognized during the nine months ended September 30, 2022 and 2021, respectively.

There was no cost of license revenue recognized during each of the three months ended September 30, 2022 and 2021. There was $0.1 million and $0.2 million in cost of license revenues for the nine months ended September 30, 2022 and 2021, respectively, for sublicensing fees incurred under the Company's license from MSK in connection with the 3DMed License Agreement.

11. Stock-Based Compensation

2017 Equity Incentive Plan

On December 29, 2017, the 2017 Equity Incentive Plan was approved by the stockholders of the Company, which currently allows for issuance of up to approximately 22,000 shares of common stock underlying stock options granted prior to September 10, 2019. The 2017 Equity Incentive Plan was terminated upon the approval of the 2019 Incentive Plan subject to outstanding stock options granted under the 2017 Equity Incentive Plan that remain exercisable through maturity for the Company's employees and directors.

2019 Equity Incentive Plan

On September 10, 2019, the 2019 Equity Incentive Plan was approved by the stockholders of the Company, which currently allows for issuance of up to approximately 1,964,000 shares of common stock in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate.

The number of shares reserved for issuance under the 2019 Equity Incentive Plan will automatically increase on January 1 of each year, for a period of not more than four years, commencing on January 1, 2020 and ending on (and including) January 1, 2023, by an amount equal to the lesser of (i) 5% of the total number of shares of common stock outstanding at the end of the prior fiscal year; and (ii) an amount determined by the board of directors or authorized committee. As of September 30, 2022, approximately 608,000 shares of common stock were reserved for future grants under the 2019 Equity Incentive Plan.

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, respectively (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development	$	72	$	36	$	197	$	84
General and administrative	383		239		1,083		639
Total stock-based compensation	$	455	$	275	$	1,280	$	723

16

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Options to Purchase Shares of Common Stock

The following table summarizes stock option activity of the Company for the nine months ended September 30, 2022:

	Total Number of Shares (In Thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2021	534	$	10.09	8.77	$	681
Granted	543	5.01
Canceled	(6)	2.28
Outstanding at September 30, 2022	1,071	$	7.56	8.73	$	28
Options exercisable at September 30, 2022	282	$	12.89	7.85	$	18

The aggregate intrinsic values of outstanding and exercisable stock options at September 30, 2022 were calculated based on the closing price of the Company’s common stock as reported on the Nasdaq Capital Market on September 30, 2022 of $2.02 per share. The aggregate intrinsic value equals the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying stock options.

The Company uses the Black-Scholes option-pricing model to determine the fair value of all its stock options granted. The weighted average assumptions used during the three and nine months ended September 30, 2022 and 2021, respectively, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Risk-free interest rate	3.00	%	1.01	%	1.95	%	1.04	%
Volatility	138.57	%	124.63	%	131.54	%	121.29	%
Expected term (years)	6.03		6.25		6.18		6.18
Expected dividend yield	—	%	—	%	—	%	—	%

The weighted-average grant date fair value of options granted during the three months ended September 30, 2022 and 2021 was $2.78 and $8.09, respectively. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 and 2021 was $4.52 and $6.99, respectively.

The Company’s expected common stock price volatility assumption is based upon the Company's own implied volatility in combination with the implied volatility of a basket of comparable companies. The expected life assumptions for employee grants were based upon the simplified method, which averages the contractual term of the Company’s options of ten years with the average vesting term of four years for an average of approximately six years. The expected life assumptions for non-employees were based upon the contractual term of the option. The dividend yield assumption is zero because the Company has never paid cash dividends and presently has no intention to do so. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates. The Company accounts for forfeitures as they occur.

As of September 30, 2022, there was $3.4 million of unrecognized compensation cost related to outstanding stock options that is expected to be recognized as a component of the Company’s operating expenses over a weighted-average period of 2.72 years.

Time-vested RSUs and RSUs with Performance Conditions

The following table summarizes RSU activity of the Company for the nine months ended September 30, 2022:

17

SELLAS LIFE SCIENCES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

	Shares (In Thousands)	Weighted Average Grant Date Fair Value
Unvested at December 31, 2021	200	$	2.81
Granted	97	$	5.34
Unvested at September 30, 2022	297	$	3.64

As of September 30, 2022, there was $0.9 million of unrecognized compensation cost related to outstanding RSUs that is expected to be recognized as a component of the Company's operating expenses over a weighted-average period of 2.25 years. No RSUs vested during the nine months ended September 30, 2022.

2021 Employee Stock Purchase Plan

On April 22, 2021, the Board of Directors adopted the 2021 Employee Stock Purchase Plan ("2021 ESPP") which was approved by the Company's stockholders on June 8, 2021. The 2021 ESPP allows employees to contribute up to 20% of their cash earnings, subject to a maximum of $25,000 per year under Internal Revenue Service rules, to be used to purchase shares of the Company’s common stock on semi-annual purchase dates. The 2021 ESPP allows eligible employees to purchase shares of common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six-month offering period during the term of the 2021 ESPP.

During the nine months ended September 30, 2022, 25,089 shares of common stock were purchased by employees under the 2021 ESPP for proceeds of approximately $0.1 million. During the three months ended September 30, 2022, 14,727 shares of common stock were purchased by employees under the 2021 ESPP for proceeds of approximately $38,000. There are currently 274,911 shares of common stock reserved for issuance under the 2021 ESPP as of September 30, 2022.

12. Subsequent Events

The Company evaluated all events or transactions that occurred after September 30, 2022 up through the date these financial statements were issued. Other than as disclosed elsewhere in the notes to the consolidated financial statements, the Company did not have any material subsequent events.

18

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition as of September 30, 2022 and results of operations for the three and nine months ended September 30, 2022 and 2021, respectively, should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission, or SEC, on March 31, 2022, or our 2021 Annual Report, and our other public reports filed with the SEC.

Overview

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

Galinpepimut-S, or GPS

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

In January 2020, we commenced in the United States a Phase 3 open-label randomized clinical trial, the REGAL study, for GPS monotherapy in patients with acute myeloid leukemia, or AML, in the maintenance setting after achievement of second complete remission, or CR2, following successful completion of second-line antileukemic therapy. Patients are randomized to receive either GPS or best available treatment, or BAT. We expect this study will be used as the basis for submission of a Biologics License Application, or BLA, subject to a statistically significant and clinically meaningful data outcome and agreement with the U.S. Food & Drug Administration, or the FDA. The primary endpoint of the clinical trial is overall survival, or OS.

Following review of preliminary data to date from the REGAL study, which was pooled (i.e., GPS arm plus BAT, or control, arm) and which remained blinded as to treatment arm, we observed that the median OS in the pooled study population is likely considerably longer, by approximately twofold, than that originally anticipated and upon which the protocol and statistical analysis plan, or SAP, for the study were based. Accordingly, the overall duration of the REGAL study is now expected to be longer than initially predicted. Following consultation with members of the Independent Data Monitoring Committee for the study and AML key opinion leaders, as well as the recommendations of our biostatistics experts, we are implementing changes to the SAP and protocol for the REGAL study as follows:

•The total targeted enrollment in the study will be increased from 116 patients to a range of 125 patients to 140 patients

•The targeted number of events (deaths) for the interim analysis will be reduced to 60 from 80 and is expected to occur in late 2023 or early 2024

•The targeted number of events (death) for the final analysis will be reduced to 80 from 105 and is expected to occur by the end of 2024

•Statistical significance would be achieved by an estimated hazard ratio (HR) for OS of 0.636, corresponding to an OS of 12.6 months vs. 8 months for GPS vs. BAT, respectively.

Because the interim and final analyses are event driven, they may occur at different times than those listed above.

19

In December 2020, we entered into an exclusive license agreement with 3D Medicines Inc., or 3DMed, a China-based biopharmaceutical company developing next-generation immuno-oncology drugs, for the development and commercialization of GPS, as well as our next generation heptavalent immunotherapeutic GPS Plus, which is at preclinical stage, across all therapeutic and diagnostic uses in the Greater China territory (mainland China, Hong Kong, Macau and Taiwan). We have retained sole rights to GPS and GPS Plus outside of the Greater China area. On March 30, 2022, an investigational new drug, or IND, application filed by 3DMed to initiate the first clinical trial in China for 3D189, also known as GPS, was approved by China’s National Medical Products Administration, or NMPA. The IND is for a small Phase 1 clinical trial investigating safety. The approval by the NMPA triggered a $1.0 million milestone payment to the Company which we recognized as license revenue in the first quarter of 2022 and payment was received in the second quarter of 2022. We have agreed with 3DMed for 3DMed to participate in the REGAL study through the inclusion of approximately 20 patients from the Greater China territory. Such participation by 3DMed is possible due to the increase in the target patient enrollment in the study and will trigger two development milestone payments totaling $13.0 million, which we expect to receive in the first half of 2023. If the REGAL study meets its primary endpoint for efficacy and the Chinese regulatory authorities determine that the REGAL data is sufficient for approval in China (which cannot be guaranteed), GPS could potentially reach the market in Greater China much earlier than we and 3DMed had been anticipated when we entered into the license agreement providing rights to 3DMed.

In December 2018, pursuant to a Clinical Trial Collaboration and Supply Agreement, we initiated a Phase 1/2 multi-arm “basket” type clinical study of GPS in combination with Merck & Co., Inc.’s, or Merck, anti-PD-1 therapy, pembrolizumab (Keytruda®). In 2020, we and Merck determined to focus on ovarian cancer (second or third line WT1+ relapsed or refractory metastatic ovarian cancer). On November 10, 2022, we reported the following confirmatory topline data from 17 evaluable patients in the study:

•Median OS was 18.4 months compared to 13.8 months with pembrolizumab alone in a in a checkpoint inhibitor single agent study in a similar patient population treated with checkpoint inhibitor alone.

•Median progression-free survival, or PFS, was 12 weeks compared to 8 weeks in a checkpoint inhibitor single agent study in a similar patient population treated with checkpoint inhibitor alone.

•The overall response rate of the trial is 6.3 percent with a disease control rate, or DCR, which is the sum of overall response rate and rate of stable disease, of 50.1 percent at a median follow-up of 14.4 months. In a checkpoint inhibitor single agent study in a similar platinum-resistant ovarian cancer patient population treated with a checkpoint inhibitor alone, the observed DCR was 37.2 percent, consistent with a DCR rate increase of approximately 45 percent in the GPS combination with pembrolizumab over that seen for checkpoint inhibitors alone.

•Survival and disease control benefits were observed in patients harboring tumors with any level of detectable PD-L1 expression, i.e., those with Combined Positive Score, or CPS, of 1 or higher. The DCR is 63.6% in patients with a CPS of 1 or higher. Patients with a CPS score of less than 1 showed a median OS of 3.2 months vs. patients with a CPS greater than or equal to 1 who had a median OS of 18.4 months and, as it relates to time to progression, patients with a CPS score of less than 1 had a median PFS of 1.9 months and patients with a CPS score of greater than or equal than 1 showed a median PFS of 3.8 months.

•In 16 evaluable patients in whom serial peripheral blood samples were available, a correlation was observed between PFS and OS and WT1-specific immune response after GPS vaccination across more than 1 channel with intracellular cytokine flow-cytometry assays in peripheral blood lymphocytes assaying reactivity against the four pooled WT1 antigens comprising GPS. The data were consistent with those seen in previous studies of GPS.

•The safety profile of GPS in combination with pembrolizumab was similar to pembrolizumab alone, with only the addition of low-grade rapidly resolving local reactions at the GPS injection site, consistent with observations from other GPS clinical studies.

In February 2020, we commenced a Phase 1 open-label investigator-sponsored clinical trial of GPS, in combination with Bristol-Myers Squibb’s anti-PD-1 therapy, nivolumab (Opdivo®), in patients with malignant pleural mesothelioma, or MPM, who harbor relapsed or refractory disease after having received frontline standard of care multimodality therapy at MSK. Completion of enrollment of a target total of 10 evaluable patients is expected during

20

the second half of 2022. In June 2022, we announced the following updated data from eight evaluable patients in this study, seven of which received at least three doses of GPS, the last given in combination with nivolumab:

•Of the eight evaluable patients, 75 percent of the patients entered the study as Stage III or IV patients, with 50 percent of patients entering as Stage IV. Initial tumor stages were II (two patients), III and IIIB (two patients) and IV (four patients). All patients had the MPM epithelioid and/or sarcomatoid variant, a tumor which is universally expressing WT1.

•Median OS calculated as the time from the cessation of the most recent previous therapy until confirmed death or most recent data update for patients who are still alive (50 percent of patients) was 40.9 weeks (9.4 months) for all eight patients and 45.7 weeks (10.5 months) in patients who received the combination therapy (seven out of eight patients). The median PFS was 11.1 weeks for all eight patients and 11.9 weeks in patients who received the combination therapy.

•The safety profile of the GPS-nivolumab combination was similar to that seen with nivolumab alone, with the addition of only low-grade, temporary local reactions at the GPS injection site, consistent with previously performed clinical studies with GPS. No Grade 3/4 toxicities were observed for GPS and there were no dose-limiting toxicities.

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

GFH009

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

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

GFH009 is currently in a Phase 1 dose-escalating clinical trial in the United States and China. We are evaluating both twice-a-week and once-a-week dosing, and the indications are relapsed/refractory AML, chronic lymphocytic leukemia, or CLL, small lymphocytic leukemia, or SLL, and lymphoma. The primary goal of the trial is to establish the recommended Phase 2 dose and to assess safety. We expect enrollment in the planned twice-a-week dosing cohorts in the trial to be completed by the end of 2022 and the once-a-week cohorts in early 2023.

Following completion of the Phase 1 clinical trial and determination of the recommended Phase 2 dose, we intend to commence a Phase 2 clinical trial of GFH009 in combination with venetoclax and azacitidine in AML patients who failed or did not respond to treatment with venetoclax and azacitidine. The primary endpoint of the Phase 2 clinical trial, which we expect to initiate by the end of the first quarter of 2023, will be complete remission (CR) rate and secondary endpoints will include progression free survival, OS and proportion of patients proceeding to transplant. We are also planning a Phase 2 clinical trial of GFH009 in certain solid tumors which will likely commence in the first quarter of 2023 and are exploring various options with respect to clinical development for GFH009 in several pediatric indications which we expect to finalize by the end of 2022.

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Impact of COVID-19

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

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Components of Results of Operations

License Revenue

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

Cost of License Revenue

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

Research and Development Expense

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

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

•manufacturing expenses;

•quality control and quality assurance services;

•outsourced professional scientific development services;

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

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

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

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

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

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

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

•the length of time required to enroll suitable patients;

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

•the number of doses patients receive;

•the duration of patient follow-up;

•the results of clinical trials;

•the expenses associated with manufacturing;

•the receipt of marketing approvals;

•the commercialization of current and future product candidates; and

•the impact of the COVID-19 pandemic.

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

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

Acquired In-Process Research and Development

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

General and Administrative Expense

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

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

Non-Operating Income (Expense), Net

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

Critical Accounting Policies and Estimates

In the 2021 Annual Report, we disclosed our critical accounting policies and estimates upon which our financial statements are derived. There have been no material changes to these policies since December 31, 2021 that are not included in Note 3 of the accompanying consolidated financial statements for the nine months ended September 30, 2022. Readers are encouraged to read the 2021 Annual Report in conjunction with this Quarterly Report on Form 10-Q.

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Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

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

	Three Months Ended September 30,
	2022		2021		Change
Licensing revenue	$	—	$	—	$	—
Operating expenses:
Cost of license revenue	—		—		—
Research and development	4,282		4,541		(259)
Acquired in-process research and development	—		—		—
General and administrative	2,864		2,436		428
Total operating expenses	7,146		6,977		169
Operating loss	(7,146)		(6,977)		(169)
Non-operating income (expense), net	124		(108)		232
Net loss	$	(7,022)	$	(7,085)	$	63

	Nine Months Ended September 30,
	2022		2021		Change
Licensing revenue	$	1,000	$	7,600	$	(6,600)
Operating expenses:
Cost of license revenue	100		200		(100)
Research and development	14,422		12,281		2,141
Acquired in-process research and development	10,000		—		10,000
General and administrative	8,982		8,794		188
Total operating expenses	33,504		21,275		12,229
Operating loss	(32,504)		(13,675)		(18,829)
Non-operating income (expense), net	324		(426)		750
Net loss	$	(32,180)	$	(14,101)	$	(18,079)

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

Licensing Revenue

There was no licensing revenue for each of the three months ended September 30, 2022 and 2021.

Licensing revenue was $1.0 million for the nine months ended September 30, 2022 related to an approval by the NMPA of an IND application for a small Phase 1 clinical trial investigating safety of GPS in China, which triggered a development milestone under the 3DMed License Agreement. Licensing revenue was $7.6 million for the nine months ended September 30, 2021 related to the initial transaction price of $9.5 million under the 3DMed License Agreement, which was recognized over a period of time to satisfy the out-licensing of intellectual property rights and transfer of technical know-how.

Cost of License Revenue

There was no cost of licensing revenue during each of the three months ended September 30, 2022 and 2021.

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We incurred $0.1 million and $0.2 million of sublicensing fees payable under our license from MSK in connection with the 3DMed License Agreement during the nine months ended September 30, 2022 and 2021, respectively.

Research and Development

Research and development expenses were $4.3 million for the three months ended September 30, 2022 compared to $4.5 million for the three months ended September 30, 2021. The $0.2 million decrease was primarily attributable to a $0.5 million decrease in clinical expenses due to the timing of start-up fees in the prior year related to our ongoing Phase 3 REGAL clinical trial of GPS in AML, a $0.4 million decrease in manufacturing expenses due to the timing of drug supply purchases and manufacturing of a registration batch of GPS in the prior year. These decreases were partially offset by a $0.3 million increase in personnel related expenses due to increased headcount and a $0.4 million increase in other clinical and regulatory consulting expenses. We anticipate that our research and development expenses will increase in the future as we continue to advance the development of GPS and GFH009, including our Phase 3 clinical trial of GPS in AML and the planned Phase 2 clinical trials of GFH009.

Research and development expenses were $14.4 million for the nine months ended September 30, 2022 compared to $12.3 million for the nine months ended September 30, 2021. The $2.1 million increase was primarily attributable to a $1.4 million increase in clinical trial expenses primarily related to our ongoing Phase 3 REGAL clinical trial of GPS in AML, a $1.1 million increase in personnel related expenses due to increased headcount, and a $0.2 million increase in other research and development expenses. These increases were partially offset by a $0.6 million decrease in manufacturing expenses due to the timing of drug supply purchases and manufacturing of a registration batch of GPS in the prior year. We anticipate that our research and development expenses will increase in the future as we continue to advance the development of GPS and GFH009, including our Phase 3 clinical trial of GPS in AML, and the planned Phase 2 clinical trials of GFH009.

Acquired In-Process Research and Development

There was no acquired in-process research and development expense during the three months ended September 30, 2022. During the nine months ended September 30, 2022, we recognized $10.0 million for the acquisition of in-process research and development related to the in-licensing of GFH009, $4.5 million of which was paid in April 2022 and the remaining $5.5 million which was deemed probable to occur and expected to be paid by the end of the second quarter of 2023. There was no acquired in-process research and development during the three and nine months ended September 30, 2021.

General and Administrative

General and administrative expenses were $2.9 million for the three months ended September 30, 2022 compared to $2.4 million for the three months ended September 30, 2021. The $0.5 million increase was primarily due to a $0.5 million increase in personnel expenses due to increased headcount, including a $0.1 million increase in non-cash stock-based compensation.

General and administrative expenses were $9.0 million for the nine months ended September 30, 2022 compared to $8.8 million for the nine months ended September 30, 2021. The $0.2 million increase was primarily due to a $1.4 million increase in personnel related expenses due to increased headcount, including a $0.4 million increase in non-cash stock-based compensation, and a $0.3 million increase in outside services and public company costs. These increases were partially offset by a $1.1 million decrease related to the amortization of contract asset costs associated with the 3DMed License Agreement in the prior year with no comparable expense in the current year, and a $0.4 million decrease in legal, accounting, and other general and administrative fees.

Non-Operating Income (Expense), Net

Non-operating income (expense), net for the three and nine months ended September 30, 2022 and 2021, respectively, was as follows (in thousands):

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Change in fair value of warrant liability	$	2	$	30	$	(28)	$	39	$	(29)	$	68
Change in fair value of contingent consideration	11		(140)		151		126		(403)		529
Interest income	111		2		109		159		6		153
Total non-operating income (expense), net	$	124	$	(108)	$	232	$	324	$	(426)	$	750

Net non-operating income of $0.1 million during the three months ended September 30, 2022 was primarily due to interest income earned from our cash and cash equivalents.

Net non-operating expense of $0.1 million for the three months ended September 30, 2021 was primarily due to an increase in the fair value of the contingent consideration liability partially offset by a slight decrease in the change in the fair value of the warrant liability.

Net non-operating income of $0.3 million during the nine months ended September 30, 2022 was primarily due to interest income earned from our cash and cash equivalents, and a decrease in the fair value of the contingent consideration liability driven by an increase in discount rates.

Net non-operating expense of $0.4 million during the nine months ended September 30, 2021 was primarily due to the increase in the change in the fair value of the contingent consideration liability and a slight increase in the change in the fair value of the warrant liability partially offset by nominal interest income.

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

Income Tax Expense

There was no income tax expense for the three and nine months ended September 30, 2022 and 2021. We continue to maintain a full valuation allowance against our net deferred tax assets.

Liquidity, Capital Resources, and Funding Requirements

We did not generate any revenue from product sales during the nine months ended September 30, 2022 and 2021. Through September 30, 2022, the Company has only generated licensing revenue from the 3DMed License Agreement. Since inception, we have incurred net losses, used net cash in our operations, and have funded substantially all of our operations through proceeds of the sale of equity securities and convertible notes.

To date, the Company has received $10.5 million in upfront payments and certain technology transfer and regulatory milestones from 3DMed, pursuant to its Exclusive License Agreement for GPS. The participation of 3DMed in the REGAL Phase 3 clinical trial in China will trigger significant milestone payments to us, which we expect to receive in the first half of 2023. A total of $191.5 million in potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3DMed License Agreement as of September 30, 2022, which milestones are variable in nature and not under our control.

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

On March 31, 2022, we entered into the GFH009 Agreement with GenFleet pursuant to which GenFleet granted to us a sublicensable, royalty-bearing license, to certain of its intellectual property, to develop, manufacture, and commercialize a small molecule CDK9 inhibitor, GFH009, for the treatment, diagnosis or prevention of disease

27

in humans and animals in all countries and territories of the world other than mainland China, Hong Kong, Macau and Taiwan, or the GFH009 Territory. GFH009 is currently in a Phase 1 clinical trial in the United States and China.

In consideration for the exclusive license, we agreed to pay GenFleet (i) an upfront and technology transfer fee of $10.0 million, of which $4.5 million was paid in April 2022, and $5.5 million is due upon the first day of the 15th calendar month following the effective date of the GFH009 Agreement, (ii) development and regulatory milestone payments for up to three indications totaling up to $48.0 million in the aggregate, and (iii) sales milestone payments totaling up to $92.0 million in the aggregate upon the achievement of certain net sales thresholds in a given calendar year. We have also agreed to pay GenFleet single-digit tiered royalties based upon a percentage of annual net sales, with the royalty rate escalating based on the level of annual net sales of GFH009 in the GFH009 Territory ranging from the low to high single digits.

On April 16, 2021, we entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. (the "Agent"). From time to time during the term of the Sales Agreement, we may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds. The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to our registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and declared effective on April 29, 2021. During the year ended December 31, 2021, we sold a total of 786,927 shares of common stock pursuant to the Sales Agreement at an average price of $12.04 per share for aggregate net proceeds of approximately $9.0 million. During the nine months ended September 30, 2022, we sold an additional 37,891 shares of common stock pursuant to the Sales Agreement at an average price of $3.25 per share for aggregate net proceeds of approximately $0.1 million. There remains approximately $40.4 million available for future sales of shares of common stock under the Sales Agreement. Other than the Sales Agreement, we currently do not have any commitments to obtain additional funds.

As of September 30, 2022, we had an accumulated deficit of $170.8 million, cash and cash equivalents of $21.3 million and restricted cash and cash equivalents of $0.1 million. In addition, we had current liabilities of $12.6 million as of September 30, 2022. We expect that our cash and cash equivalents will not be sufficient to fund our current planned operations for at least the next twelve months from the date of issuance of these financial statements. These conditions give rise to a substantial doubt over our ability to continue as a going concern.

We will require substantial additional financing to commercially develop any current or future product candidates. If we are unable to obtain additional funding on a timely basis, we will be required to scale back our plans and place certain activities on hold. Other than the Sales Agreement, we currently do not have any commitments to obtain additional funds. Our management continues to evaluate different strategies to obtain the required funding for future operations. These strategies may include utilizing the Sales Agreement, public and private placements of equity and/or debt securities, payments from potential strategic research and development collaborations, and licensing and/or marketing arrangements with pharmaceutical companies. Additionally, we continue to pursue discussions with global and regional pharmaceutical companies for licensing and/or co-development rights to its product candidates. There can be no assurance that these future funding efforts will be successful.

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

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Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 (in thousands):

	Nine Months Ended September 30,
	2022		2021
Net cash (used in) provided by:
Operating activities	$	(18,657)	$	(21,045)
Investing activities	(4,500)		—
Financing activities	23,150		12,024
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents	$	(7)	$	(9,021)

Net Cash Used in Operating Activities

Net cash used in operating activities of $18.7 million during the nine months ended September 30, 2022 was primarily attributable to our net loss of $32.2 million, which was partially offset by various net non-cash charges of $11.4 million and the net change in our operating assets and liabilities of approximately $2.1 million. Net non-cash charges were driven by $10.0 million in expense related to the acquired in-process research and development, $1.3 million in non-cash stock compensation expense, and $0.1 million in other net non-cash charges. The net change in our operating assets and liabilities of $2.1 million is primarily attributable to an increase in accrued expenses and other current liabilities of $1.9 million, and a decrease in prepaid expenses and other current assets of $0.5 million, which were partially offset by a decrease in operating lease liabilities of $0.3 million.

Net cash used in operating activities of $21.0 million during the nine months ended September 30, 2021 was primarily attributable to an $8.1 million change in our operating assets and liabilities and our net loss of $14.1 million, which was offset by various net non-cash charges of $1.2 million. The net change in our operating assets and liabilities of $8.1 million is primarily attributable to a decrease in deferred revenue of $5.6 million, a $2.2 million increase in prepaid expenses and other assets primarily for prepaid insurance premiums and clinical trial costs and a $1.4 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $1.1 million decrease in contract acquisition costs related to the out-licensing of intellectual property rights and transfer of technical know-how associated with the 3DMed License Agreement.

Net Cash Used in Investing Activities

Net cash used in investing activities of $4.5 million during the nine months ended September 30, 2022 related to license payments made for the acquisition of in-process research and development under the GFH009 Agreement.

There was no cash used in investing activities during the nine months ended September 30, 2021.

Net Cash Provided by Financing Activities

We generated $23.2 million in net cash from financing activities during the nine months ended September 30, 2022 that was due to $23.0 million in aggregate net proceeds received from our underwritten public offering, which closed in April 2022, $0.1 million in aggregate net proceeds received from the issuance of common stock under the Sale Agreement, and $0.1 million in aggregate net proceeds received from the issuance of common stock under the employee stock purchase plan.

We generated $12.0 million of net cash from financing activities for the nine months ended September 30, 2021. We received $9.0 million in net proceeds from the issuance of common stock under the Sales Agreement, as well as $3.0 million from the exercise of warrants to acquire shares of common stock.

Off-Balance Sheet Arrangements

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We have not entered into any off-balance sheet financing arrangements as of September 30, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and our principal financial officer (the “Certifying Officer”), evaluated the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure. Based on these evaluations, the Certifying Officers have concluded, that, as of the end of the period covered by this Quarterly Report on Form 10-Q:

(a)our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(b)our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Exchange Act was accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to Note 7 (Commitments and Contingencies) to our consolidated financial statements contained in Part I, Item 1 (Financial Statements) of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

ITEM 1A. RISK FACTORS

Please refer to our note on forward-looking statements on page 2 of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in our 2021 Annual Report and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. The risks described in such 2021 Annual Report and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, operating results and stock price.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit #	Description	Form	Exhibit	Filing Date
3.1	Composite Amended and Restated Certificate of Incorporation of the Registrant (formerly, Galena Biopharma, Inc.) amended as of December 27, 2017	10-K	3.1	April 13, 2018
3.2	Amended and Restated By-Laws of the Registrant	8-K	3.3	January 5, 2018
31.1	Certification of Principal Executive Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.**
31.2	Certification of Principal Financial Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act, as amended.**
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ***
101.INS	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema.*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase.*
101.LAB	XBRL Taxonomy Extension Label Linkbase.*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.*

*	Indicates management contract or compensatory plans or arrangements.
**	Filed herewith
***	The certification attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SELLAS Life Sciences Group, Inc.
By:	/s/ Angelos M. Stergiou
	Angelos M. Stergiou, MD, ScD h.c.
	President and Chief Executive Officer
	Date: November 14, 2022

34

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Angelos M. Stergiou, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SELLAS Life Sciences Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2022

/s/ Angelos M. Stergiou

Angelos M. Stergiou, MD, ScD h.c.

President and Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Angelos M. Stergiou, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SELLAS Life Sciences Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2022

/s/ Angelos M. Stergiou

Angelos M. Stergiou, MD, ScD h.c.

President and Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of SELLAS Life Sciences Group, Inc., (the “Company”) on Form 10-Q for the period ended September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the Company’s financial condition and results of operations.

By:	/s/ Angelos M. Stergiou
	Angelos M. Stergiou, MD, ScD h.c.
	President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)
	Date: November 14, 2022

A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

XML

Cover - shares	9 Months Ended
	Sep. 30, 2022	Nov. 10, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-33958
Entity Registrant Name	SELLAS Life Sciences Group, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-8099512
Entity Address, Address Line One	7 Times Square, Suite 2503,
Entity Address, City or Town	New York,
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10036
City Area Code	(646)
Local Phone Number	200-5278
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Trading Symbol	SLS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		20,588,247
Entity Central Index Key	0001390478
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 21,348	$ 21,355
Restricted cash and cash equivalents	100	100
Prepaid expenses and other current assets	1,157	1,589
Total current assets	22,605	23,044
Operating lease right-of-use assets	961	723
Goodwill	1,914	1,914
Deposits and other assets	521	594
Total assets	26,001	26,275
Current liabilities:
Accounts payable	2,127	2,144
Accrued expenses and other current liabilities	4,570	2,640
Operating lease liabilities	356	198
Acquired in-process research and development payable	5,500	0
Total current liabilities	12,553	4,982
Operating lease liabilities, non-current	680	610
Warrant liability	1	40
Contingent consideration	170	296
Total liabilities	13,404	5,928
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; Series A convertible preferred stock, 17,500 shares designated; no shares issued and outstanding at September 30, 2022 and December 31, 2021	0	0
Common stock, $0.0001 par value; 350,000,000 shares authorized, 20,588,247 and 15,895,637 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	2	2
Additional paid-in capital	183,378	158,948
Accumulated deficit	(170,783)	(138,603)
Total stockholders’ equity	12,597	20,347
Total liabilities and stockholders’ equity	$ 26,001	$ 26,275

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	350,000,000	350,000,000
Common stock, shares issued (in shares)	20,588,247	15,895,637
Common stock, shares outstanding (in shares)	20,588,247	15,895,637
Series A Preferred Stock
Preferred stock, shares authorized (in shares)	17,500	17,500

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Licensing revenue	$ 0	$ 0	$ 1,000,000	$ 7,600,000
Operating expenses:
Cost of licensing revenue	0	0	100,000	200,000
Research and development	4,282,000	4,541,000	14,422,000	12,281,000
Acquired in-process research and development	0	0	10,000,000	0
General and administrative	2,864,000	2,436,000	8,982,000	8,794,000
Total operating expenses	7,146,000	6,977,000	33,504,000	21,275,000
Operating loss	(7,146,000)	(6,977,000)	(32,504,000)	(13,675,000)
Non-operating income (expense), net:
Change in fair value of warrant liability	2,000	30,000	39,000	(29,000)
Change in fair value of contingent consideration	11,000	(140,000)	126,000	(403,000)
Interest income	111,000	2,000	159,000	6,000
Total non-operating income (expense), net	124,000	(108,000)	324,000	(426,000)
Net loss	$ (7,022,000)	$ (7,085,000)	$ (32,180,000)	$ (14,101,000)
Per share information:
Net loss per common share, basic (in dollars per share)	$ (0.34)	$ (0.45)	$ (1.70)	$ (0.92)
Net loss per common share, diluted (in dollars per share)	$ (0.34)	$ (0.45)	$ (1.70)	$ (0.92)
Weighted-average common shares outstanding, basic (in shares)	20,562,351	15,874,076	18,932,571	15,344,210
Weighted-average common shares outstanding, diluted (in shares)	20,562,351	15,874,076	18,932,571	15,344,210

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2020		14,254,554
Beginning balance at Dec. 31, 2020	$ 27,961	$ 1	$ 145,864	$ (117,904)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock and common stock warrants, net of issuance costs (in shares)		786,927
Issuance of common stock and common stock warrants, net of issuance costs	9,005		9,005
Issuance of common stock upon exercise of warrants (in shares)		832,650
Issuance of common stock upon exercise of warrants	3,019	$ 1	3,018
Stock-based compensation	723		723
Net loss	(14,101)			(14,101)
Ending balance (in shares) at Sep. 30, 2021		15,874,131
Ending balance at Sep. 30, 2021	26,607	$ 2	158,610	(132,005)
Beginning balance (in shares) at Jun. 30, 2021		15,873,941
Beginning balance at Jun. 30, 2021	33,415	$ 2	158,333	(124,920)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of warrants (in shares)		190
Issuance of common stock upon exercise of warrants	2		2
Stock-based compensation	275		275
Net loss	(7,085)			(7,085)
Ending balance (in shares) at Sep. 30, 2021		15,874,131
Ending balance at Sep. 30, 2021	26,607	$ 2	158,610	(132,005)
Beginning balance (in shares) at Dec. 31, 2021		15,895,637
Beginning balance at Dec. 31, 2021	20,347	$ 2	158,948	(138,603)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock and common stock warrants, net of issuance costs (in shares)		4,667,521
Issuance of common stock and common stock warrants, net of issuance costs	23,065		23,065
Issuance of common stock under employee stock purchase plan (in shares)		25,089
Issuance of common stock under employee stock purchase plan	85		85
Stock-based compensation	1,280		1,280
Net loss	(32,180)			(32,180)
Ending balance (in shares) at Sep. 30, 2022		20,588,247
Ending balance at Sep. 30, 2022	12,597	$ 2	183,378	(170,783)
Beginning balance (in shares) at Jun. 30, 2022		20,551,918
Beginning balance at Jun. 30, 2022	19,057	$ 2	182,816	(163,761)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock and common stock warrants, net of issuance costs (in shares)		21,602
Issuance of common stock and common stock warrants, net of issuance costs	69		69
Issuance of common stock under employee stock purchase plan (in shares)		14,727
Issuance of common stock under employee stock purchase plan	38		38
Stock-based compensation	455		455
Net loss	(7,022)			(7,022)
Ending balance (in shares) at Sep. 30, 2022		20,588,247
Ending balance at Sep. 30, 2022	$ 12,597	$ 2	$ 183,378	$ (170,783)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net loss	$ (32,180)	$ (14,101)
Adjustment to reconcile net loss to net cash used in operating activities:
Acquired in-process research and development expense	10,000	0
Non-cash stock-based compensation	1,280	723
Non-cash lease expense	334	0
Change in fair value of common stock warrants	(39)	29
Change in fair value of contingent consideration	(126)	403
Changes in operating assets and liabilities:
Contract asset	0	1,128
Prepaid expenses and other assets	505	(2,181)
Accounts payable	(17)	(2,112)
Accrued expenses and other current liabilities	1,930	666
Operating lease liabilities	(344)	0
Deferred revenue	0	(5,600)
Net cash used in operating activities	(18,657)	(21,045)
Cash flows from investing activities:
Cash paid for acquisition of in-process research and development	(4,500)	0
Net cash used in investing activities	(4,500)	0
Cash flows from financing activities:
Proceeds from issuance of common stock and common stock warrants, net of offering costs	23,065	9,005
Proceeds from employee stock purchases	85	0
Net proceeds from exercise of warrants	0	3,019
Net cash provided by financing activities	23,150	12,024
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	(7)	(9,021)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the beginning of period	21,455	35,402
Cash, cash equivalents, restricted cash, and restricted cash equivalents at the end of period	21,448	26,381
Supplemental disclosure of cash flow information:
Cash received during the period for interest	159	6
Supplemental disclosure of non-cash investing and financing activities:
Payable for acquired in-process research and development	5,500	0
Increase in operating right of use assets and current and non-current lease liabilities	$ 449	$ 0

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Description of Business

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

Description of Business

Overview

SELLAS Life Sciences Group, Inc. (the "Company" or "SELLAS") is a late-stage clinical biopharmaceutical company focused on novel therapeutics for a broad range of cancer indications. SELLAS’ lead product candidate, galinpepimut-S ("GPS"), is a cancer immunotherapeutic agent licensed from Memorial Sloan Kettering Cancer Center ("MSK") and targets the Wilms Tumor 1 ("WT1") protein, which is present in an array of tumor types. GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers and solid tumor indications. SELLAS' second product candidate is GFH009, a small molecule, highly selective cyclin-dependent kinase 9 ("CDK9") inhibitor, which is licensed from GenFleet Therapeutics (Shanghai), Inc. ("GenFleet"), for all therapeutic and diagnostic uses in the world outside of Greater China (mainland China, Hong Kong, Macau and Taiwan).

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Liquidity

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity

Liquidity

Since inception, the Company has incurred recurring losses and negative cash flows from operations and, as of September 30, 2022, has an accumulated deficit of $170.8 million. During the nine months ended September 30, 2022, the Company incurred a net loss of $32.2 million, which includes a one-time $10.0 million expense for acquired in-process research and development related to the upfront license fee for GFH009, and used $18.7 million of cash in operations. The Company expects to generate losses from operations for the foreseeable future primarily due to research and development costs for its product candidates, which raises substantial doubt about the Company's ability to continue as a going concern.

On April 16, 2021, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. (the "Agent"). From time to time during the term of the Sales Agreement, the Company may offer and sell shares of common stock having an aggregate offering price up to a total of $50.0 million in gross proceeds. The Agent will collect a fee equal to 3% of the gross sales price of all shares of common stock sold. Shares of common stock sold under the Sales Agreement are offered and sold pursuant to the Company's registration statement on Form S-3, which was filed with the SEC on April 16, 2021 and declared effective on April 29, 2021. During the year ended December 31, 2021, the Company sold a total of 786,927 shares of common stock pursuant to the Sales Agreement at an average price of $12.04 per share for aggregate net proceeds of approximately $9.0 million. During the nine months ended September 30, 2022, the Company sold an additional 37,891 shares of common stock pursuant to the Sales Agreement at an average price of $3.25 per share for aggregate net proceeds of approximately $0.1 million. There remains approximately $40.4 million available for future sales of shares of common stock under the Sales Agreement. Other than the Sales Agreement, the Company currently does not have any commitments to obtain additional funds.

In December 2020, the Company, together with its wholly-owned subsidiary, SLSG Limited, LLC, entered into an Exclusive License Agreement (the “3DMed License Agreement”) with 3D Medicines Inc. ("3DMed"), pursuant to which the Company granted 3DMed a sublicensable, royalty-bearing license, under certain intellectual property owned or controlled by the Company, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS product candidates for all therapeutic and other diagnostic uses in mainland China, Hong Kong, Macau and Taiwan ("3DMed Territory"). To date, the Company has received $10.5 million in upfront payments and certain technology transfer and regulatory milestones. The participation of 3DMed in the REGAL Phase 3 clinical trial in China will trigger two development milestone payments totaling $13.0 million to the Company, which the Company expects to receive in the first half of 2023. A total of $191.5 million in potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3DMed License Agreement as of September 30, 2022, which milestones are variable in nature and not under the Company's control.

As of September 30, 2022, the Company had cash and cash equivalents of approximately $21.3 million and restricted cash and cash equivalents of $0.1 million. In accordance with Accounting Standards Codification ("ASC") 205-40, Presentation of Financial Statements - Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a

going concern within one year after the consolidated financial statements are issued. The Company expects its cash and cash equivalents will not be sufficient to fund its current planned operations for at least the next twelve months from the date of issuance of these financial statements.The Company will require substantial additional financing to commercially develop any current or future product candidates. If the Company is unable to obtain additional funding on a timely basis, it will be required to scale back its plans and place certain activities on hold. Other than the Sales Agreement, the Company currently does not have any commitments to obtain additional funds. The Company's management continues to evaluate different strategies to obtain the required funding for future operations. These strategies may include utilizing the Sales Agreement, public and private placements of equity and/or debt securities, payments from potential strategic research and development collaborations, and licensing and/or marketing arrangements with pharmaceutical companies. Additionally, the Company may continue to pursue discussions with global and regional pharmaceutical companies for licensing and/or co-development rights to its product candidates. The Company has prepared its consolidated financial statements assuming that it will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

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Basis of Presentation and Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Significant Accounting Policies

The Company's complete summary of significant accounting policies can be found in "Item 8. Financial Statements and Supplementary Data - Note 3. Basis of Presentation and Significant Accounting Policies" in the audited annual consolidated financial statements included in the 2021 Annual Report. The significant accounting policies summarized and included in the 2021 Annual Report have not materially changed, except as set forth below.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the ASC and Accounting Standards Updates ("ASUs") of the Financial Accounting Standards Board ("FASB").

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. Unless the context otherwise indicates, reference in these notes to the "Company" refer to SELLAS Life Sciences Group, Inc., and its wholly owned subsidiaries, SELLAS Life Sciences Group, Ltd., a privately held Bermuda exempted company, SLSG Limited, LLC, Sellas Life Sciences Limited, and Apthera, Inc.

Unaudited Interim Results

These consolidated financial statements and accompanying notes should be read in conjunction with the Company's annual consolidated financial statements and the notes thereto included in the 2021 Annual Report. The accompanying consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021, are unaudited, but include all adjustments, consisting of normal recurring entries, that management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2021 have been derived from the audited financial statements as of that date.

Impact of COVID-19

The ongoing global COVID-19 pandemic, including the surges of cases from various variants, continues to disrupt the Company’s business operations and those of its collaborators, including 3DMed and GenFleet, contractors, contract research organizations (“CROs”), suppliers, clinical sites, contract manufacturing organizations (“CMOs”), and other partners. The COVID-19 pandemic has and may continue to affect the health and availability of the Company’s workforce and that of the third-parties it relies on, such as its CROs, clinical sites, CMOs, and other

contractors as well as the governmental agencies, such as the U.S. Food and Drug Administration (“FDA”) and health authorities in other countries which could delay or otherwise adversely impact the ability of such parties to fulfill their obligations. The Company is continuously monitoring the impact of the pandemic on its clinical development programs. The full extent to which the COVID-19 pandemic will continue to directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that, despite progress in vaccination efforts, remain highly uncertain, subject to change and cannot be predicted with confidence, including the duration of the outbreak, the continued availability and efficacy of vaccines and booster shots, developments or perceptions regarding safety of vaccines, new information which may emerge concerning the severity of COVID-19, the emergence of new strains of COVID-19, including any future variants that may emerge, the actions to contain COVID-19 or treat its impact, including continuing or new lockdowns, among others, and the direct and indirect economic effects of the pandemic, including as a result of inflation, supply chain disruptions, shifting demand and labor shortages. The estimates of the impact on the Company’s business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

Acquired In-Process Research and Development

Costs incurred in obtaining technology licenses are immediately recognized as acquired in-process research and development expense, provided the technology licensed has no alternative future use. Payments related to contingent consideration such as development milestones, commercial milestones and royalties (Note 5) will be recognized when the contingency is probable and reasonably estimable as prescribed by ASC 450, Contingencies.

Net Loss Per Share

Net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options and unvested restricted stock that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted average number of shares remains the same for both calculations due to the fact that, when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	As of September 30,
	2022	2021
Common stock warrants	5,148	558
Stock options	1,071	526
Restricted stock units ("RSUs")	297	210
	6,516	1,294

Recent Accounting Standards Adopted

In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications of Exchanges of Freestanding Equity-Classified Written Call Options to clarify the accounting for modifications or exchanges of freestanding equity-classified written call options, such as warrants, that remain equity classified after modification or exchange. This ASU became effective for the Company on January 1, 2022 and did not have a material impact on the Company's consolidated financial statements.

Recent Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which, among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard becomes effective for the Company in the first quarter of 2024 and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its consolidated financial statements.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):

Description	September 30, 2022		Quoted Prices In Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	20,967	$	20,967	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	21,067	$	21,067	$	—	$	—
Liabilities:
Warrant liability	$	1	$	—	$	—	$	1
Contingent consideration	170		—		—		170
Total liabilities measured and recorded at fair value	$	171	$	—	$	—	$	171

Description	December 31, 2021		Quoted Prices In  Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	21,000	$	21,000	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	21,100	$	21,100	$	—	$	—
Liabilities:
Warrant liability	$	40	$	—	$	—	$	40
Contingent consideration	296		—		—		296
Total liabilities measured and recorded at fair value	$	336	$	—	$	—	$	336

The Company did not transfer any financial instruments into or out of Level 3 classification, during the nine months ended September 30, 2022 or during the year ended December 31, 2021. See Note 9, Warrants to Acquire Shares of Common Stock, for a reconciliation of the changes in the fair value of the warrant liability for the nine months ended September 30, 2022.

A reconciliation of the change in the fair value of the contingent consideration liability for the nine months ended September 30, 2022 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent consideration, December 31, 2021	$	296
Change in the fair value of the contingent consideration	(126)
Contingent consideration, September 30, 2022	$	170

The contingent consideration relates to the future contingent payments of up to $32.0 million based on the achievement of certain development and commercial milestones relating to the Company’s nelipepimut-S ("NPS") product candidate, of which $2.0 million has been paid to date. The remaining contingent consideration of up to $30.0 million is payable at the election of the Company in either cash or shares of common stock, provided that the Company may not issue any shares in satisfaction of any contingent consideration, unless it has first obtained approval from its stockholders in accordance with Rule 5635(a) of the Nasdaq Marketplace Rules. The fair value of the contingent consideration is measured at the end of each reporting period using Level 3 inputs. The fair value of development and regulatory milestones are estimated utilizing a probability adjusted, discounted cash flow approach and the fair value of net sales milestones is estimated utilizing an option pricing model with Monte Carlo simulation.

The following significant unobservable inputs were used in the valuation of the contingent consideration liability:

	As of September 30, 2022		As of December 31, 2021
Potential milestone payments	$0 - $30 million		$0 - $30 million
Discount rate	16.8	%	15.5	%
Cumulative probability of success	5.3	%	5.3	%
Projected years of payments	2028 - 2031		2028 - 2031

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Acquired In-Process Research and Development

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Acquired In-Process Research and Development

Acquired In-Process Research and Development

Exclusive License Agreement with GenFleet

On March 31, 2022, the Company entered into an exclusive license agreement with GenFleet pursuant to which GenFleet granted to the Company a sublicensable, royalty-bearing license, under certain of its intellectual property, to develop, manufacture, and commercialize GFH009 for the treatment, diagnosis or prevention of disease in humans and animals in all countries and territories of the world other than mainland China, Hong Kong, Macau, and Taiwan (the "GFH009 Territory"). GFH009 is currently in a Phase 1 clinical trial in the United States and China.

In consideration for the exclusive license, the Company has agreed to pay to GenFleet (i) an upfront and technology transfer fee of $10.0 million, of which $4.5 million was paid in April 2022 and $5.5 million is due upon the first day of the 15th calendar month following the effective date of the license agreement, (ii) development and regulatory milestone payments for up to three indications totaling up to $48.0 million in the aggregate, and (iii) sales milestone payments totaling up to $92.0 million in the aggregate upon the achievement of certain net sales thresholds in a given calendar year. The Company has also agreed to pay GenFleet single-digit tiered royalties based upon a percentage of annual net sales of GFH009 in the GFH009 Territory, with the royalty rate escalating based on the level of annual net sales ranging from the low to high single digits.

During the nine months ended September 30, 2022, the Company expensed $10.0 million related to the acquired technology as in-process research and development based on the assessment that the technology has no alternative future use, $4.5 million of which was paid in April 2022 and the remaining $5.5 million expected to be paid by the end of the second quarter of 2023 for which the Company has recorded an acquired in-process research and development payable as of September 30, 2022.

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Balance Sheet Accounts

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Accounts

Balance Sheet Accounts

Prepaid expenses and other current assets consist of the following (in thousands):

	September 30, 2022		December 31, 2021
Insurance	$	667	$	217
Clinical development	316		1,309
Professional fees	127		36
Other	47		27
Prepaid expenses and other current assets	$	1,157	$	1,589

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30, 2022		December 31, 2021
Clinical trial costs	$	2,947	$	1,325
Compensation and related benefits	1,228		989
Professional fees	203		165
Other	192		161
Accrued expenses and other current liabilities	$	4,570	$	2,640

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases

The Company has a non-cancelable operating lease for certain executive, administrative, and general business office space for its headquarters in New York, New York, which began on June 5, 2020, was amended in February 2022 to add additional space, and has a term through December 31, 2024. The Company assessed the lease amendment for the additional space and determined it should be accounted for as a separate contract.

The weighted average discount rate of the Company's operating leases under ASC 842, Leases is approximately 13.95%. As of September 30, 2022, the leases have a remaining term of 2.25 years.

Rent expense related to the Company's operating leases was approximately $0.1 million for each of the three months ended September 30, 2022 and 2021, and $0.3 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively. The Company made cash payments related to its operating leases of approximately $0.1 million for each of the three months ended September 30, 2022 and 2021, and $0.3 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

Future minimum lease payments are as follows as of September 30, 2022 (in thousands):

Future minimum lease payments:
2022 (remaining)	$	127
2023	518
2024	533
Total future minimum lease payments	1,178
Less: imputed interest	(142)
Current and non-current operating lease liabilities	$	1,036

Legal Proceedings From time to time, the Company is subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business, which may include employment matters, breach of contract disputes and stockholder litigation. Such actions and proceedings are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, when the Company has assessed that a loss is probable and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. As of September 30, 2022, there was no pending or threatened litigation.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Preferred Stock

The Company has authorized up to 5,000,000 shares of preferred stock, $0.0001 par value per share, for issuance. There were no preferred shares outstanding as of September 30, 2022 and December 31, 2021.

Common Stock

The Company has authorized up to 350,000,000 shares of common stock, $0.0001 par value per share, for issuance.

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

As of September 30, 2022, the Company has shares of common stock reserved for future issuance as follows (in thousands):

Warrants outstanding	5,148
Stock options outstanding	1,071
RSUs outstanding	297
Shares reserved for future issuance under the Company’s 2019 Equity Incentive Plan	608
Shares reserved for future issuance under the 2021 Employee Stock Purchase Plan	275
Total common stock reserved for future issuance	7,399

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Warrants to Acquire Shares of Common Stock

9 Months Ended

Sep. 30, 2022

Warrants and Rights Note Disclosure [Abstract]

Warrants to Acquire Shares of Common Stock

Warrants to Acquire Shares of Common Stock

Warrants Outstanding

The following is a summary of the activity of the Company's warrants to acquire shares of common stock for the nine months ended September 30, 2022 (in thousands):

Warrant Issuance	Outstanding, December 31, 2021	Granted	Canceled/Expired	Outstanding, September 30, 2022	Exercise Price per Share		Expiration
Warrants classified as equity:
April 2022 Offering	—	4,630	—	4,630	$	5.40	April 2027
January 2020 Offering	309	—	—	309	$	3.93	July 2025
July 2020 PIPE Offering	25	—	—	25	$	3.30	August 2025
July 2018 Offering	132	—	—	132	$	7.50	July 2023
March 2019 Exercise Agreement	30	—	—	30	$	7.50	March 2024
Other	9	—	—	9	$	306.66	December 2022 - June 2024
	505	4,630	—	5,135
Warrants classified as liability	14	—	(1)	13	$	7.50	September 2023 - November 2023
	519	4,630	(1)	5,148

Warrants to acquire shares of common stock primarily consist of equity-classified warrants. In addition, warrants to acquire shares of common stock that may require the Company to settle in cash are liability-classified warrants.

Warrants Classified as Equity

The warrants to acquire shares of common stock issued during the April 2022 Offering were recorded as equity upon issuance. During its evaluation of equity classification of these warrants, the Company considered the conditions as prescribed within ASC 815-40, Derivatives and Hedging, Contracts in an Entity’s own Equity (“ASC 815-40”). The conditions within ASC 815-40 are not subject to a probability assessment. The warrants to acquire shares of common stock do not fall under the liability criteria within ASC 480, Distinguishing Liabilities from Equity, as they are not puttable and do not represent an instrument that has a redeemable underlying security. The warrants do meet the definition of a derivative instrument under ASC 815, but are eligible for the scope exception as they are indexed to the Company’s own stock and would be classified in permanent equity if freestanding.

Warrants Classified as Liabilities

Liability-classified warrants consist of warrants to acquire common stock which may be settled in cash and were determined not to be indexed to the Company’s common stock.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date, and any decrease or increase in estimated fair value is recorded in the consolidated statement of operations as change in fair value of warrant liability. The fair value of the warrants is estimated using a Black-Scholes pricing model with the following inputs:

	September 30, 2022			December 31, 2021
Risk-free interest rate	4.05		%	0.65		%
Volatility	89.94		%	131.04		%
Expected term (years)	1.00			1.75
Expected dividend yield	—		%	—		%
Strike price	$	7.50		$	7.50

The expected volatility assumption is based on the Company's implied volatility. The expected term assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

The changes in fair value of the warrant liability for the nine months ended September 30, 2022 were as follows (in thousands):

 

Warrant liability, December 31, 2021	$	40
Change in fair value of warrants	(39)
Warrant liability, September 30, 2022	$	1

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License Revenue

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

License Revenue

License Revenue

Exclusive License Agreement with 3D Medicines Inc.

In December 2020, the Company, together with its wholly-owned subsidiary, SLSG Limited, LLC, entered into the 3DMed License Agreement with 3DMed, pursuant to which the Company granted 3DMed a sublicensable, royalty-bearing license, under certain intellectual property owned or controlled by the Company, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS (referred to as GPS Plus) product candidates ("GPS Licensed Products") for all therapeutic and other diagnostic uses in the 3DMed Territory. The license is exclusive except with respect to certain know-how that has been non-exclusively licensed to the Company and is sublicensed to 3DMed on a non-exclusive basis. The Company has retained development, manufacturing and commercialization rights with respect to the GPS Licensed Products in the rest of the world.

In partial consideration for the rights granted by the Company, 3DMed agreed to pay the Company (i) a one-time upfront cash payment of $7.5 million, and (ii) milestone payments totaling up to $194.5 million in the aggregate upon the achievement of certain technology transfer, development and regulatory milestones, as well as sales milestones based on certain net sales thresholds of GPS Licensed Products in the 3DMed Territory in a given calendar year. 3DMed also agreed to pay tiered royalties based upon a percentage of annual net sales of GPS Licensed Products in the 3DMed Territory ranging from the high single digits to the low double digits.

The Company determined the initial transaction price of the single performance obligation to be $9.5 million, which included the $7.5 million upfront fee as well as $2.0 million in development milestones that were assessed as probable of being achieved at the inception of the 3DMed License Agreement and therefore were not constrained. As of December 31, 2021, the full $9.5 million initial transaction price was fully recognized as licensing revenue. The Company determined that the remaining $192.5 million in certain future development, regulatory, and sales milestones is variable consideration subject to constraint at inception. At the end of each reporting period, the Company reevaluates the probability of achievement of the future development, regulatory, and sales milestones subject to constraint and, if necessary, will adjust its estimate of the overall transaction price. Any such adjustments will be recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

On March 31, 2022, the Company announced that an IND application filed by 3DMed for a small Phase 1 clinical trial investigating safety of GPS in China was approved by China's NMPA. The IND approval by the NMPA triggered a $1.0 million milestone payment to the Company which was recognized as licensing revenue in the first quarter of 2022 and payment was received in May 2022. An additional $191.5 million in potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3DMed License Agreement as of September 30, 2022, which milestones are variable in nature and not under the Company's control.

For the sales-based royalties, the Company will recognize revenue when the related sales occur. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

There was no license revenue recognized during each of the three months ended September 30, 2022 and 2021. There was $1.0 million and $7.6 million in license revenue recognized during the nine months ended September 30, 2022 and 2021, respectively.

There was no cost of license revenue recognized during each of the three months ended September 30, 2022 and 2021. There was $0.1 million and $0.2 million in cost of license revenues for the nine months ended September 30, 2022 and 2021, respectively, for sublicensing fees incurred under the Company's license from MSK in connection with the 3DMed License Agreement.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

2017 Equity Incentive Plan

On December 29, 2017, the 2017 Equity Incentive Plan was approved by the stockholders of the Company, which currently allows for issuance of up to approximately 22,000 shares of common stock underlying stock options granted prior to September 10, 2019. The 2017 Equity Incentive Plan was terminated upon the approval of the 2019 Incentive Plan subject to outstanding stock options granted under the 2017 Equity Incentive Plan that remain exercisable through maturity for the Company's employees and directors.

2019 Equity Incentive Plan

On September 10, 2019, the 2019 Equity Incentive Plan was approved by the stockholders of the Company, which currently allows for issuance of up to approximately 1,964,000 shares of common stock in connection with the grant of stock-based awards, including stock options, restricted stock, restricted stock units, stock appreciation rights and other types of awards as deemed appropriate.

The number of shares reserved for issuance under the 2019 Equity Incentive Plan will automatically increase on January 1 of each year, for a period of not more than four years, commencing on January 1, 2020 and ending on (and including) January 1, 2023, by an amount equal to the lesser of (i) 5% of the total number of shares of common stock outstanding at the end of the prior fiscal year; and (ii) an amount determined by the board of directors or authorized committee. As of September 30, 2022, approximately 608,000 shares of common stock were reserved for future grants under the 2019 Equity Incentive Plan.

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, respectively (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development	$	72	$	36	$	197	$	84
General and administrative	383		239		1,083		639
Total stock-based compensation	$	455	$	275	$	1,280	$	723

Options to Purchase Shares of Common Stock

The following table summarizes stock option activity of the Company for the nine months ended September 30, 2022:

	Total Number of Shares (In Thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2021	534	$	10.09	8.77	$	681
Granted	543	5.01
Canceled	(6)	2.28
Outstanding at September 30, 2022	1,071	$	7.56	8.73	$	28
Options exercisable at September 30, 2022	282	$	12.89	7.85	$	18

The aggregate intrinsic values of outstanding and exercisable stock options at September 30, 2022 were calculated based on the closing price of the Company’s common stock as reported on the Nasdaq Capital Market on September 30, 2022 of $2.02 per share. The aggregate intrinsic value equals the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying stock options.

The Company uses the Black-Scholes option-pricing model to determine the fair value of all its stock options granted. The weighted average assumptions used during the three and nine months ended September 30, 2022 and 2021, respectively, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Risk-free interest rate	3.00	%	1.01	%	1.95	%	1.04	%
Volatility	138.57	%	124.63	%	131.54	%	121.29	%
Expected term (years)	6.03		6.25		6.18		6.18
Expected dividend yield	—	%	—	%	—	%	—	%

The weighted-average grant date fair value of options granted during the three months ended September 30, 2022 and 2021 was $2.78 and $8.09, respectively. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 and 2021 was $4.52 and $6.99, respectively.

The Company’s expected common stock price volatility assumption is based upon the Company's own implied volatility in combination with the implied volatility of a basket of comparable companies. The expected life assumptions for employee grants were based upon the simplified method, which averages the contractual term of the Company’s options of ten years with the average vesting term of four years for an average of approximately six years. The expected life assumptions for non-employees were based upon the contractual term of the option. The dividend yield assumption is zero because the Company has never paid cash dividends and presently has no intention to do so. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates. The Company accounts for forfeitures as they occur.

As of September 30, 2022, there was $3.4 million of unrecognized compensation cost related to outstanding stock options that is expected to be recognized as a component of the Company’s operating expenses over a weighted-average period of 2.72 years.

Time-vested RSUs and RSUs with Performance Conditions

The following table summarizes RSU activity of the Company for the nine months ended September 30, 2022:

	Shares (In Thousands)	Weighted Average Grant Date Fair Value
Unvested at December 31, 2021	200	$	2.81
Granted	97	$	5.34
Unvested at September 30, 2022	297	$	3.64

As of September 30, 2022, there was $0.9 million of unrecognized compensation cost related to outstanding RSUs that is expected to be recognized as a component of the Company's operating expenses over a weighted-average period of 2.25 years. No RSUs vested during the nine months ended September 30, 2022.

2021 Employee Stock Purchase Plan

On April 22, 2021, the Board of Directors adopted the 2021 Employee Stock Purchase Plan ("2021 ESPP") which was approved by the Company's stockholders on June 8, 2021. The 2021 ESPP allows employees to contribute up to 20% of their cash earnings, subject to a maximum of $25,000 per year under Internal Revenue Service rules, to be used to purchase shares of the Company’s common stock on semi-annual purchase dates. The 2021 ESPP allows eligible employees to purchase shares of common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six-month offering period during the term of the 2021 ESPP.

During the nine months ended September 30, 2022, 25,089 shares of common stock were purchased by employees under the 2021 ESPP for proceeds of approximately $0.1 million. During the three months ended September 30, 2022, 14,727 shares of common stock were purchased by employees under the 2021 ESPP for proceeds of approximately $38,000. There are currently 274,911 shares of common stock reserved for issuance under the 2021 ESPP as of September 30, 2022.

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Subsequent Events	9 Months Ended
	Sep. 30, 2022
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsThe Company evaluated all events or transactions that occurred after September 30, 2022 up through the date these financial statements were issued. Other than as disclosed elsewhere in the notes to the consolidated financial statements, the Company did not have any material subsequent events.

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Basis of Presentation and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the ASC and Accounting Standards Updates ("ASUs") of the Financial Accounting Standards Board ("FASB").

Principles of Consolidation

Principles of Consolidation The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. Unless the context otherwise indicates, reference in these notes to the "Company" refer to SELLAS Life Sciences Group, Inc., and its wholly owned subsidiaries, SELLAS Life Sciences Group, Ltd., a privately held Bermuda exempted company, SLSG Limited, LLC, Sellas Life Sciences Limited, and Apthera, Inc.

Acquired In-Process Research and Development

Acquired In-Process Research and DevelopmentCosts incurred in obtaining technology licenses are immediately recognized as acquired in-process research and development expense, provided the technology licensed has no alternative future use. Payments related to contingent consideration such as development milestones, commercial milestones and royalties (Note 5) will be recognized when the contingency is probable and reasonably estimable as prescribed by ASC 450, Contingencies.

Net Loss Per Share

Net Loss Per Share

Net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options and unvested restricted stock that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share, the weighted average number of shares remains the same for both calculations due to the fact that, when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

Recent Accounting Standards Adopted and Recent Accounting Standards Not Yet Adopted

Recent Accounting Standards Adopted

In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications of Exchanges of Freestanding Equity-Classified Written Call Options to clarify the accounting for modifications or exchanges of freestanding equity-classified written call options, such as warrants, that remain equity classified after modification or exchange. This ASU became effective for the Company on January 1, 2022 and did not have a material impact on the Company's consolidated financial statements.

Recent Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which, among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard becomes effective for the Company in the first quarter of 2024 and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its consolidated financial statements.

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Basis of Presentation and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	As of September 30,
	2022	2021
Common stock warrants	5,148	558
Stock options	1,071	526
Restricted stock units ("RSUs")	297	210
	6,516	1,294

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets (in thousands):

Description	September 30, 2022		Quoted Prices In Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	20,967	$	20,967	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	21,067	$	21,067	$	—	$	—
Liabilities:
Warrant liability	$	1	$	—	$	—	$	1
Contingent consideration	170		—		—		170
Total liabilities measured and recorded at fair value	$	171	$	—	$	—	$	171

Description	December 31, 2021		Quoted Prices In  Active Markets (Level 1)		Significant Other Observable  Inputs (Level 2)		Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	$	21,000	$	21,000	$	—	$	—
Restricted cash equivalents	100		100		—		—
Total assets measured and recorded at fair value	$	21,100	$	21,100	$	—	$	—
Liabilities:
Warrant liability	$	40	$	—	$	—	$	40
Contingent consideration	296		—		—		296
Total liabilities measured and recorded at fair value	$	336	$	—	$	—	$	336

Schedule of Reconciliation of Level 3 Liabilities

A reconciliation of the change in the fair value of the contingent consideration liability for the nine months ended September 30, 2022 is as follows (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Contingent consideration, December 31, 2021	$	296
Change in the fair value of the contingent consideration	(126)
Contingent consideration, September 30, 2022	$	170

Schedule of Fair Value Measurement Inputs and Valuation Techniques

The following significant unobservable inputs were used in the valuation of the contingent consideration liability:

	As of September 30, 2022		As of December 31, 2021
Potential milestone payments	$0 - $30 million		$0 - $30 million
Discount rate	16.8	%	15.5	%
Cumulative probability of success	5.3	%	5.3	%
Projected years of payments	2028 - 2031		2028 - 2031

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Balance Sheet Accounts (Tables)

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

	September 30, 2022		December 31, 2021
Insurance	$	667	$	217
Clinical development	316		1,309
Professional fees	127		36
Other	47		27
Prepaid expenses and other current assets	$	1,157	$	1,589

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	September 30, 2022		December 31, 2021
Clinical trial costs	$	2,947	$	1,325
Compensation and related benefits	1,228		989
Professional fees	203		165
Other	192		161
Accrued expenses and other current liabilities	$	4,570	$	2,640

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Lease Payments

Future minimum lease payments are as follows as of September 30, 2022 (in thousands):

Future minimum lease payments:
2022 (remaining)	$	127
2023	518
2024	533
Total future minimum lease payments	1,178
Less: imputed interest	(142)
Current and non-current operating lease liabilities	$	1,036

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Schedule of Common Stock Reserved for Future Issuance

As of September 30, 2022, the Company has shares of common stock reserved for future issuance as follows (in thousands):

Warrants outstanding	5,148
Stock options outstanding	1,071
RSUs outstanding	297
Shares reserved for future issuance under the Company’s 2019 Equity Incentive Plan	608
Shares reserved for future issuance under the 2021 Employee Stock Purchase Plan	275
Total common stock reserved for future issuance	7,399

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Warrants to Acquire Shares of Common Stock (Tables)

9 Months Ended

Sep. 30, 2022

Warrants and Rights Note Disclosure [Abstract]

Schedule of Warrant Activity

The following is a summary of the activity of the Company's warrants to acquire shares of common stock for the nine months ended September 30, 2022 (in thousands):

Warrant Issuance	Outstanding, December 31, 2021	Granted	Canceled/Expired	Outstanding, September 30, 2022	Exercise Price per Share		Expiration
Warrants classified as equity:
April 2022 Offering	—	4,630	—	4,630	$	5.40	April 2027
January 2020 Offering	309	—	—	309	$	3.93	July 2025
July 2020 PIPE Offering	25	—	—	25	$	3.30	August 2025
July 2018 Offering	132	—	—	132	$	7.50	July 2023
March 2019 Exercise Agreement	30	—	—	30	$	7.50	March 2024
Other	9	—	—	9	$	306.66	December 2022 - June 2024
	505	4,630	—	5,135
Warrants classified as liability	14	—	(1)	13	$	7.50	September 2023 - November 2023
	519	4,630	(1)	5,148

Schedule of Fair Value of Warrants is Estimated Using Black-Scholes Option Pricing Model

The fair value of the warrants is estimated using a Black-Scholes pricing model with the following inputs:

	September 30, 2022			December 31, 2021
Risk-free interest rate	4.05		%	0.65		%
Volatility	89.94		%	131.04		%
Expected term (years)	1.00			1.75
Expected dividend yield	—		%	—		%
Strike price	$	7.50		$	7.50

Schedule of Changes in Fair Value of Warrant Liability

The changes in fair value of the warrant liability for the nine months ended September 30, 2022 were as follows (in thousands):

 

Warrant liability, December 31, 2021	$	40
Change in fair value of warrants	(39)
Warrant liability, September 30, 2022	$	1

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Allocated Stock-based Compensation Expense

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, respectively (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development	$	72	$	36	$	197	$	84
General and administrative	383		239		1,083		639
Total stock-based compensation	$	455	$	275	$	1,280	$	723

Schedule of Stock Option Activity

The following table summarizes stock option activity of the Company for the nine months ended September 30, 2022:

	Total Number of Shares (In Thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2021	534	$	10.09	8.77	$	681
Granted	543	5.01
Canceled	(6)	2.28
Outstanding at September 30, 2022	1,071	$	7.56	8.73	$	28
Options exercisable at September 30, 2022	282	$	12.89	7.85	$	18

Schedule of Assumptions for Option Grants Issued

The Company uses the Black-Scholes option-pricing model to determine the fair value of all its stock options granted. The weighted average assumptions used during the three and nine months ended September 30, 2022 and 2021, respectively, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Risk-free interest rate	3.00	%	1.01	%	1.95	%	1.04	%
Volatility	138.57	%	124.63	%	131.54	%	121.29	%
Expected term (years)	6.03		6.25		6.18		6.18
Expected dividend yield	—	%	—	%	—	%	—	%

Schedule of RSU Activity

The following table summarizes RSU activity of the Company for the nine months ended September 30, 2022:

	Shares (In Thousands)	Weighted Average Grant Date Fair Value
Unvested at December 31, 2021	200	$	2.81
Granted	97	$	5.34
Unvested at September 30, 2022	297	$	3.64

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Liquidity (Details) - USD ($) $ / shares in Units, $ in Thousands			1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2022	Apr. 16, 2021	May 31, 2022	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Accumulated deficit	$ 170,783			$ 170,783		$ 170,783		$ 138,603
Net loss				7,022	$ 7,085	32,180	$ 14,101
Acquired in-process research and development expense				$ 0	$ 0	10,000	0
Net cash used in operating activities						$ 18,657	$ 21,045
Shares of common stock reserved for issuance (in shares)	7,399,000			7,399,000		7,399,000
Upfront fee and milestone payments						$ 10,500
Milestone payment received			$ 1,000			13,000
Potential milestone payments to be received	$ 191,500					191,500		192,500
Cash and cash equivalents	21,348			$ 21,348		21,348		21,355
Restricted cash and cash equivalents	$ 100			$ 100		$ 100		$ 100
Sales Agreement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sale of shares, common stock gross proceeds		$ 50,000
Percentage gross proceeds from the sale of shares (as a percent)		3.00%
Number of shares of stock (in shares)						37,891		786,927
Stock price per share (in dollars per share)	$ 3.25			$ 3.25		$ 3.25		$ 12.04
Net proceeds of common stock						$ 100		$ 9,000
Shares of common stock reserved for issuance (in shares)	40,400,000			40,400,000		40,400,000

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Basis of Presentation and Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	6,516	1,294
Common stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	5,148	558
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	1,071	526
Restricted stock units ("RSUs")
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in shares)	297	210

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Fair Value Measurements - Contingent Purchase Price Consideration, Measured at Estimated Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Liabilities:
Warrant liability	$ 1	$ 40
Fair Value, Measurements, Recurring
Assets:
Cash equivalents	20,967	21,000
Restricted cash equivalents	100	100
Total assets measured and recorded at fair value	21,067	21,100
Liabilities:
Warrant liability	1	40
Contingent consideration	170	296
Total liabilities measured and recorded at fair value	171	336
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets (Level 1)
Assets:
Cash equivalents	20,967	21,000
Restricted cash equivalents	100	100
Total assets measured and recorded at fair value	21,067	21,100
Liabilities:
Warrant liability	0	0
Contingent consideration	0	0
Total liabilities measured and recorded at fair value	0	0
Fair Value, Measurements, Recurring | Significant Other Observable  Inputs (Level 2)
Assets:
Cash equivalents	0	0
Restricted cash equivalents	0	0
Total assets measured and recorded at fair value	0	0
Liabilities:
Warrant liability	0	0
Contingent consideration	0	0
Total liabilities measured and recorded at fair value	0	0
Fair Value, Measurements, Recurring | Unobservable  Inputs (Level 3)
Assets:
Cash equivalents	0	0
Restricted cash equivalents	0	0
Total assets measured and recorded at fair value	0	0
Liabilities:
Warrant liability	1	40
Contingent consideration	170	296
Total liabilities measured and recorded at fair value	$ 171	$ 336

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Fair Value Measurements - Reconciliation of Level 3 Liabilities (Details) - Unobservable  Inputs (Level 3) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration, beginning balance	$ 296
Change in the fair value of the contingent consideration	(126)
Contingent consideration, ending balance	$ 170

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Fair Value Measurements - Narrative (Details) - Apthera, Inc.	9 Months Ended
	Sep. 30, 2022 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration payable, maximum amount	$ 32,000,000
Contingent consideration paid	2,000,000
Contingent consideration	$ 30,000,000

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Fair Value Measurements - Fair Value Measurement Inputs and Valuation Techniques (Details) - Apthera	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Contingent consideration payable, minimum amount	$ 0	$ 0
Contingent consideration payable, maximum amount	$ 30,000,000	$ 30,000,000
Discount rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Business combination, contingent consideration, measurement input (as a percent)	0.168	0.155
Cumulative probability of success
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Business combination, contingent consideration, measurement input (as a percent)	0.053	0.053

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Acquired In-Process Research and Development (Details) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended
	Mar. 31, 2022	Apr. 30, 2022	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
License And Collaboration Agreements [Line Items]
Cash paid for acquisition of in-process research and development					$ 4,500,000	$ 0
Acquired in-process research and development expense			$ 0	$ 0	10,000,000	$ 0
GenFleet Therapeutics (Shanghai) Inc
License And Collaboration Agreements [Line Items]
Upfront fee	$ 10,000,000
Cash paid for acquisition of in-process research and development		$ 4,500,000
Acquired in-process research and development payable, non-current	5,500,000		$ 5,500,000		5,500,000
Eligible payment from collaboration for development and regulatory milestone achievement under collaborations agreement	48,000,000
Maximum amount eligible for milestones under collaborations agreement	$ 92,000,000
Acquired in-process research and development expense					$ 10,000,000

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Balance Sheet Accounts - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Insurance	$ 667	$ 217
Clinical development	316	1,309
Professional fees	127	36
Other	47	27
Prepaid expenses and other current assets	$ 1,157	$ 1,589

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Balance Sheet Accounts - Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Clinical trial costs	$ 2,947	$ 1,325
Compensation and related benefits	1,228	989
Professional fees	203	165
Other	192	161
Accrued expenses and other current liabilities	$ 4,570	$ 2,640

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Commitments and Contingencies - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]
Operating lease, discount rate (as a percent)	13.95%		13.95%
Operating lease, remaining term			2 years 3 months
Rent expense	$ 0.1	$ 0.1	$ 0.3	$ 0.2
Cash payments related to operating lease	$ 0.1	$ 0.1	$ 0.3	$ 0.2

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Commitments and Contingencies - Maturities of Lease Liabilities - 842 (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2022 (remaining)	$ 127
2023	518
2024	533
Total future minimum lease payments	1,178
Less: imputed interest	(142)
Current and non-current operating lease liabilities	$ 1,036

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Stockholders' Equity - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	Apr. 05, 2022	Sep. 30, 2022	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Preferred stock, shares authorized (in shares)		5,000,000	5,000,000
Preferred stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Preferred stock, shares outstanding (in shares)		0	0
Common stock, shares authorized (in shares)		350,000,000	350,000,000
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Underwriting Agreement
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of stock (in shares)	4,629,630
Common stock to be called by warrants (in shares)	4,629,630
Offering (in dollars per share)	$ 5.40
Number of securities called by each warrant	1
Exercise price (in dollars per share)	$ 5.40
Warrant term	5 years
Net proceeds of common stock	$ 23.0

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Stockholders' Equity - Common Stock are Reserved for Future Issuance (Details) - shares shares in Thousands	Sep. 30, 2022	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding (in shares)	5,148	519
Stock options outstanding (in shares)	1,071	534
Total common stock reserved for future issuance (in shares)	7,399
2019 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)	608
2021 ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares reserved for future issuance (in shares)	275
Restricted stock units ("RSUs")
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs outstanding (in shares)	297	200

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Warrants to Acquire Shares of Common Stock - Warrants Outstanding (Details) shares in Thousands	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	519
Granted (in shares)	4,630
Canceled/Expired (in shares)	(1)
Outstanding, end of period (in shares)	5,148
Common stock warrants
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	505
Granted (in shares)	4,630
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	5,135
April 2022 Offering | Common stock warrants
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	0
Granted (in shares)	4,630
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	4,630
Exercise price (in dollars per share) | $ / shares	$ 5.40
January 2020 Offering | Common stock warrants
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	309
Granted (in shares)	0
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	309
Exercise price (in dollars per share) | $ / shares	$ 3.93
July 2020 PIPE Offering | Common stock warrants
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	25
Granted (in shares)	0
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	25
Exercise price (in dollars per share) | $ / shares	$ 3.30
July 2018 Offering | Common stock warrants
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	132
Granted (in shares)	0
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	132
Exercise price (in dollars per share) | $ / shares	$ 7.50
March 2019 Exercise Agreement | Common stock warrants
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	30
Granted (in shares)	0
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	30
Exercise price (in dollars per share) | $ / shares	$ 7.50
Other | Common stock warrants
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	9
Granted (in shares)	0
Canceled/Expired (in shares)	0
Outstanding, end of period (in shares)	9
Exercise price (in dollars per share) | $ / shares	$ 306.66
Warrants classified as liability
Class of Warrant or Right, Outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	14
Granted (in shares)	0
Canceled/Expired (in shares)	(1)
Outstanding, end of period (in shares)	13
Exercise price (in dollars per share) | $ / shares	$ 7.50

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Warrants to Acquire Shares of Common Stock - Fair Value of Warrants is Estimated Using Black-Scholes Option Pricing Model (Details)	Sep. 30, 2022	Dec. 31, 2021
Risk-free interest rate
Class of Warrant or Right [Line Items]
Warrants, measurement input	0.0405	0.0065
Volatility
Class of Warrant or Right [Line Items]
Warrants, measurement input	0.8994	1.3104
Expected term (years)
Class of Warrant or Right [Line Items]
Warrants, measurement input	1.00	1.75
Expected dividend yield
Class of Warrant or Right [Line Items]
Warrants, measurement input	0	0
Strike price
Class of Warrant or Right [Line Items]
Warrants, measurement input	7.50	7.50

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Warrants to Acquire Shares of Common Stock - Narrative (Details)	Sep. 30, 2022	Dec. 31, 2021
Coupon rate
Class of Warrant or Right [Line Items]
Warrants, measurement input	0
Expected dividend yield
Class of Warrant or Right [Line Items]
Warrants, measurement input	0	0

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Warrants to Acquire Shares of Common Stock - Changes in Fair Value of Warrant Liability (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Class of Warrant or Right, Fair Value [Roll Forward]
Warrant liability, December 31, 2021	$ 40
Change in fair value of warrants	(39)
Warrant liability, September 30, 2022	$ 1

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License Revenue - Narrative (Details) - USD ($)		1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2022	May 31, 2022	Dec. 31, 2020	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	Dec. 13, 2020
Revenue from Contract with Customer [Abstract]
Upfront cash payment received			$ 7,500,000
Future milestone payments received			194,500,000
Performance obligation, amount									$ 9,500,000
Milestones probable of being achieved			$ 2,000,000
Deferred revenue recognized license								$ 9,500,000
Potential milestone payments to be received	$ 191,500,000					$ 191,500,000		$ 192,500,000
Milestone payment received		$ 1,000,000				13,000,000
Licensing revenue				$ 0	$ 0	1,000,000	$ 7,600,000
Cost of licensing revenue				$ 0	$ 0	$ 100,000	$ 200,000

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Stock-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended		9 Months Ended
	Apr. 22, 2021	Sep. 10, 2019	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 29, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for issuance (in shares)			7,399,000		7,399,000
Closing price of the Company's common stock (in dollars per share)			$ 2.02		$ 2.02
Weighted average exercise price, granted (in dollars per share)			$ 2.78	$ 8.09	$ 4.52	$ 6.99
Averages contractual term					10 years
Expected dividend yield (as a percent)			0.00%	0.00%	0.00%	0.00%
Unrecognized compensation cost, options			$ 3,400		$ 3,400
Operating expenses weighted average period					2 years 8 months 19 days
Proceeds from employee stock purchases					$ 85	$ 0
Restricted stock units ("RSUs")
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average exercise price, granted (in dollars per share)					$ 5.34
Operating expenses weighted average period					2 years 3 months
Unrecognized compensation cost			$ 900		$ 900
RSUs vested (in shares)					0
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average vesting term					6 years
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average vesting term					4 years
2017 Equity Incentive Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized for issuance (in shares)							22,000
2019 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock authorized for issuance (in shares)		1,964,000
Option term		4 years
Increase in number of shares available for future issuance under stock based awards (as a percent)		5.00%
Shares of common stock reserved for issuance (in shares)			608,000		608,000
2021 ESPP | Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock reserved for issuance (in shares)			274,911		274,911
Cash earnings contributed per year	20.00%
Purchase price of common stock	85.00%
Offering period	6 months
Share-based compensation arrangement by share-based payment award, shares purchased for award			14,727		25,089
Proceeds from employee stock purchases			$ 38		$ 100

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Stock-Based Compensation - Allocated Stock-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 455	$ 275	$ 1,280	$ 723
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	72	36	197	84
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated share based compensation expense	$ 383	$ 239	$ 1,083	$ 639

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Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Options outstanding, beginning balance (in shares)	534,000
Granted (in shares)	543,000
Canceled (in shares)	(6,000)
Options outstanding, ending balance (in shares)	1,071,000	534,000
Options exercisable (in shares)	282,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted average exercise price, beginning balance (in dollars per share)	$ 10.09
Weighted average exercise price, granted (in dollars per share)	5.01
Weighted average exercise price, canceled (in dollars per share)	2.28
Weighted average exercise price, ending balance (in dollars per share)	7.56	$ 10.09
Weighted average exercise price, exercisable (in dollars per share)	$ 12.89
Weighted average remaining contractual term, outstanding (in years)	8 years 8 months 23 days	8 years 9 months 7 days
Weighted average remaining contractual term, options exercisable (in years)	7 years 10 months 6 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Aggregate Intrinsic Value [Roll Forward]
Aggregate intrinsic value, beginning balance	$ 681
Aggregate intrinsic value, ending balance	28	$ 681
Aggregate intrinsic value, options exercisable	$ 18

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Stock-Based Compensation - Assumptions for Option Grants Issued (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Share-Based Payment Arrangement [Abstract]
Risk-free interest rate	3.00%	1.01%	1.95%	1.04%
Volatility	138.57%	124.63%	131.54%	121.29%
Expected term (years)	6 years 10 days	6 years 3 months	6 years 2 months 4 days	6 years 2 months 4 days
Expected dividend yield	0.00%	0.00%	0.00%	0.00%

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Stock-Based Compensation - Summary of RSU Activity (Details) - $ / shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Weighted Average Grant Date Fair Value
Granted (in dollars per share)	$ 2.78	$ 8.09	$ 4.52	$ 6.99
Restricted stock units ("RSUs")
Shares
Beginning balance (in shares)			200
Granted (in shares)			97
Ending balance (in shares)	297		297
Weighted Average Grant Date Fair Value
Beginning balance (in dollars per share)			$ 2.81
Granted (in dollars per share)			5.34
Ending balance (in dollars per share)	$ 3.64		$ 3.64